Inefficiency: Getting it Done since 1947

First, I must apologize for my absence from this blog over the last week. In Goa I fell and was feeling the side effects up until a few days ago. I will spare you the details but I am sure you can imagine the symptoms.
With that said, a lot has happened over the last week. After a very relaxing weekend in the resort town of Goa we flew to Bangalore – India’s IT hub. Prior to going to Bangalore I knew very little outside of it being a technology center. Outside of that, Indians informed me that Bangalore boasts great nightlife and cooler temperatures than the rest of the country. Well, it was indeed a few degrees cooler which was very nice. I was able to wear jeans on a regular basis and not sweat profusely after walking half a block down the street. As for the nightlife, I was not feeling well so did not partake but recently Bangalore mandated that bars must shut down before midnight. Good nightlife? This decision is thanks to the very conservative ruling party, BJP, that runs the region.
As for our itinerary in Bangalore we visited Christ University on Wednesday. Thursday we had two company visits: One to Accenture and in the afternoon we went to Boeing. Friday we had our final company visit to GE Healthcare.
Let’s begin with Christ University – one of the longer days we have had in India. In the morning we took a bus to the University and learned about their Slums Education Project. Basically, a wing of the University that does very community service projects throughout the country. Specifically, we were learning about their project in a local Bangalore slum. They had a few initiatives in place here: set up a composting plant and organizing a women’s group. Most interesting was the women’s group. This was a group that met regularly where women from this particular slum were able to discuss any issues going on in their community. In addition, they each donated money and then lent it out to local businesses at a 2% annual interest. This scheme allowed the women to learn basic business and banking skills. Also, it shifted some of the power in the community from the men to the women. Essentially, these women were running a bank of sorts. I was very impressed with their business acumen and their maturity. The age of the group varied with some women being very young to others being senior citizens.
The slum itself was like a scene out of Slumdog Millionaire. Poverty everywhere. The roads were littered with trash and sewage. Cows, dogs and goats roamed around freely (like much of India). Despite the conditions of the slum, I must say that the people seemed happy. Visiting the slums was one of the better experiences I had in India. In a way I am almost jealous that they are able to be so happy with so little while I am still striving for happy despite all my possessions.
In the afternoon we met with Christ University MBA students to discuss the Tata Consultancy and Shoppers Stop cases. Rather than going into elaborate details about our conversations I will give an overview of my thoughts on this experience. I found the Indian students to be very intelligent. Very numbers oriented. They had no problem taking data and processing it as long as numbers were involved. Otherwise they lack the ability to read into the facts and make worthwhile assumptions. Compared to our visit with Chinese MBA students last year I felt the Indian students were a step ahead. While still a weakness, the Indians did posses great amount of soft skills than the Chinese students. Like the Chinese students, the Indians mostly came from a technology and/or engineering background.
The University was very welcoming to our SU group. They fed us both lunch and dinner and put on a short cultural show for us. Throughout this trip both the companies and university have gone out of their way to welcome us and give us the “VIP treatment”.
The next day we had a morning visit to Accenture. Here, Sandeep, the head of Accenture India spoke to us for a couple of hours in a Q&A session. I was impressed that he was willing to make time for us given his job title and the fact that he oversees thousands of people throughout Accenture’s Indian offices. Accenture sees themselves as the top consulting firm alongside IBM. They do view Tata, Wipro, HCL, and Infosys and worthy competitors but not quite in the same league. I think that Accenture and IBM posses a more worldly reach and greater resources. One of the biggest pieces of advice Sandeep had to offer was the importance of business people to get global experience. He suggested taking an expat assignment if possible (seems easier said than done). His point alluded to the growing competitiveness and the increasing talent emerging from countries such as India and China. In order for Americans to stay competitive they have to get this international outlook as part of their resume.
After Accenture we went to Boeing’s Research and Technology office that was only established earlier this year. Honestly, I didn’t get much out of this presentation as they mostly spoke in acronyms that only Boeing people (16 on our trip) could understand. With that said, Boeing seems to have some challenges in India. Politics is crucial in all of Boeing’s deals. The State Department and Boeing work closely to get approval of deals. Also, the US government sometimes steps in to Boeing’s deal on their behalf and negotiates with high level government official in order to try and win this American company business. Boeing currently works with Air India, Jet Airways, and Spicejet. They are also actively seeking military contracts with India but have stiff competition from Saab and Eurojet among others.
Friday we visited GE Healthcare. They had a huge campus in the outskirts of Bangalore with multiple buildings. Each building was dedicated to a different GE business. We had a Director of Engineering speak to us about some of the initiatives being undertaken by GE Healthcare in India. Their vision is the shift healthcare from being reactive to more proactive and preventative. They are taking some great steps towards providing affordable equipment to rural India. For example they have an ECG machine which retails for around $1,000. This machine is very basic but allows for an adequate measure of heart activity and it does not need a doctor to oversee it. They are coming out with many other competitively priced machines that can be used in lower income areas to provide a higher quality of healthcare and thus increase lifespan.
So that’s it. Two weeks in India has flown by. All of our company visits were well organized and worthwhile. I got to see a lot of great things in this country and did some shopping for my friends and loved ones at home.
Some final thoughts:
• India has got to be one of the dirtiest and most polluted places I have been (and I have been to many places in the developing world)
• Things take longer in India
• While money may get you a lot of things it will not get you out of an Indian traffic jam
• People seem happier here even with less
• Democracy is great for the Indian people but it also results in all these delays into improving infrastructure
• Diarrhea is a way of life here – at least for foreigners.
• India is very colorful – I think I took some good pictures.
• It is amazing that peace exists in India with the plethora of cultures that exist.
• I found India to be incredibly frustrating but perhaps it was good in the sense that it helped me relax and realize I cant control every situation.

