Bhoo wears the thinking cap!

As if that is possible!

Archive for the ‘My dream for India’ Category

Of course, I have a lot of interest and huge hopes on India’s development. Here are my thoughts!

India: socialistic, USA: Capitalistic – is the image changing?

Posted by bhoo on December 11, 2006

I am not a political commentator.  I do not have very strong opinions either on these matters, but this is very obvious to my eyes, that I cannot but write about it.

I have observed in India that the general portrayal of rich people in India is that of bad people – you cannot become rich without bending law kind of a feel – and rich is taking away wealth from the poor kind of a thing.  I have felt that India leans towards being a socialistic democracy.

In the recent times, that has changed – with rich people – the likes of Narayana Murthy and Azim Premji – adorning the riches, there is increased respect for rich people, and I think there is a general adoration for those who make money, compared to those who do not, and it is not a default image of a “crook” for those who are rich.

On the contrary, I have always felt that the USA has a capitalistic outlook – there is respect for those who make money.

But, in my recent visit, I am hearing so much of negative comments about “Rich is becoming richer, poor becoming poorer”,  “Burgeoning CEO’s salaries”, “More than 40% of entire country’s income goes to less than 10% of the population”.  It is there in every media – newspaper comments, TV shows, radio shows, everywhere.  Of course, Iraq war was a bigger discussion in these 4 weeks in all media, but this was there, and whatever was commented about these matters was generally negative about those who are rich!

One of the people that I visited even asked me – “software engineers seem to make much more than others in India – is that creating a civil unrest, like there is a fear of such a thing in the USA?” – I do not believe there is any thoughts in those directions in India – or am I cocooned to notice that?

A friend gave an explanation – in the last handful of years, the number of scams exposed in the USA is enormous, compounded with economy not doing very well – it is creating a situation that lends itself to such general feelings.  He says, the underlying core is still strong in the USA.

Somehow I seem to hear these things more in the United States, than in India!

Is India becoming more and more capitalistic, with USA becoming more and more socialistic?  Some political commentator, I am sure is looking at this. 

This is just an observation from a naive onlooker!

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Is outsourcing to India losing its cost competitiveness?

Posted by bhoo on December 2, 2006

The worry is there – salary costs in India are going up and up, like there is no end!  So, will the cost arbitrage – the very reason why India has shined in the IT sector so far – sustainable?

Will India lose its cost competitiveness?

I believe that cost competitiveness is sustainable.  Here is a recent research from Everest research institute, that looked at this aspect from many different angles, and reported that labor arbitrage will likely sustain for next 30 years.  This is what Everest Institute had sent after I attented the webinar on India’s cost arbitrage .

That is just one aspect – there are several other reasons why India will sustain competitiveness for several more years:

a) Increased availability of experienced engineers:

Our CEO, Gowri – comes with this explanation: 

We did not have 150-200k engineering graduates passing out every year, till early 2000s.  It was more like 20-25% of these numbers those days.  So, the number of Indian IT people who have 5+ years of experience is limited to the lower number of people that were added to the pool before 2000.  Subtract from that those who shifted to the USA, due to the high H1B cap of 150000 that used to exist until recently.  So, the pool of engineers with 5+ years of experience is very limited.  And, the demand for them is huge – and hence that talent commands a huge premium right now.

And again, until 2002, the IT industry in India was not hiring in such volumes either – it is only in the past 2-3 years that the industry is hiring in such numbers.  But, the opportunity to shift to the USA is limited by the H1B cap, and also the sheen is lesser now than earlier.

So, these people that are added to the industry as fresh graduates are gaining experience in the industry, and in the next 2 years these people will turn out to be experienced.  The experienced lot will become a lot more available in the next 2-3 years, and hence, since supply is a lot more, the costs will stabilize.  The salaries will continue to grow, but, not as fast as it is now.

b) Shift work to the lowest possible level: 

A lot of successful companies in India are sustaining by using a good process to produce quality work with a team of less-experienced people.  That model is getting more and more perfected, and looks sustainable as of now. 

All said and done, experience counts, and so there is a process overhead of QA and testing, and a senior guidance and so on.  As the experienced pool becomes available, productivity will increase, and hence the cost will cut down further.

c) Other costs will come down:

One surprise element with India is the cost of other infrastucture.  Real estate rentals in India is comparable, and in many cases more expensive than the USA.  It is more expensive to hire a sq. ft in Tidel park in Chennai, India, than an office space in Empire State Building, New York.  The cost of power from power companies is comparable at about 10 cents per kwhr, but, the loaded costs of UPS backup, need for generator, etc makes the power very expensive in India.  Internet connection is the killer expense of them all – You can get a T1 line (1.5 MBPS) for $300 – $500 per month in the USA, and broadband connections – which provide much more bandwidth than those in India – are even cheaper than that.  If I were to get an equivalent 1:1 T1 connection in India, it will cost close to $3000 per month.  (See the tariff here.)

