Dr Jon Earith Issue: India 2004
Article no.: 3
Topic: India’s intellectual capital – its neural network
Author: Dr Jon Earith
Title: Chief Technology Officer
Organisation: MBT
PDF size: 76KB

About author

Dr Jon Earith is MBT’s Chief Technical Officer. Before MBT, Jon held senior positions at IBM Global Services, Sema, Cable and Wireless and BT where, working at Syntegra, he led the UK systems and consultancy integration team. Subsequently, Dr Earith founded Telecoms Consultants and Management Ltd one of the UK’s leading independent Telecoms consultancy companies. Jon obtained a PhD from Nottingham University. Dr Earith’s research focused on fibre optic communications and culminated in the design and installation of the first long haul system in the UK. Dr Earith, an engineer and MBA as well, has had extensive overseas experience in North America, Brazil, Asia, India and China.

Article abstract

India is transforming itself, and the nation’s economy, through the exploitation of its intellectual capital, is building upon education to drive the country from service provider to innovator and technological leader. Indian companies have long offered IT services internationally. At first, they provided coders for ‘western’ software, but, over time, added genuine expertise in design and consultancy. Today, companies in search of overall value look to Indian offshore partnerships for the distinctive skills and high performance they offer.

Full Article

Over the last fifteen to twenty years, India has taken great strides forward in terms of business development, by increasingly opening up to the outside world, encouraging foreign investment and economic reform. Looking to the future, optimism about the country’s continuing success on the global stage is fuelled by a growing recognition of one of its greatest strengths – the depth of its intellectual capital. One way to understand this is to consider the advanced computing technique, known as ‘artificial intelligence’, which models the electronic brain on the human one–on the neural network. In computing, such networks, which often deploy Bayesian and other techniques to replicate human intellectual processing, have enormous power. One could argue that, in today’s India, there is such power–an entirely human neural network, a rapidly developing organism, dependent upon people who are both highly educated and highly motivated. That power is delivering a growing competitive advantage to India, generating increasingly rich and rare skill sets and nurturing new intellectual property. Educational empowerment Gandhi said: “The purpose of education is to bring out the best in you.” The Indian philosophy of Upanishadas makes it clear that education is much more than the transference of knowledge; it is the development of character. The goal of education is not to create individuals who can reiterate today’s knowledge, but to empower them to describe new solutions to new challenges. That is precisely what is happening in India and the result is a transformation in the nation’s economy, through the exploitation of intellectual capital. It is driving the country from service provider to innovator and technological leader. As far back as the late 1970s and early 1980s, Indian companies offered IT services internationally. Back in those days it was simply bodyshopping; providing coders to implement ‘western’ software designs. Indian work proved reliable and significantly lower-cost than the home resource. Nevertheless, you cannot build a long-term business – or a nation’s prosperity – on price. Someone else will always undercut you. The price advantage in any market will always move, like water, to the lowest-cost resource. So the secret for long-term success is not to aim for a low price, but to deliver good value for money. If the value proposition is right, the price can rise and we all benefit. From price to value This was the course of the Indian IT industry. It has built on its value-for- the-money coding and added genuine, world-class expertise in design and consultancy, not least by anticipating the needs of global businesses and developing skills in advance. A recent McKinsey Quarterly report confirmed that, today, leading US companies in the financial sector and other industries create offshore partnerships to achieve far more than cost-reduction; they are taking advantage of the distinctive skills and high performance on offer. That is, they are in search of value overall. The report further quantifies the nature of this competitive advantage: “Most leading Indian IT outsourcing firms operate at level five–the highest degree of expertise–of the IT service capability maturity model (CMM).” Most internal IT departments, by contrast, in the United States have reached levels two and three. As a result, according to the Ministry of Communications and Information Technology, the Indian IT and ITES (Information Technology Enabled Services) industries are expected to achieve exports of US$13 billion in 2003/4. India, today, is the world’s service provider. Its global market share in off shore services stands at 24 per cent and the government predicts revenues of US$148 billion by 2012, a staggering figure. Can this be achieved? Commitment to change Through a continuation of the process, which has driven the educational structure over the last 30 years it can be achieved. That is, by reaping the benefit of India’s intellectual capital. India’s colleges and universities produce three million graduates a year, of who 520,000 qualify in IT subjects, largely from educational institutions rated very highly on a global standard. That has not happened by accident; educational authorities, at