Times of India and Lowe Lintas

Friday, our final full day in Mumbai, was dedicated to marketing. First we had a nice presentation at the Times of India - essentially the equivalent of the New York Times here in India. We spoke to their marketing lead and the editor of the Futures section. They talked about the paper industry in India. Whereas in the US the industry is struggling it is not really so in India. Sure, internet is becoming more prevalent and the TOI has shifted to putting their papers also on the web but much of India still doesnt have this luxury. Additionally, literacy rate is increasing in the villages creating a further need for print newspapers. Another takeaway I had was how the paper itself is run. While they maintain a great sense of integrity in their work, the Times is like any other business and needs to make a profit. Thus, they need to sell advertising and make their paper appealing to potential and current advertisers. An example of how they have maintained their integrity is with Tata. Tata was their largest advertiser. Being such a large company, Tata is regularly in the paper. The Times reported a negative issue about Tata that resulted in the Chairman of Tata getting upset and pulling all advertising. A year later the Times reported a positive issue and Tata started their relationship with the Times again. Tata realized that the Times will report positive issues when they occur and also negative when they happen. The Times of India never gave in and steered their journalism to make their advertisers happy.

Second visit of the day was Lowe Lintas, an advertising firm. Lowe Worldwide took over the indian company, Lintas, about 2 years. Think Indian Mad Men. We spoke to various people within the company including their British CEO. Indian advertising is VERY different than most places in the world. Because of the diversity in race and religion amongst their country they have to be especially sensitive with all their marketing and advertising spots. Essentially, they have to tell a story to present the message rather than being so direct. They have to relate the message to their citizens. A 30 second spot simply saying to buy a product will not work. As a result many of the advertisements are almost like mini movies with a storyline. Here is an example that Lowe Lintas did for their customer Idea, a cellular company: http://www.youtube.com/watch?v=0bh3HP51rJs Essentially it is bringing in the issue of education which is very important in India. it is saying that Idea phones work in all areas and connect people. In this case it enables/promotes education. They presented 20 or so such commercials for different accounts they handle - all with similar tactics and positive results.

As I write this now I am in Goa - a beach resort town on the Arabian Sea. It is beautiful here - very warm, lush, and lots of water. Will take some pictures...

Ciao,

Paul

Port of Mumbai

Yesterday was a very exciting and tiresome day. Our group headed out on a 2 hour bus ride to the Port of Mumbai where we were to get a tour of the port and meet with Expeditors, a Seattle based logistics company. We arriving at CFS - a container storage area where we meet with Expeditors and the managers of one of the Port's. It was very interesting because we were provided with a lot of exposure that is not normally given to the "outsiders". Expeditors has been in the logistics business for over 25 years. Their strengths are being a non-asset based business that has a strong knowledge and skill set amongst its employees spread around the world.

The most interesting part of the day was actually going to the Port and being able to walk along the docks as ships were coming and going and containers were being unloaded. Again, safety not a big deal. Our group literally was under the containers as they were being lifted off of the ships and onto a truck. Not even the employees wore hard hats. Apparently many lives are lost on the docks each year. According to Madhu, who has been to ports in Shanghai and Seattle, this exposure to the ports is rarely given - a sign of Expeditors strong presence in the region. Mumbai has the 22nd largest port in the World and is smaller than Seattle's. Still, a very big operation and the largest in India. But a good question arises - if the biggest port in all of India is smaller than Seattle's, how do they currently handle and meet the shipping demands of a country with a population of over 1.3 billion people?

