From: IT And The East, How China and India are altering the future of technology and innovation
By: James M. Popkin & Partha Iyengar, Gartner, Inc.
Published by: Harvard Business School Press
A critical uncertainty that will determine India’s future in global ICT is the country’s infrastructure - roads, highways, bridges, seaports, subways, buses and trains, airports and airlines, electric power and water utilities, telecommunication systems, and so on.
Those within India’s fast-rising IT community sadly ponder what could have been - and what yet could be - if India’s infrastructure were the equal of any developed economy in the world. In its most recent report on global competitiveness, the World Economic Forum confirmed what millions of Indians and foreign business travellers to India know too well: “an inadequate supply of infrastructure” is by far the largest impediment to doing business in India. Indian executives themselves rank poor infrastructure as their biggest major concern, ahead of lack of access to capital, inadequate legal protection, excessive regulation and vulnerability to rising energy prices.
The problem of India’s infrastructure is clearly an important issue for the IT industry. Shipments cannot be guaranteed to arrive on time. Rail networks are inadequate. Electric power and other energy supplies are erratic. Telecommunication networks are unreliable. Roads are inferior. One Chinese IT services firm we know believes that India’s abysmal infrastructure provides a contrast so shocking compared with China’s modern cities and highways that the Chinese firm happily pays for prospective clients to visit India and see conditions there firsthand. More often than not, the Chinese executives tell us, a decision in their favor is guaranteed before final negotiations are completed back in China.
To create a world-class infrastructure, India requires a high level of investment through government spending and increased reliance on foreign direct investment (FDI).
Infrastructure breakdowns, logjams, and persistent crowding certainly hamper business activity in India’s major IT cities.
One morning in 2006, Partha was on his way to participate in a panel discussion on biotechnology that an important global client had organized on its campus on the southern outskirts of Bangalore. He had less than 10 miles to travel from his hotel but, anticipating traffic jams on the main road to Electronic City, he had blocked out an hour and a half for the trip in his rental car. He nearly missed the start of his panel. When he finally inched his way to where he could see the cause of the roadblock, Partha could only laugh. A large elephant was lumbering slowly along in the right lane with his caretaker. Nearby, a partially built highway overpass was still under construction, four years after the first concrete had been poured. This infamous “flyover”, with a completion date unfathomable by jaded commuters might have helped matters that day: But in the eyes of hundreds of thousands in the global IT community who have seen it, the flyover’s sole purpose is to stand as a dispiriting icon of India’s long-running ineptitude with infrastructure.
Life in India’s major cities is challenging for IT professionals. A normal commute requires about two hours each way along crowded, polluted roads that are pockmarked with potholes. Public buses are rarely seen. Interruptions if electric power supplies are ubiquitous and unpredictable which generally complicates even the most dedicated persons efforts to better their lives.
Global IT employers know that it can be more difficult for professionals to be productive under these conditions in India than in cities where lights typically go on when a switch is flipped and buses, trains and subways run on time. Many of India’s IT services firms own and operate business campuses with their own electricity supplies, employee transport systems and, in some cases, even hotel accommodation for visitors.
“India is running out of capacity in many areas - airports, roads and hotels”, Infosys’s then chief financial officer T.V. Mohandas Pai, told the Hindu Business Line. “People like us depend on international business. Therefore, it is imperative that our business visitors travel easily and stay comfortably”.
As Anand Mahindra, vice chairman and managing director of Mahindra & Mahindra, the diversified industrial company, wrote early in 2006, “We stand no chance of becoming a manufacturing power without the bedrock foundation of efficient infrastructure”.
India’s notoriously poor infrastructure is the reason why Dutch global electronics company Philips is more successful at making light bulbs in China than in India. light bulbs have to be packaged in corrugated cardboard tubes instead of thin boxes even for local travel. “The light bulbs break when bumping around in the back of a truck along India’s rutted roads. Because there are relatively few goods exported from India, sailings from India’s ports aren’t frequent enough for the global economy” Forbes reported.
Bangalore, the shining light of Indian IT, is strangely enough also the city that increasingly represents one of them main problems highlighted in this scenario: poor infrastructure caused by a lack of foresight, planning and investments. Despite aspirations to become the “new San Francisco”, Bangalore is instead a “premature metropolis” that has grown too quickly, according to local academic Ramchandra Guha. “Twenty years ago it was a town of a couple million people. Now it’s eight million (and) public systems simply can’t cope”. As an IT hub, Bangalore has the buzz of being one massive incubator of innovation. As a major capital, however, it is dysfunctional.
Yet, like Bangalore, this isolated ICT Islands scenario has its bright spots. Bangalore itself could be in a good position to benefit from accelerating collaborations between India and China. Yet even if that materializes, India’s IT industry will remain focused solely on export in the ICT Islands scenario. The domestic market will remain weak, and India will be forced to compete primarily on cost in global markets, as it does today, rather than race-to-the-top capabilities rooted in advanced education and innovation.
The obvious danger to India is that the remarkable gains of the past decade, notably in IT and manufacturing, will have been wasted. Momentum required to elevate more of India’s economy into world-class products and services, to be a global leader, will have been lost. Historians will record this period for India as a classic case of one step forward and two steps back, with progress denied simply because reliable infrastructure development and consistent levels of government support for qualified resources did not materialize.
Another potential danger is that global enterprises will grow weary of waiting for India to get its act together and provide a stable and predictable platform for business. The might turn to other countries that are in the race for scarce FDI. In some case, we could see companies already invested in India pulling out. While this is not a very strong possibility at this point in India’s globalization journey, given the long-term potential of India’s economy, it cannot entirely be dismissed. We encourage global enterprises to include contingency plans for such an exit, should it become necessary.