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Integrating the U.S.-India circuit

B.S. Prakash

Newer areas of convergence may be emerging between the two countries.

THE EVOLVING technology connections between India and the United States are a particularly fascinating aspect in their current high-energy engagement. The focus here is not on sensitive technologies such as nuclear cooperation, nor on the exchanges between the two governments. From this writer's privileged perch close to the high-technology hub in the Silicon Valley, the attempt is more to outline the corporate and business-to-business connections driven by shifts in technology and the emerging implications for India.

The close link between Silicon Valley and the Indian IT buzz centres such as Bangalore, Hyderabad, Chennai, and Gurgaon is now well recognised. To speak of the imprint of Indians, and now of Corporate India, in the global business environment of which Silicon Valley is an integral part is not patriotic hype. It is visible in the critical mass of Indians at all levels in the Valley, in the growing awareness about Indian capabilities among educated Americans, and if proof is still needed, in the fact that as many as 220 of the Fortune 500 companies have some presence in India.

The patterns of this connection, however, have evolved over the last three decades.

To trace this evolution very briefly, starting from the 1970s many bright Indian engineers from IITs (and in many cases with higher degrees thereafter from top-notch American Universities) started gravitating towards Silicon Valley. Some of the well-known names in the Valley such as Vinod Khosla or Knawal Rekhi belong to this period. They were instrumental both in establishing a profile of competence and success and also of spurring hundreds of other Indian engineers and technologists into making their mark here. In due course this led to a phase of replicating Silicon Valley experiences in entrepreneurship in India. Corporates such as Infosys or Wipro to this day are not only closely linked to the IT industry in the U.S. but even their campuses are clones of the offices in the Valley — from the Golf carts to ferry visitors to the in-house shops selling T-shirts and caps with the company logo.

The next phase of making India a force to reckon with for IT solutions happened from around the year 2000 with the imperative to solve the Y2K problem, which gave a real impetus to Indian software programmers. Since then we have seen an exponential growth in the IT sector, which continues to show phenomenal export growth of more than 30 per cent. Next, the growing global connectivity, the Indian competence in English and the relative cost advantage inevitably led to the famous or infamous `outsourcing.' Many parts of the information processing or the lower end IT work was shipped to India in a `flat world' paradigm as popularised by Thomas L. Friedman. The many call centres and other BPO-related offices that now dot the Indian landscape have shrunk the space and time between the two continents. The outsourcing issue did become a contentious political debate during the last U.S. elections, but it would now appear that the inevitability and irreversibility of outsourcing is accepted at least at the corporate level in the U.S. Certainly, in Silicon Valley, the logic of it is taken as virtually infallible.

But we are already in the next phase. What we are seeing today is a more sophisticated understanding of how partnering with India can be profitable and productive for business. This realisation is leading to many major American companies starting R&D centres in India or looking at integrating work in India with their global operations.

An example from the exciting area of bio-technology may make this logic clearer. In bio-technology or for that matter in pharmaceuticals, the process of finding a new solution or developing a new product is extremely expensive, time-consuming. It also entails risks and failures. It is the nature of science and industry that the processes require many trials and errors, a pool of scientists from a variety of backgrounds — pathologists, pharmacologists, engineers, biologists — working together, and several laboratories trying out different tracks. Drug discovery, for instance, is a very expensive process and the search for a new molecule can cost up to $1 billion. Some of this work could be done in India, with the costs reduced by more than half.

India offers researchers in many of these specialised areas, laboratories, and possibly even opportunities for clinical trials. The point that emerges is the attractiveness of partnering with India, or offshoring operations to India, to bring down the `cost of innovation' of a new process or product. Of course there are many other issues involved — ownership, intellectual property protection, infrastructure, and terms for technology transfer. But many in Silicon Valley are already aware that in the innovation cycle, there would be both a cost and an intellectual advantage in factoring India. The next exciting transition may well be from product design to product germination and hopefully product development. What is true in bio-technology is even truer and already prevalent in IT. Nano-technology, the science dealing with very small materials, is another area of significant opportunities.

Another factor that energises the technology connection is the exponential growth in the domestic market in India for electronic products. Our success story of adding more than five million mobiles a month is getting known and dramatically demonstrates the market potential in India for all kinds of technology based products.

There is also a realisation that India is looking at technology-driven solutions for some of its mega challenges, be it in public health, education or agriculture. The slew of governmental agreements for cooperation in these areas would also lead to much more activity in the technology sector across the spectrum.

Disruption and convergence are terms used in management sometimes to see how new patterns emerge. The changes in Asia, principally in India and China, are leading to such disruptions in the traditional patterns and in high-technology may lead to newer areas of convergence between the U.S. and India.

(The writer is India's Consul-General in San Francisco and can be reached at cg@cgisf.org.)

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