Again, kind of a mute point because Indians don't see it as an issue, but the infrastructure is weak. The port is located a good 2 hours out of the main part of Mumbai and the roads are terrible.

We have only had great company visits since being in India but the Port was by far one of the most interesting.

After the port we stopped at a large mall on the way back. We dined at McDonalds where I tried the salsa paneer wrap and had a bite of the chicken maharaja mac... delicious. I bought a cricket bat... no idea how I will get this home but it seemed like a good idea at the time and it was not all that expensive. The mall provided a nice break from the hustle and bustle of the Indian streets.

Paul

Namaste from Mumbai

Hello from Mumbai! I am glad our group made it here. We were scheduled to fly Jet Air but due to two pilots being sacked they decided to have a strike causing a cancellation of all flights. Luckily we were able to get booked on a low cost carrier called Spice Jet for the 1.5 hour flight. We got into Mumbai around 5pm and then had an hour drive to our hotel, The Taj President. Mumbai is MUCH different than Delhi. I think it is more beautiful - more green, massive amounts of waterfront... etc. Also, you can tell the city is much richer. Higher end shops, nicer cars, more modern buildings. I have a feeling i may like Mumbai better than Delhi.

Last night I was pretty tired so I stayed back from some of the group and grabbed a drink and dinner at the hotel. I ate at the Indian restaurant here. I had a good server who explained some of the regional differences within Indian cuisines. Most of the Indian back in states is North Indian. South Indian uses more seafood, coconut, and has different spices and peppers. A very informative meal!

Today we are going to visit Expeditors at the Port of Mumbai. This should be exciting as Expeditors is based out of Seattle.

Will keep you updated.

Paul

First update from India

Namaste from India!

Where to begin? I will not bore you with the details of the 24hr journey just to get here! Rather, I will skip to the first day. From Delhi we woke up at 230am on first day to go to Agra to see The Taj Mahal. This was not as painful as it sounds due to the jetlag and 12.5 hour time difference most people were up at this early hour. It is about a 4.5 hour bus ride to Agra with no traffic and 5.5 hours with traffic. We also left early because it gets so hot in Agra (around 35 degrees Celsius) that is is best to reach the Taj before it gets too hot. It's hard to describe the Taj in the sense that most of you have already seen pictures of it. The difference is in person it is even more beautiful. The marble is of the finest quality and there are so many precious gems that it looks different all times of the day because of how the sun reflects on the building. After the Taj we grabbed a nice buffet dinner at a local Agra hotel and also went to a marble workshop. I was not planning on purchasing anything but i walked away with a little marble elephant with a variety of precious gems within it. That evening I was so exhausted that I just went for a swim at the hotel pool then had dinner at hotel and passed out.

The next day we had our first company visits. We visited Hewitt BPO first. Hewitt does human resources outsourcing - mainly handles benefits for North American companies. The company is based out of Chicago but have a variety of centers in India. This one was in Gurgaron a suburb of Delhi where most of the international firms are. The people we interacted with at Hewitt were all very well educated and seem to posses strong people skills. None of them viewed infrastructure as an inconvenience which I found interesting. Mainly their point was that the lack of Indian infrastructure does not effect their daily business as they are not reliant on it. Plus they have their own generators and transportation system for employees.

Next visit in the afternoon was Hero Honda. This is a joint venture between the Indian company Hero and Honda. For over 50 years Hero has been making motorcycles and scooters but in the 1980s teamed up with Honda to reap the benefits of japanese technology and processes. So far this appears to have been a success for a variety of reasons. 1) The joint venture is still intact. 2)Hero Honda has the majority of marketshare. They have very little presence outside of India - just in Philippines, Bangladesh, Sri Lanka, and Columbia. Their partnership with Honda limits how competitive they can be outside of India. They are only allowed to export 3% of their total production. Other big takeaway after the factory tour - safety is not a big deal here. Compared to China, the factory conditions were horrible. Loud noise and lots of fumes. Barely anyone wore safety equipment...

That evening we went for a walk around a busy shopping street and I worked with Vikas in order to get a SIM card for my phone. This proved to be a very difficult process as the government has cracked down post Mumbai terrorist attacks. not many places sell the SIM cards now and you need to fill out as lot of paperwork. An hour later we finally got it!

Finally a great dinner in the Connaught Place area of Delhi then back to the hotel for some sleep. So far so good.

Later today we go to Mumbai.

