India: Reality Check On IT - Masters or cyber-coolies? (fwd)
"Frederick Noronha (FN)" <fred@...> wrote:
From: "Frederick Noronha (FN)"
Date: Sun, 13 Jul 2003 00:56:49 +0530 (IST)
Subject: [bytesforall_readers] India: Reality Check On IT - Masters or cyber-coolies? (fwd)
---------- Forwarded message ----------
India: Reality Check On IT
Masters or cyber-coolies?
By Praful Bidwai
[July 7 2003]
The success of India's information technology (IT) industry and
related businesses has produced such a euphoric and exuberant
reaction that some of its more enthusiastic celebrants have already
declared India a "knowledge-based society" and "information
superpower" which qualifies it for a special global status. This
"knowledge-based" description sounds odd, to put it mildly, in a
society in which almost half the population is illiterate, the
general level of skills very low, and transmission of knowledge
severely restricted by the hierarchies of class, caste and gender.
India's computer software export boom has admittedly been an
impressive success story, with annual growth rates of 40 percent or
more over the past decade. It has contributed significantly to
India's foreign exchange reserves. But euphoria over it could be
misplaced--not only because growth has now slowed down to 26 percent,
according to the latest figures.
IT certainly contributes in growing measure to the Indian economy,
but it remains an "island" phenomenon. It cannot drive the entire
country into another epoch or "stage" of development. There are three
reasons for saying this. First, the computer software business
remains extremely (80 percent-plus) export-dependent. This is even
truer of information technology-enabled services (ITES) like call
centres and medical transcription, and business process outsourcing
(BPO), which are now growing at twice the speed of software exports.
The best or most informed estimate of the size of India's indigenous
information technology sector, including hardware and domestic
software, is that it accounts for less than 2 percent of GDP. By
contrast, trade and hospitality alone account for 15 percent of GDP.
Even in external sector accounts, software exports ($7.2 billion)
still contribute less than remittances, mainly from poor workers in
the Gulf ($8.1 billion). Even if the ITES/BPO business grows five- or
eight-fold over the coming five years, as optimistic projections
estimate, its contribution to India's GDP will remain relatively
Second, despite their meteoric rise, most IT companies are puny even
by Indian corporate standards, with their sales turnover usually
within some hundreds of crores of rupees, or in the top range, a few
thousand crores--as compared to tens of thousands for manufacturing
sector majors. It is only now, this year, that India's largest IT
company, Tata Consultancy Services, joined the "One Billion Club",
with revenues exceeding Rs. 4,800 crores. Other IT giants, like
Infosys and Wipro, have even lower revenues (Rs. 3,323 crores and Rs.
4,334 crores respectively). Only four IT companies figure in the
Economic Times list of India's top 100 corporations (rated by sales).
IT companies' profits are high, share prices stellar, and market
capitalisation spectacular. But their economic size and influence are
And third, the geographical distribution of India's IT business is
extremely uneven. The maldistribution bears no relationship to the
uneven spread of literacy, education and other human development
indicators, or to infrastructure development. For instance, of the
total exports of computer software and electronics hardware, the
South alone accounts for over 50 percent, with the North coming a
distant second (26 percent), and the East lagging at a pitiable 2
percent. If Delhi and adjoining parts of Uttar Pradesh and Haryana
are excluded, the North's share falls to an embarrassing 4 percent.
The South has always taken the lead in IT, with Karnataka alone
claiming half the region's share. Yet, there are no signs that these
huge disparities are narrowing. This too does not speak of a
national-level driving force or "growth engine". There are other
basic constraints on IT growth too, such as poor infrastructure, low
telecom density (just 5 out of 100 Indians are connected), and one of
the poorest levels of penetration of computers (less than 6 machines
per one thousand people, as compared to China's 19).
Many IT strategists pin their hopes on the relatively rapid recent
expansion of IT-enabled services. Their growth spurted last year by
59 percent to touch Rs. 11,300 crores (of a total of Rs. 46,100
crores for the IT sector as a whole, which grew by 26 percent).
