The infrastructure myth

Are Indian IT companies really infrastructure-independent? Sameer Kochhar clarifies this myth and describes the different types of infrastructure relevant for an IT company

The statement ‘India is going to do well in IT since IT is not very infrastructure dependent’ is a myth and it’s time for a wake up call now. Infrastructure related to IT will involve:

• Physical Infrastructure
• IT Infrastructure
• Logistics Infrastructure
• Regulatory Infrastructure

Physical infrastructure

The physical infrastructure needs of IT companies are pretty much the same as any other industry, albeit the usage is lower. The IT industry too needs good roads, buildings, power and water—four areas where facilities in Indian metros or even industrial parks are woefully inadequate. Setting up an IT unit in India today is like building a town—locating or building a structure with the right specifications, creating captive power generation capacity, repairing the roads that lead to it and taking care of the water problem, which remains unaddressed due to the blanket ban on exploitation of ground water. Now while most big companies have set up their own fancy campuses and buildings, it is the SMEs who grapple with physical infrastructure issues every day. Solving this problem needs all round infrastructure development as government-owned campuses have failed to do the job. The lack of infrastructure adds to overall costs considerably, eroding the low cost of manpower advantage that India has.

IT infrastructure

Telecom links, Internet and PC penetration constitute the IT infrastructure requirements of a company. As far as Internet and PC penetration go we continue to be one of the least developed countries in the world. Poor quality of service and lack of compelling content are responsible for low Internet usage, while extortionate excise duty has resulted in poor PC penetration. As far as telecom links are concerned, there has been considerable progress over the past few years, but cost of bandwidth in India still remains one of the highest in the world. Digital Subscriber Link (DSL) is largely becoming the delivery norm for Internet worldwide due to a higher bandwidth at cheaper-than-dial-up prices. In India smart marketing brains in DSL providers conveniently add the cost of one month of dial-up access and the monthly telephone cost to arrive at the cost of a DSL connection—why would anybody buy it unless it is at least 30 percent cheaper?

Transportation, customs, etc would constitute logistics infrastructure. The Railways, as a mode of transporting IT products, is not an advisable option due to a very high degree of pilferage. Air is too expensive, and that virtually leaves road transport to move PCs within India and shipping to bring them to India. While the roads await completion of the golden quadrilateral project, there is not even a plan to decongest the already clogged seaports. One prime reason why hardware manufacturing for exports hasn’t taken off in India is the inability of our infrastructure to deal with just-in-time delivery schedules.

Last comes the regulatory infrastructure where every move to increase transparency increases complexity. Dealing with departments like customs, excise, sales and service taxes is a nightmare. Your appeals and protests can take years to settle. Once the goods enter Indian shores, it is impossible to send them back for repairs and most companies simply write off defective spares as a business cost for that reason. On the software front, though we have Intellectual Property (IP) protection laws, infrastructure to implement in India starting with the law. In contrast Singapore offers comprehensive IP protection as well as an arbitration court for IP disputes.

That the IT industry has done well despite the inadequacies is a tribute to the grit and gumption of the entrepreneurs here. If only the government would play its part and at least solve problems that are addressable in the short term it would boost industry performance on one hand and stem the brain drain partially on the other.

Sameer Kochhar is the CEO of Skoch, a strategy and management consulting company to several Fortune 500 as well as SME companies worldwide. He can be contacted at skoch@skoch.org