Paul

India IT paper

A requirement before we leave for India is to write a position paper on the future of the IT industry. Here is my rough draft:

India’s Future in IT Outsourcing

Since the early 1990’s when India underwent economic reform and welcomed foreign direct investment, the economy has drastically changed much to the credit of it’s then burgeoning IT industry. Almost twenty years later India’s economy is still growing and the IT Business Process Outsourcing (BPO) industry is still strong. However, India has done such a good job in this arena that others have taken notice. Other nations such as China, Vietnam, Philippines, and Brazil are now pushing to increase their share of the BPO business. While India’s superior experience is not disputed, their weak infrastructure, slow-moving government, and lack of diversified expertise in other areas outside of IT has made many other countries a more lucrative destination for outsourcing.

India has been in the IT BPO industry longer than other countries. In fact, India has arguably established the paradigms for how the BPO industry is run. As a result, while the other countries I mentioned above may have a brighter upside, they still need to overcome the widespread feeling that India is still the premier outsourcing destination. As recently as this year, consulting firm ATKearney, rated India as the #1 destination for offhshoring following by China, Malaysia, and Thailand.[1] The ATKearney study does acknowledge India’s outsourcing competitors but does not quite see them as a serious threat. “India and Philippines together account for 50% of the world's BPO market, but Philippines, often spoken of as threat to India, is only a 'distant' second, according to the study. ‘Philippines is more call-centre oriented and we don't necessarily see it growing at the same pace as China and some other South Asian countries. Some of the reasons that has made India number one continue and they will help it tide over the economic downturn faster than any other in the world,’ said AT Kearney senior partner Saurine Doshi.”[2] While most of the world, especially China, has been hit hard but the global recession, India has faired relatively well thus making it more lucrative for the time being as an offshoring destination. Prime Minister Manmohan Singh signaled on September 1, 2009 that the recession appeared to be ending in India, “Singh's remarks came a day after official data showed India's economy grew 6.1 percent in the three months to June, signaling the country was emerging from the negative effects of the global downturn.”[3] India’s already established expertise in IT along with an economy that has held its own compared to other countries, make it for the time being a stronger destination for companies to look to for outsourcing. However, as the rest of the world slowly emerges from the recession and their already established strengths where India possesses weakness in the area of politics and infrastructure, will ultimately cause a shifting of shares of the IT outsourcing market to other destinations.

The biggest roadblock to India’s future in the IT outsourcing real is their lack of a stable and well-built infrastructure. India’s already densely populated cities have little to offer in terms of reliable infrastructure. The roads are few and are dated and mass transit is limited and unreliable. Because of this, companies doing business in India are often left to foot the bill for Indian infrastructure projects or at least provide alternative forms of transportations for their employees. “With virtually no mass transit in Bangalore, Indian technology firm Infosys Technologies Ltd. spends $5 million a year on buses, minivans, and taxis to transport its 18,000 employees to and from Electronics City. And traffic jams mean workers can spend upwards of four hours commuting each day. ‘India has underinvested in infrastructure for 60 years, and we're behind what we need by 10 to 12 years,’ says T.V. Mohandas Pai, director of human resources for Infosys.”[4] As a result of India’s lack of investment in infrastructure, companies such as Infosys are now responsible for providing services that in most other countries municipalities are responsible for. Perhaps a contributing factor as to why India so desperate lacks in infrastructure in and around these IT hubs is that while the industry is large, approximately only 1.6 million (of a total population in excess of 1.3 billion) people are employed in this sector.[5] If the number of IT workers was drastically higher I am sure there would be more of a push to reform and improve the infrastructure. However, as it stands now, the IT worker is the minority in the argument. Not helping their argument is the fact that a good infrastructure is not necessary to provide the various tech services these Indian companies specialize in. Rather, it is an added benefit that employees may or may not have. According to The Japan Times, “Road space in Indian cities is woefully inadequate: It is 18 percent of total city area in Delhi, 11.9 percent in Bangalore, 10 percent each in Mumbai and Chennai, and 6 percent in Kolkata. Ideally, road space should be closer to 30 percent.”[6] Regardless of the need for good roads and other infrastructure to provide tech services, the fact that India lacks so very much in this area provides a huge challenge to those doing business within India. But, India’s lack of a good infrastructure does not just affect those in the country. Companies and consumers are also having a negative experience. “Nokia Corp. saw thousands of its cellular phones ruined last October when a shipment from its factory in Chennai was soaked by rain because there was no room to warehouse the crates of handsets at the local airport.”[7] Outside of challenges due to poor roads and construction, companies must also deal with rolling blackouts, patchy internet and phone service in some areas amongst other challenges. The cost of a lack of good infrastructure within India needs to be accounted for when considering outsourcing to the locale.

