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Feb
19
Basics: Why do US firms send maintenance/support jobs to India? Because our standard of living is lower than theirs, and we can do the same tasks at least as well as American workers, at a small fraction of their wages.
So the crux of the matter is low price. We are concerned about rising salaries in the IT sector in India, about us becoming uncompetitive and less attractive vis-a-vis Vietnam, the Phillipines, even China. The all-important relation is
Rising Salaries => Uncompetitive, Less Attractive
And just what does that relation imply? Two things.
1.) That means that we compete purely on price. As long as workers at an offshore development centre do the job as well as American workers, it’s fine. If they do better, well, nothing like it. But “as well as” is good enough. Hence, having the ability to innovate is not going to result in any major gains. If there is another country which can do the job at cheaper rates than India can, a US firm will move jobs there. The costs of training are quite small when compared to the savings on wages. When volumes are higher, the incentive to shift to lower wages is higher.
2.) These skills are completely transferrable (I’m not sure if fungible is the correct word. Is it?). That is, a bunch of people in the Phillipines can do the same job as well as another in India. The exact same skill set skill level can be replicated in another region/country.
What does that teach us? That “software development” skills, technical skills are a commodity, are available in abundance from a number of vendors. The only differentiator is price. And I do not think that India ought to be building an entire industry where the only product is a commodity. Even steel is different - first, it does not depend as much on people as IT, there aren’t as many vendors as in IT, the long-term capital sinkage is very high. Hence it isn’t as easy to shift your steel supplier as it is to shift your IT services supplier.
Technical knowledge is a science which can be learnt to acquire a equal level of skill by many peoples, many countries. In time, the only differentiator among the practitioners of these skills will be price.
The alternative, then, is to compete in an area where skills are not a commodity - and that does not mean simply moving to a different area of technology where skills can be commoditized in due course of time.
Skills which cannot be reduced to science, which are an art, will never be commoditized.
What skills are unique, in the technology domain?
1.) Products, as opposed to services. It is an art to make products. It is not an art to service and maintain products made by someone else.
2.) Management skills. Project, People and Business management. You cannot replicate a good manager. Management is an art.
3.) Products and services targeting the local market. I have said this many times in the past, and will repeat again. There is a huge market in India, in domains as diverse as telecom/internet infrastructure (including wireless Internet), mobile applications, supply chain management optimization (and I mean SCM optimization for B2C systems that already exist - such as farmer-to-retail, post, government, anything). And no one knows our market as well as we do.
Call to arms for the Indian Technology Industry: Focus on skills which are an art, not science.
If technical skills were commodities, would it not be illogical to think management skill as “ART”
If Indians or Indian companies operating from India could acquire both these skills in a period or less than 10-20 years…others can do the same also.
The next logical step, that you say, one has to take is but to get into innovations. This needs a different mindset and a different kind of education and environment (which I think is slowly catching up with Indians, at least in some software companies though with education and culture per say we have to go a long way). The scary part is, by the time we catch up with innovations as a real money-spinner…we should not have the non-America world out-race us
I agree with Vikram. While your article makes a compelling and relevant case for the Indian IT milieu to “upgrade” itself to real cutting-edge innovation, there are several other aspects of importance:
(a) As Vikram points out, going by the line of thought you have presented, management itself becomes a science and not an art.
(b) Irrespective of whether management is an art or a science (and even extending that argument like Steve McConnell does, irrespective of whether software engineering itself is an art, science or engineering), fact is, that despite the best B-schools being in the Western world, it is Indians who have established themselves as ustads of the off-shore delivery model. I think that in itself is a strength to reckon with and we should use this to advantage. Like say, setting up another revenue stream by consulting for “wannabe-ITES companies” in the far east so that our forex earnings from mainstream IT would be supplemented. After all, in a community-enabled knowledge economy, wealth and knowledge increase by sharing.
(c) Innovation in the West is where it is today, because - in addition to access to funds and high-quality education - the Western world has achieved a state of standardisation that makes high-volume routine tasks amenable to automation. Take for example, the state of automation in the transport sector in the US and in India. I think this is as significant a stumbling block to our “getting there” as is the mindset and education that Vikram alludes to, if not more.
In summary though - at the risk of sounding paranoid - we should act as if the writing is on the wall: Innovate or perish. Even if innovation means we start by setting up a new revenue stream (like from consulting as described above) we have to make a beginning somewhere. The sooner the better.