From Rice to the Chip

Luís Ángel Fernández Hermana - @luisangelfh
19 June, 2018
Editorial: 211
Fecha de publicación original: 18 abril, 2000

Old ox means a straight furrow

Vinai Dishpande is not a name that usually hits the headlines in the West. Perhaps he has never made them, in fact. Nevertheless, in India he is a kind of Bill Gates. He is the father of the equivalent of Silicon Valley in this Asian country. A Stanford-educated engineer, Deshpande has built a computer park in the area surrounding Bangalore which many rich countries would be proud of. Having picked his way through all kinds of difficulties, particularly opposition from his compatriots and colleagues, his company became the first to manufacture a PC that competed with traditional brand names in the US and Japan. The strategic orientation that started him off on his electronic adventure, in a country that was “a priori” outside the circuits of this world market, finally crystalised in the National Software Technology Centre, involved in research, training and the development of computer programmes. India has now become an exporter in all three fields. It has gone from sending computer packages to industrialised countries, a business it has excelled in over the last five years, to exporting experts to the US, Germany, Australia, Japan and South Africa. This is what the emigration of the Information Society means.

Experts consider that the media have exaggerated the success story of the software industry in India. For example, India has not managed to successfully launch a home-made software product on the market. Its potential lies mainly in its software services, particularly in adapting programmes to customer needs and solving of problems or demands in the industry (“outsourcing”). In this field, India only possessed a small domestic market at the beginning of the decade. It is now estimated that it has captured 16% of the world market in “customised” programmes. Over the last five years, this industry has grown at a rate of 50% –the period of the public explosion of the Internet–. If this tendency persists, then software could represent as much as 25% of the country’s exports, a remarkable performance in record time bringing it into clear competition with the main economic activity of the country namely agriculture.

The future, however, is not all rosy. While India is in an excellent position to turn itself into the main supplier of these software services on the world market, its neighbours too are learning the lesson, and fast. Such is the case in China and the Philippines. The difference, at least for a while anyway, is that the Indian government invested heavily in higher education in the 80s to support its nuclear and space industry. These have been the two springboards that have allowed the programming industry to take off. The third came from outside and was not in the books: the US became its best client as companies started to incorporate information technology into their production processes. Hunger joined forces with need, in this case the lack of a technical workforce in the US. Before anyone had really taken a look at what India was up to, its programmers were doubling the economic profits of an industry that had matured long before the fruit began to fall off the tree.

Although the major part of the Indian software industry is new, its famous Tata Institute for Fundamental Research had already constructed its first computer by the beginning of the 50s, a very short time after the US switched the ENIAC on for the first time. Nevertheless, for 30 years the electronic landscape was dominated by the big foreign names in the sector, such as IBM, DEC or ICL. Then, in the 80s, a sizeable battalion of software developers and companies devoted to domestic services began to make incursions into exporting. Their profits immediately attracted substantial investment which multiplied the size of this labour market in a very short period of time. In addition, lots of programmers went to the States to get trained.

The return of some of them, like Vinai Deshpande, proved providential in the establishing of a stable structure in such a volatile and fragile sector. The combination of software parks, heavy investment in higher education and a diversified strategy –from the customising of software, to packaging of programmes and products for specific industries or for company planning– created fertile ground which has helped India to become an important player on the world market in the Information Society, as the OECD’s latest report on information technology recognised. What began in Bangalore as an experiment with a dubious future, has now been copied in Bombay, Madras, Pune, Hyderabad, Calcutta and Bhuvaneshwar. The most recent centres, such as the last two, no longer limit themselves to software but are entering into more complex areas. The OS of the Oracle network computers has been developed in India, as well as some of Texas Instruments’ chips.

The main clients for the export of Indian software are the US (58%), followed by Europe (21%), South-East Asia (8%) and Japan (4%). This structure, according to analysts, will be maintained now that there is the need to not only import services for the industry, but also for them to make up a significant part of the workforce. The wheels of the vacuum cleaner are in motion. Salaries in the US are more than four times those of India for skilled labour with the same kind of training, specialisation and experience. This “vacuum cleaner” effect might seriously affect the future of the Indian industry itself however much it appears, at first glance, to be an incentive for further expansion. The increase in specialised emigration over the last two years –still relatively low– made salaries shoot up by 20% last year and, even then, this sector of the labour market has not been able to fill local demand.

While the rich countries design socially acceptable immigration policies in order to attract contingencies of ICT workers from India, India itself is unveiling a host of job offers to try and keep its specialists at home and tempt those that have already left to come back. The classic labour market from the time of the Industrial Revolution, with a colonial style way of operating that favoured the metropolis, now works on a different dynamic, where from that massive flow of workforce we move to an almost personalised offer based on the information and knowledge of each individual worker. And this is just the beginning.

Translation: Bridget King