Much of the reason that India so desperately lacks a quality infrastructure can be attributed to its political structure. India is a democratic federal republic. Whereas China and Vietnam are socialist states that do not require the approval of a large group of people to make decisions, this is not so India. The normally healthy ideal that India provides a voice to their plethora of citizens is actually a detriment when it comes to some areas of growing economically. A large-scale infrastructure project such as building a highway, airport, or mass transportation may take China a year to complete whereas it could take India a decade just to get approval for such a project. A handful of Indian politician have tried to make India more efficient in dealing with such matters. “N. Chandrababu Naidu, the former chief minister of the state of Andhra Pradesh, transformed the state capital of Hyderabad from a backwater into a high-tech destination by building new roads, widening others, and aggressively carving out land for factories and office parks… His reward? Voters tossed him out of office two years ago. During his decade in power, Naidu didn't do enough for rural areas, and his challenger promised to channel state funds into irrigation projects and electricity subsidies.”[8] Unfortunately, an immensely large population makes it hard to please all constituencies. Usually these infrastructure projects are aimed at benefitting the businesses around the major cities and have no real positive effect on the larger lower-class population of India. Consequentially, it is easier for these politicians who support such large scale projects to be vilified as being in the pockets of rich businesses. India’s large population and democratic government make it inevitable that politics will continue to be a “thorn in the side” for businesses looking to outsource there.

India’s IT industry would benefit if the country contributed more to other business sectors such as manufacturing. Initially I identified the lack of a stable infrastructure as the primary reason that the Indian IT industry will struggle in the future. A more diversified business landscape, one that is not so heavy in IT, would benefit all areas of India as it would provide a higher demand and more pressure for improved infrastructure and services around India. As previously mentioned, to provide top-notch IT services, good roads and mass transit are not a necessity. However, for manufacturing goods and transporting those goods infrastructure is critical to its success. For India to compete with other countries in the manufacturing outsourcing sector a vast improvement in infrastructure is required. Should this happen, the Indian IT sector could ride the coattails and reap the benefits of these projects and services. Currently, IT services represent 43% of the total share of outsourcing to India while Financial Services 17% and Manufacturing is only 9%.[9] An increase share of manufacturing services as a total percentage of the outsourcing pie would result in huge benefits to the rest of the industries in India. With the addition of more manufacturing plants India can increase number of jobs and demand a better infrastructure from the politicians. Hopefully these jobs would be able to employ the same group of people who voted N. Chandrababu Naidu out of office because they felt their needs weren’t being addressed.

There is no doubt that India is and will continue to be the optimal source for IT outsourcing for the next few years. However, India’s lack of infrastructure, slow-moving political machine, and lack of diversity in other outsourcing sectors will hinder its ability to provide the highest-quality and most cost-efficient IT services to International companies. Whereas other countries have looked to replicate and build upon India’s previous efforts with IT BPO, India must look to other countries such as China and Vietnam to learn how they are able to build and replicate efforts so fast. However, there are inherent challenges in this approach. Mainly, the fact the India is a democracy where many other countries now competing for outsourcing business are not. For many of the reasons that India has been so successful and an exciting place to do business in recent years are the same reasons that India will be challenged to maintain their position as the go-to destination for IT services. The current infrastructure and primarily the politics behind this are the primary reasons why India will not be able to sustain their IT industry and will eventually lose out to other countries in providing these services.

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[1] "Global Services Location Index (GSLI) 2009 report | Publications." A.T. Kearney - Global Management Consultants. Web. 01 Sept. 2009. .

[2] "India Remains World's Top Outsourcing Destination - BusinessWeek." BusinessWeek - Business News, Stock Market & Financial Advice. Web. 01 Sept. 2009. .

[3] "AFP: Global economic downturn ending, says Indian PM." Google. Web. 01 Sept. 2009. .

[4] "The Trouble With India." BusinessWeek - Business News, Stock Market & Financial Advice. Web. 01 Sept. 2009. .

[5] "The Trouble With India." BusinessWeek - Business News, Stock Market & Financial Advice. Web. 01 Sept. 2009. .

[6] Bhaskaran, Gautaman. "Infrastructure shortcomings throttling India | The Japan Times Online." Web. 01 Sept. 2009. .

[7] "The Trouble With India." BusinessWeek - Business News, Stock Market & Financial Advice. Web. 01 Sept. 2009. .

[8] "The Trouble With India." BusinessWeek - Business News, Stock Market & Financial Advice. Web. 01 Sept. 2009. .

[9] "Business process outsourcing in India -." Wikipedia, the free encyclopedia. Web. 01 Sept. 2009. .

Namaste

I will be blogging my Indian adventures here! Check back shortly. I leave Saturday, September, 5th.

Paul