Vision 2006 : A teacher’s dream

In the keynote address at the Skoch Summit, Dr Deepak B Phatak says that a concerted medium-term approach can help India to consolidate its position on the global IT map and achieve its IT penetration objectives in the domestic market

Dr Deepak B Phatak

No denying that with its potential and performance in the international software export arena, India has earned the status of a significant software player, particularly in comparison to its traditional rival, China. But there is still a long way to go. Export earnings are required to gain economic strength, but at the same time if India has to leapfrog in this race, an equal focus is required to be given to the domestic IT scene. While there have been several reports on the subject for long term planning till 2008 or even 2020, this paper is an attempt to define some medium term goals that can be achieved through a few simple actions. Government, industry and the academia being important stake holders in the achievement of these goals, this paper is also a call for action for all three.

Dream of a teacher
As has been said by many, perhaps most convincingly and confidently by our President, Dr Abdul Kalam that it is high time the world stops calling us a developing country. To acquire the visible signs of a developed nation, we need to develop a healthy, prosperous and peaceful life for our citizens, and the united strength of a nation of a billion people. It is my firm personal belief that India can use IT as a springboard to achieve this ambition earlier than what would otherwise be possible. This springboard is already primed for wealth generation as witnessed by the growth of our software exports. An equally important task ahead is to create a wide proliferation of IT usage within the country. It is this task that would unleash the true potential of millions of capable young minds, many of whom are sadly on the wrong side of an ever widening digital divide. Rajesh Jain, in his weblogs (www.emergic.org) has been consistently urging us to ensure that a significant share of the next 500 million IT users should come from India. I dream this share to be a modest 100 million by 2010. These people will need affordable access devices (desktops or PCs at present) and useful applications and content to give them both knowledge and jobs. It is in this broad perspective that I am attempting to examine a possible near-term action agenda for the country. Although the numbers may appear ambitious to some, I believe these are definitely achievable.

Phatak’s panchshila
I would like to base this medium-term plan on the achievement of five goals. The target period—end of 2006. The goals are :
n Creating 50 additional companies that are more than Rs 250 crore in size.

• Having at least 5 PCs dedicated to education per 1,000 of Indians.
• Doubling the current installation base of PCs to 20 million.
• Have at least 10,000 people in India with the capability to charge $100 per hour for offshore work.
• To create 500,000 additional jobs.

50 cross-over companies
We must create at least 50 new companies that are more than Rs 250 crore in size and therefore can survive in the global arena over the longer term. These would be our new ‘Infosys’ kind of companies, catalysing future growth. By the end of 2006, we should have stopped talking about the performance of the top 20 companies and start talking about the performance of the top 70.

The small and medium enterprises (SMEs)—on whom most of our export activity is dependent—have to play a leading role in this by following a more focused approach. The arbitrage business, for example, can be left to the bigger players who not only have a strong brand pull but also the muscle to offer very low prices due to their scale of operations in both the IT as well as ITES arenas.

End-to-end services based on domain expertise can prove to be more profitable for SMEs. For example, in just one area like Internet banking, they can offer both ITS and ITES lines of business based on consulting, Internet banking products, projects, facilities management and even a per transaction-based BPO operation. For this to succeed they must look at inducting banking experts into their operations and not just techies.

SMEs must look for business synergies through M&As to gain scale and market access, instead of only focusing on scarce VC funding or the difficult IPO option for them at this juncture. In fact their ability to garner funding will go up as they gain size and stature post- M&A. It also makes them better positioned as successful IPO candidates.

While SMEs have shown their potential, the government needs to give them full support with a view to achieving better results. Access to real capital, price preference in government buying, marketing support, simplified procedures and broad-basing the definition of ITS and ITES in line with the WTO Information Technology Agreement, or indeed even exceeding that, could be among the steps that the government can take to encourage the SME sector.

Similarly, educational institutions like the IITs and other top institutes in every state can extend help in terms of skills upgradation of SME professionals or even offer cheaper outsourcing alternatives to them through project handling.

Increasing education PC penetration
We must have an education PC penetration of at least 5 per 1,000 of Indians. Based on today’s growth figures, by the end of 2003, we will have a penetration of only 0.44 PCs in the education segment, compared to 3.04 for China. This then will become a national competitiveness issue in all IT and IT enabled fields. The key drivers for this in India will be cost, content and communications.