every level, have responded to the calls of industry and have adjusted curricula to developing needs. Today, India’s education system is adapting as rapidly as the changing global business environment – a process rarely matched by its competitors. The companies that drive India’s IT success demonstrate their commitment to raising general education standards by investing heavily to recruit the right staff, but this is enlightened self-interest. Many Indian-based IT companies’ staff, for example, include a high percentage with masters degrees or doctorates, 19 per cent and two per cent respectively, in my own company’s case. Enlightened self-interest continues after hiring. There are induction programmes, ongoing training, personal and leadership development and active encouragement to add further formal qualifications. A key element of this process is to integrate the employee into the corporate culture, thus building team work and a strong sense of customer loyalty. Programmes of this sort, naturally, build on the strengths of the Indian character, because this is at the core of the Indian IT proposition. There is a strong organisational/business focus but, more broadly, the staff acquires general interpersonal and behavioural skills and all the other attributes necessary to work globally. Necessarily, since Indian IT today is inherently outward facing, its software exports represent no less than 79 per cent of sales. Moreover, the critical success factor in its move from bodyshop to partner lies in comprehending not only technical requirements but also, across styles and cultures, the way in which client companies operate. Active encouragement of education and development continues throughout the employee’s career. Most major Indian IT companies, for example, have formed alliances with leading educational establishments around the world. Skills and value This process is about far more than formal qualifications. Indian IT has won widespread international market respect by reacting fast to changing situations and developing human resources to match. Illustratively, the use of Siebel software to create sophisticated customer relationship management systems emerged several years ago as a major trend. It provides all the tools necessary for leading edge solutions. However, the problem is, there is a world shortage of consultants with sufficient knowledge in depth to be able to specify, design and implement such systems. As demand has soared, India’s neural network has been well placed to exploit the opportunity. This trend is paralleled across the COTS (Customised Off The Shelf packages) sector, as major telecommunications customers seek to changeover old legacy and proprietary formats. Other examples of such rare COTS skill-sets include Geneva, in billing and Clarify in CRM and BEA. In each case, an opportunity is created. Education for life In the West, ‘lifetime education’ has become a fashionable talking point. Leading management writers have waxed lyrical about aspects of the subject from the ‘learning organisation’ to ‘knowledge management’. Still, success is, as yet, comparatively rare. Yet in India, it is a reality, fundamental to corporate culture and embraced by workforces. Employee surveys across the IT industry report routinely that staff place such culture at the top of their requirements, alongside more obvious factors such as pay and rewards, and the international opportunities afforded by the IT world. It is often the ‘educational’ opportunity, which becomes the critical decision-making factor. This mutual commitment is reflected in staff loyalty. The average rate of employee attrition in the Indian IT industry is about 15 per cent; in Europe comparable employers expect double the churn. The staff tell their friends and family they are happy, too. In fact, the ‘buddy’ system is a primary recruitment source. The policy of continuous development of staff is matched by a steady rise in corporate standards. Most Indian IT companies operating globally are certified to international quality standards like CMM and ISO 9000, a further testament of seriousness. Beyond bodyshopping So Indian IT today is moving far beyond its bodyshopping roots, to a situation where its leading companies are now prime contractors for blue-chip businesses worldwide. They provide innovative design skills as well as cost-effective coding. Rather than just react, they lead and benefit from staff members who are respected at every level. In December 2003, the Ministry of Communications and Information Technology reported that, “Maintaining India’s momentum and share of this global opportunity will depend on its ability to create and make available a growing and appropriately skilled pool of talent. While India is well positioned today, high growth aspirations demand that adequate actions be taken to ensure that supply-side constraints do not prevent us from realising the potential of the opportunity.” True, India cannot rest, but its opportunity is great. Continuously higher investment in its burgeoning neural network benefits all – whether employed in the IT industry or not. A better developed workforce will enable Indian IT to increase its penetration of the world market, enhancing financial returns for its companies, their staff, and the wider community. Then too, the benefit extends globally. As India’s participation in, and contribution to, the world economy grows apace India is playing its own substantial part in global growth. Collectively, these represent rich dividends for India’s commitment over the past two decades and are a testament to the strength of its ‘neural network,’ but this, perhaps, is only the beginning.