ITES-BPO now contributes a quarter of India's IT exports and has
created 160,000 jobs. ITES boasts of a 65:35 female-male employment
ratio and also a fair amount of indirect job creation. According to
the National Association of Software and Service Companies (Nasscom),
ITES "has the potential of creating one million direct jobs by 2008"
largely through outsourcing or farming out of business from the West.
India has emerged as the preferred ITES outsourcing destination ahead
of China, Russia, and many other countries because of advantages like
low costs, language, scalability, and stability of policy, according
to investment banking research firm Brean Murrary Research. In its
report, "Secular Megatrends: India -- Software Outsourcing
Superpower", the firm says India should adopt the outsourcing model
as a "strategic necessity". This projection is based on the fact that
top firms like Infosys and Wipro have recently signed large contracts
in the $20 million to $100 million range with big US manufacturing
However, even here, hope is running up against social obstacles. The
greatest of these is rising awareness in the Western countries that
India's ITES has grown largely because of outsourcing and transfer of
jobs. For instance, well-known consultant Forrester Research
estimates that 3.3 million service-sector jobs will have left the US
by 2015, perhaps half of them to India. Another firm (Deloitte)
predicts that ITES operators in the First World will move two million
jobs to low-wage countries over the next five years, again mostly to
Similarly, in Britain, The Sunday Times carried the "shock and
horror" headline: "Banks prepare to shift 200,000 jobs to India".
This has so alarmed British trade unionists that they have decided to
launch a campaign against India's call centres and software industry
which, they feel, are big "job-snatchers".
These are not all "crying-wolf" scare stories. In the US, Silicon
Valley programmer Kevin Flanagan recently shot himself to death,
because he couldn't face the prospect of losing his job to
outsourcing. Ironically, before being given the marching orders, the
programmer helped train the very same Indian workers who were
supposed to take over his job. Flanagan's suicide was an extreme
step. But his circumstances were by no means exceptional. He was one
of some 800,000 Americans who have lost their jobs to outsourcing in
the past year alone. No wonder this has prompted legislators in New
Jersey to ban the export of IT-related state contracts to other
countries. Other American states (Missouri, Connecticut, Washington,
Maryland) are also moving in that direction. It won't be easy to
prevent such curbs--despite US rhetoric about "free markets".
Livelihoods are at stake.
The basic reason why India is seen as an outsourcing "threat" is
simple. In the US, it costs $43,000 to hire a full-time employee in
the ITES business. The cost of an Indian employee is $6,180, or seven
times lower. Because of time-zone difference, India can provide
round-the-clock service on all days of the week. (There need be no
closures on weekends). The average Indian employee's productivity is
high. Big companies like General Electric report 85 to 92
percent-plus "satisfaction" ratings for its Indian employees. There
is a relatively large pool of English-speaking low-skilled manpower
in India. All this makes India a Western corporate attraction--and an
IT worker's nightmare!
The crux, the key, is low wages. That's the bottom-line! India's
ITES-BPO, like its computer software business, is heavily
concentrated in low-paid jobs and low value-addition segments. Indian
companies have developed very few finished, marketable software
products, selling which generates the cream. They tend to develop
components or sub-packages/assemblies/programmes that go into the
final products made and marketed by US companies. Thus, a good
proportion of the sub-programmes in Windows 95 and 98 were developed
by Indian engineers. But it's Mr Bill Gates who skimmed off the
The situation is even worse at the level of call centres. Here, young
women and men work painfully long hours practising cultivated
American accents to sell products they have never seen or give
invisible customers information they don't remotely comprehend (e.g.
about a restaurant's location in Memphis, Tennessee)--all for a
pittance. This disembodied, alienating relationship to work, and low
levels of skills and wages--lower than even a bank chaprasi's--are
turning these people into almost mindless cyber-coolies.
