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TECHNOLOGY: How India became an outsourcing magnet

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NEW DELHI – An inoffensive history of the Indian software industry, written by a good-natured man who frequently uses the word “proactive” in its telling, was released this week.

Kiran Karnik, the former president of India’s best-known pressure group, the National Association of Software and Services Companies, or Nasscom, was in a position to write a deep and revealing book. But he chose not to make enemies so late in his life. In fact, The Coalition of Competitors is largely about how Nasscom used its public relations skills to create the myth of Indian software genius and influenced government policy and journalism to favor the Indian software industry.

After the terrorist attacks of Sept. 11, 2001, and the slowdown of the U.S. economy in 2002, when outsourcing to India became a political issue in the United States, Mr. Karnik writes, Nasscom was involved in intense behind-the-scenes dialogues with politicians, businessmen and journalists.

One of the aims was to move the public debate from the emotional (human interest stories about job losses that pull at the heartstrings) to the rational, he writes in his book. He says Nasscom was disturbed by emotional stories in the American news media, such as 35-year-old single mother, supporting sick parents, loses job due to outsourcing and now is unable to pay school fees for her daughter.

Nasscom countered such reports by digging out happy stories, for example, how a young girl’s life was saved following an accident because her X-ray could be immediately sent and analyzed by a certified radiographer in India — thanks to outsourcing.

Mr. Karnik, who was president of Nasscom from 2001 to 2008, assumed office after the death of his predecessor, Dewang Mehta, an exuberant man who served as a bridge between politicians and software entrepreneurs.

Mr. Mehta altered, at least for a brief spell, India’s most popular slogan, a form of fervent prayer addressed to an unidentified benefactor: Food, clothes and shelter. He changed it to Food, clothes, shelter and bandwidth.

It is impossible to know when exactly the Indian outsourcing industry was born. According to Mr. Karnik’s book, however, a meeting at a New Delhi hotel in 1989 was a significant moment.

Jack Welch, who was then chief executive of General Electric, was in India to persuade the country to place an order for G.E. aircraft engines. Present at the meeting was Sam Pitroda, a technology adviser to the Indian prime minister, Rajiv Gandhi.

As recounted in The Coalition of Competitors, after Mr. Welch said what he wanted from India, Mr. Pitroda said, Fine, but first we want you to outsource $10 million of I.T. software work to India.

Mr. Karnik writes that G.E.’s famous boss was surprised, but he finally said, “Fine. Done.” And G.E. became the first U.S. company to outsource software work to India.

In the 1980s, Mr. Gandhi tried to computerize the vast and numerous departments of the Indian government, but senior bureaucrats were initially reluctant to accept the technology. The personal computer was seen and largely used as a typewriter and, surely, no officer wanted to play the lowly role of a typist, Mr. Karnik writes.

But, following the economic overhauls of 1991, urban India began to transform at a rapid pace. Nasscom helped persuade the government to adopt policies that would make it easy for foreign companies to outsource work to Indian firms. There were hundreds of thousands of engineering and science graduates in the country, and the software industry sucked them in at various rungs, offering them unprecedented salaries and a chance to work in the United States.

The brightest Indians joined the industry, and they made it appear that India had a deep pool of exceptional software talent. Nasscom, says Mr. Karnik, played a crucial role in promoting the idea of a republic filled with young geniuses.

After the happy 1990s, when the world changed suddenly and the Indian software industry faced hostility in the United States, Mr. Karnik writes, Nasscom was tempted to open an office there, but decided against it reasoning that this could become a political bull’s-eye.

Nasscom took a more surreptitious tack, trying to convince influential Americans that Indian outsourcing was valuable to the U.S. economy.

There were problems at home, too, which persist. A country that has not invested in education cannot sustain the myth of its talent for long. Beneath the surface of what is considered gleaming Indian talent is an ocean of unemployable graduates. Even a habitually inoffensive man like Mr. Karnik does not hide the fact that India’s software industry found the quality of Indian graduates so poor that they considered only 25 percent of engineering graduates and 15 percent of other graduates employable.

Also, in the past decade, the Indian software industry has lost considerable political support because politicians have realized that millions of rural voters, who are not direct beneficiaries of the software boom, are repulsed by all the fuss around information technology. A chief minister who often posed with his laptop lost power and is no longer seen with his computer.

When top IT businessmen in Bangalore criticized the Karnataka state government for the pathetic state of infrastructure in that city, local politicians began to harass them in various ways.

Mr. Karnika’s history of the good and the bad days of Nasscom and the Indian I.T. industry comes as India’s supremacy is being threatened by more efficient countries, like China and the Philippines. Some Indian companies themselves now outsource work to the Philippines.

Manu Joseph is editor of the Indian newsweekly Open and author of the novel SERIOUS MAN

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