By the year 2006, we should have an installed PC base of 20 million, which is quite achievable given the fact that new Internet-based applications that cover e-mail to e-commerce have already started driving growth. And despite a global recession, the PC market has witnessed a significant 14 percent growth here.

But if you want to gain volumes and economies of scale, the PC needs to be brought within the affordable limits of more consumers. A low-cost PC that acts as a computing and communication device can be made in India. Open source software, cheaper CPUs, etc, can bring the cost of production down. Local-level content will of course remain the major issue, for which content providers have to devise sustainable business models, say, subscription-based or simply on pay-per-use basis. This content can be related to entertainment, education or be a useful service. We have recently set up a special lab in KReSIT at IIT Bombay termed ‘Affordable Solutions Lab’, which has begun undertaking R&D projects in this direction.

However, even with many attempts in the past, the Indian market has been quite slow to adapt to a thin-client concept and has tended to be more amenable to fully loaded PCs with all bells and whistles, for which affordability is currently the big killer. The current excise duty of 16 percent should be waived for PCs going to the education sector, with a target to equip at least 36,000 schools with 10 PCs each, over the next three years. A focus on IT-based vocational skills will create more interest among the student community to learn computers. A robust communication backbone and 100 percent depreciation on PCs can further boost demand and make fully configured second-hand PCs available at very low prices for use in the education sector.

Government applications like e-governance and office automation leading to paperless offices are among the major opportunities that could be tapped for proliferating IT usage.

Moving up the value chain
Indian companies should also look for higher margin software export avenues. By increasing their skill sets to handle high-end project management jobs, Indian professionals are capable of earning more than $100 per hour even through off-shore services. Software products and consultancy services are the other areas where Indian players can dominate. The knowledge gained from projects can be applied to create packaged software.

We need to garner expertise in the area of intellectual property management so that every time we sell a project, we do not end up selling the associated Intellectual Property Rights (IPR). Rather we can actually create products out of project implementations.

For too long we have looked at business consulting divorced from technology consulting, and a business plan divorced from the technology road map. In the real world both are inseparable. While as a country we have focused a lot on technology consulting and implementations, we have totally ignored the bigger opportunities available in business consulting and planning. Indeed, it is easier to sell technology and projects if you are already engaged with the client as a business consultant. Both the industry and the government must recognise this—the sooner they do the better—as this alone can give us the capability to charge $100 per hour kind of offshore rates and still be a couple of hundred dollars per hour cheaper than the Big Five.

Generating additional 5,00,000 jobs
As IT has become an indispensable tool to achieve higher productivity levels, it can surely create more employment opportunities. The target should be at least 5,00,000 additional jobs by 2006. The IT sector can in fact create jobs for non-IT professionals who also have domain expertise in areas such as finance, medicene, fine arts and so on.

A key role is required from the training industry that must stop being dream merchants and start imparting real life education. For example, as the season changes to ITES, we are finding ITES courses galore, without any focus on a basic vertical industry understanding, which will form the basis of the delivery to a service level agreement. Instead of only producing manpower with better American accents, manpower equipped with basic vertical industry knowledge will always find greater employment avenues both in exports as well as the domestic market.

If all the three stakeholders—the industry, the government and academia—get committed to this simple plan and put in collective effort employment will take care of itself and provide stronger IT legs to the Indian economy in the cut-throat global technology race.

Concluding remarks
What I have attempted to outline here is a modest mission of a larger dream. As I have said earlier, all the stakeholders must work hard together to get there.

On the academic front, I am proposing to undertake visits to at least 100 institutions in India in the next academic year to push their part of the agenda. National associations like CSI, Nasscom and MAIT must do their bit to push the competitive edge for Indian companies, and if I may so add, undertake a special drive on issues concerning smaller and medium-sized companies.

Finally, the government must do some out-of-the-box thinking on policy planning (and implementation). I am confident that together we will make it happen.

Dr Deepak B Phatak is the head of the Kanwal Rekhi School of Information Technology at IIT, Mumbai. He can be contacted at dbp@it.iitb.ac.in

Education PC Penetration 

Based on ‘An Education PC for India’ Skoch-2000
*Estimates