“Success breeds complacency, and the last thing that Indian IT industry can do is to be complacent at this point. Competition from developing economies such as Vietnam, China and Eastern Europe is rising for real, and that should be taken seriously,” said Azim Premji, Chairman, Wipro, participating in a panel discussion on IT and Telecom: Time to Think Ahead, as part of the India Economic Summit, organized by World Economic Forum (WEF) at New Delhi from 26–28 Nov., ’06. Better education and better utilization of available talent is the key to compete, he said, even while completely rejecting any possibility from a fight-back from the large Western companies, calling them “yesterday’s business models.”
China and thrust on developing manpower dominated most part of the discussion and Q&A, though infrastructure also got some mention in the discussion, which, part from Premji, included participants such as Francois Barrault, president BT International; c; and India’s minister of state for IT and Telecommunications, Shakeel Ahmad.
“I am often asked how long will the Indian IT growth sustain,” said Premji, opening his remark, only to put in perspective that India’s share of $30 billion of IT and related services in 2006–07 is just about three percent of the global market. “That can potentially be 30%,” he said, “allaying all fears that growth may be slowing down.” He also dismissed the fear that Indian companies may overprice them because of the growth in wages. “Assuming that Indian wage growth remains at 12%–14% as they are today and the U.S. wage growth remains at four percent, it will take 25 years to reach that level of wages,” he said. In fact, he claimed that the attrition rates in the U.S. IT industry is now more than those in India.
On the other hand, he felt countries like China are coming up fast, and they can be real competition for India. Speaking before him, Barrault of BT, said that the Mayor of Dalian had told him recently that he wanted to make his city another Bangalore.
Premji’s reference to China was not limited to the threat from the middle kingdom. While talking on the issue of Visa issuance in the U.S. and European countries (he made it a point to exclude U.K., which he said has very “progressive” regime), he said that trade negotiators of India need to take a cue from China how to gain from the negotiations. “China takes two times of what it gives,” he said.
Premji said that the industry just manages to access about 30% of the 400,000 graduates that come out of colleges every year. “We need to increase that,” he said, while adding that Wipro and other large IT companies are already working in that direction.
Rajendra Pawar, whose company, NIIT, is both into IT services and training, while lading the government’s efforts of late to boost primary education, said that the government should liberalize the higher education. “The government should concentrate on one fourth of the colleges and institutes that it is running today, and make those few real centers of excellence,” he said suggesting that the rest could be released to the private sector.
BT’s Barrault said that development of telecom infrastructure in small towns and villages can bring the people there more accessible to the mainstream. That will breed entrepreneurship and growth, he said.
Premji, who was asked almost all the questions by the audience, said in reply to one, that Indian companies would probably never make billion-dollar acquisitions in the U.S.A. for scale, because there is no point giving a premium to buy what are essentially yesterday’s business models. Saying that the West will gain because of outsourcing in the long run, he, however, made it very clear that when it comes to American IT-services companies, they are at least three years behind in offshoring. His claim that the attrition rates in the U.S.A. are higher than India, and the salary differentials are too large to close means his (and other Indian companies’) present business model would continue to hold good for some time to come.
The annual India Economic Summit of WEF is a platform for people from industry, government, academicians and others to discuss economic issues related to India. It is held in association with the Confederation of Indian Industry (CII).