This is not something we should be proud of--no more than the Chinese
should be proud of producing low-cost goods thanks to repressed,
non-union, low-wage labour. If we want to get into high-end,
high-value-added services, which alone can upgrade our people's
skills while raising their incomes and redistributing new wealth, we
must set our sights high. That implies ambitious goals for manpower
training, skill generation, backward-region development (through the
conscious creation of new jobs in Bihar or Punjab), export content
rules, etc. We can't let Western companies do that for us. Setting
our goals in accordance with our people's needs and resources is the
only way we can move from being cyber-coolies with no rights and
little security, to dignified, respected workers who control the
labour processes they work under.--end--
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> The crux, the key, is low wages.exactly; trivedi makes a similar point in the post on 'cyber-coolies,
english and hindi'
from time to time the forbes magazine 'public legend' about the
bombay dabbawallas does the rounds on the internet. you know the one -
- "Six Sigma for Mumbai's Dabbawallas":
"They make one Error on every 16 million transactions.... The charge
for this extraordinary service is just 150 rupees ($3.33) per month,
enough for the tiffinwallahs, who are mostly self-employed, to make a
good living. After paying Rs. 60 per crate and Rs.120 per man per
month to the Western Railway for transport, the average Tiffinwallas
clears about Rs. 3,250."
"a good living" in mumbai on rs. 3,250 a month -- yeah, right.
and we all have anecdotes of this kind to narrate: take the the
local 'iranian' eatery, 'cafe bahar', 100m down the road from my
place. the amount of 'traffic' the front-desk chap handles at any
given time is simply amazing -- a dozen dishes in varying quantities,
some for the 'table' and some 'parcel'; the occasional customization
request -- mirchi kam -- to be built into the orders; the constant
reprioritization -- 'wajid, kya hora?' 'chicken 65 chota
saab'; 'nakko, usko do banao, ek parcel aur ek table, aur uske baad,
ek cashew parcel': and this triage is in 'realtime' as the kids say.
in the several hundred parcels i've taken from the place (yes, i'm
practically the cornerstone of their business :), there've been mix-
ups all of three times, and then the alternatives have been close
enough: mutter paneer instead of palak paneer, that kind of thing.
someone else was telling me about a chow mein joint on the pavement
on a commercial street in kolkata which was doing roaring business.
an upstart macdonald's came up opposite -- swank, slick and
expensive. the mac-place closed down in six months: it just couldn't
match the efficiency levels of the chow mein joint.
unfortunately, as bidwai and trivedi point out, the economic heart of
this high efficiency lies in low purchasing power and low wages.
precisely because wages are pathetic, costs are low, and affordable
within the disposable incomes of the middle class.
nor is this new: as fernand braudel in _the perspective of the world_
(1979; tr. 1984) -- the third volume of his magisterial 'civilization
and capitalism: 15th-18th century' -- reports:
"It is a truism to speak of the gap between Indian wages and those in
Europe. In 1736, the directors of the East India Company reckoned
that the wages of French workmen (and we know that these were far
below those of English labour) were six times as high as wages in
> The cost of an Indian employee is $6,180, or sevenif wajid's wages were such that he could live a half-way decent life,
> times lower.
these six sigma stories might look rather different.
Dr A Giridhar RAO
'Sudarshan' 1st Floor, 3-5-819 Hyderguda, Hyderabad 500 029, India.
Tel +91-40-2323 2989. drgiridhar@....
--- In FRIENDS_of_UP@yahoogroups.com, shaji john <shajijohnk@r...>
> "Frederick Noronha (FN)" <fred@g...> wrote:To:
> CC: s-asia-it@a...or cyber-coolies? (fwd)
> From: "Frederick Noronha (FN)"
> Date: Sun, 13 Jul 2003 00:56:49 +0530 (IST)
> Subject: [bytesforall_readers] India: Reality Check On IT - Masters
> ---------- Forwarded message ----------
> India: Reality Check On IT
> Masters or cyber-coolies?
> By Praful Bidwai
> [July 7 2003]
> The success of India's information technology (IT) industry and
> related businesses has produced such a euphoric and exuberant
> reaction that some of its more enthusiastic celebrants have already
> declared India a "knowledge-based society" and "information
> superpower" which qualifies it for a special global status. This
> "knowledge-based" description sounds odd, to put it mildly, in a
> society in which almost half the population is illiterate, the
> general level of skills very low, and transmission of knowledge
> severely restricted by the hierarchies of class, caste and gender.