One investment banker that I met was saying that these costs will come down in the next few years.  If I look around and see the amount of construction going on around India, I can see how the availability of commercial space will multiply in the next 1-2 years, and how that will change the rental costs.  I can also see how power scenario has been improving in India – it is not a distant future when we are going to see India using UPS only for mission critical applications, like it is in the USA now.  I am seeing internet costs coming down so fast in the past few years, that I do not see how it will not be comparable in a very short while.

Conclusion:

These factors, in addition to those mentioned by Everest Research Institute should be able to sustain India’s cost competitiveness.

Posted in My dream for India, Outsourced Product Development(OPD), Outsourcing | 3 Comments »

Indian Roads are broad, minds are not!

Posted by bhoo on September 20, 2006

Everytime I drive in an Indian road, this question haunts me – why is it this way – congested and slow and painstaking – and when, if ever, will this condition change.

Contrary to popular belief, I personally do not believe fully that our roads are narrow, or that they are badly built.  If you think I am mad, take a drive between 11 pm and 5 am on the roads, and you will know what I am talking about.  The roads are broad enough, and the roads are built OK also, except for a few bad roads!

There is certainly room for improvement in the road quality and breadth.  But, that does not preclude us from the other problems plaguing our roads! 

The other day I was traveling in an excellently built road, that connects 2 outside suburbs of our city (Chennai), circumventing the problem of entering into city traffic.  This was a broad road, 2 lanes, and 2 very broad shoulders, for accommdating bike traffic.  Almost fully built as an elevation, and hence not too much scope for shops on either sides.  I was clocking 100 KMPH (65 MPH), for about 10 Kms (7 miles). 

What good is this road, if we do not have any courtesy to the other drivers on the road?  There was a truck guy from my front, who was trying to overtake another truck, occupying my lane, making it dangerous for me!  Of course, he might have thought, there is a shoulder, and I could either come to a complete stop, or occupy the shoulder, to let him have HIS WAY.  But, that was not to be.  There was another truck, who was overtaking this second truck, coming in the opposite side in the wrong side’s shoulder.  It is like a 6-lane highway, where 3 lanes are devoted to the traffic opposite to my direction, and as if I was driving in the wrong lane.  I had to come to a complete halt, from 100 Kmph, and thank that I was alive after such a dangerous incident.  From then on, I lost all my stamina to drive fast on that road.

The most prevalent attitude on indian roads is “one-upmanship”.  We drive like “Hey, you! See, I have won you!”.  And, another mightier person wins over us, another person wins over him and so on… In the entire process, everyone loses, and the entire traffic is so slow!

I think there are 5-6 factors that contribute to what we see in roads.  The most important is training and courtesy.  We need a very strong training, a very strong iron hand to implement all the strategies together to solve this problem, to make our roads safer and faster.  Any initiative that does not look comprehensively at all these aspects together cannot solve the problem.

Till we accomplish that, no amount of fly-overs are grade separators or 6-lane highways will ever help us:

— Avoid one-upmanship:  We need to become much more courteous on the roads.  One-upmanship never helps.  It makes everyone slower.  We need to have severe fines for those who drive in this fashion!
— Have more inspection.  The theory has been that the traffic cops are corrupt and making them powerful will kill us.  I think the solution is to make bribing legal!  What that means is – if a traffic cop catches some wrongdoer, he gives a spot fine, and he gets to keep 50% of such spot fine.  If we do this, compliance will increase, and the traffic cops will be more motivated to be honest to the system.  This is kind of a revolutionary change!  (Of course, I recommend this kind of revenue-sharing change to a lot of our government departments, as a way to kill corruption, and to keep the Babus motivated to do good work.)
— Have strict parking rules.  Our entire country is built with shops on either side of the roads.  The big problem is that the shops face the roads.  The shops invariably encroach into the walk ways and many times the road itself.  Then, the visitors to the shop, who park their vehicles in front of the shop on the roads, stand in front of the shop, and many times in a real chaotic fashion, not bothering about the ongoing traffic.  This entire activity needs to be stopped, and with strict rules to keep the road clear, the shop owners will be discouraged to build and operate shops without paying heed to the traffic hindrance that they are causing.  We need to have clearly earmarked parking spaces in the side roads to be able to implement this strictly.  We need to build multi-storeyed parking lots in many places and have stiff parking charges!
— Increase the public transport multi-fold, and introduce multiple classes of public transport.  This, while is happening, is not happening enough.  There is so much crowd in the buses in India.  Why can’t we run much more buses?  Why should it be that the 2 alternates to commute without self driving only be bus and the nearest is the very expensive auto-rickshaw?  If we introduce a class in between, it will sell well.  Our omnibuses and mahindra vans, and shared autos, charge slightly higher than buses, are only slightly more comfortable than buses, but have such a high patronage.  That goes to prove that if we ply some more means of transport that is even better than the vans and shared autos at a premium, people will buy.  This needs huge investments.

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