SPEECH OF KIRAN KARNIK, PRESIDENT OF NASSCOM
Delivered at Cebu ICT, June 2005

Excellencies, distinguished guests, ladies and gentlemen, delegates, good morning. It’s a special privilege and a treasure to speak with you this morning, and I bring you greetings from the Indian IT industry—very warm greetings—made all the warmer by the fact that we are having 42 degrees in Delhi, and I hope that you are enjoying better weather.

I want to speak this morning about the Indian IT industry, and then share some thoughts with you about how we might look at working together between India and the Philippines in areas of joint concern, joint interest, and for our mutual benefit as we move forward in the area of IT and business process outsourcing. I do want to first say that I do miss being there personally, I’d have been delighted to have been amongst you this morning, to share the excitement of an excellent conference, to listen to all the very distinguished and expert speakers, to mingle with all of you, to look at the beautiful country in the City of Cebu, and of course to meet the beautiful people of the Philippines. I’m going to miss that, sadly, and I do hope to make up for it some other time. But this morning we’ll have to make do with my virtual presence and I would like to share with you some thoughts as best as I can from many thousand miles away.

The Indian IT industry has done rather well for itself; it began in its present form just about 15 years ago when we first started realizing the possibilities of what we could do in the area of software, as we began getting out into the world markets and looking at what was possible globally. It was a break in many ways for India, because this was a first industry that looked on itself as necessarily being globally competitive from Day One. We did not look for protection, we did not look for tariff walls and barriers that would help a nascent industry to grow, as has been the argument in many other cases. We realized from Day One that if this industry is to grow, if we were to survive in India, then it needs to be competitive and stand on its own feet. And it was with that philosophy that the industry began. And it is for this reason that the Indian IT industry has welcomed multinational firms into India. The reason is not far to look for: it is because the presence of these firms in India—especially in the early years—give the credibility to India as a destination from which to source IT. If you had large, well-known multinational companies coming into India, and developing software in India, getting services from India, then the credibility of India as a source for these services would go up, and that would benefit Indian companies, too. This sounded like theory, but it actually happened in practice, and today we are, in many ways, reaping the fruits and the benefits of that outlook, of that approach, of saying, “look, if the pie grows, we will compete, but we will all grow.” And I want to come back to this as we talk of India and the Philippines.

Today, the Indian IT software and services industry—which includes product development, services, business process outsourcing—taken together, this industry is India’s number one exporter. Last year—our financial year ends March 31—we had exports of over 17 billion dollars. The domestic market is much smaller, about a fourth of that, but growing rapidly. And more important than numbers has been the fact that the growth of these numbers in India has meant that today we are able to provide a very wide range of services and a wide range of development facilities to our customers around the world. The Indian IT industry takes pride in the fact that it is not servicing customers, but that it is working with partners to make them competitive. In a globally competitive scenario, nothing could be more important to a company than to make sure that its products and services are competitive. And that competitiveness comes not merely from being lower in cost, in fact often, that’s not an important parameter, it comes much more from having high quality, of having high customer service and of having a reliable source from which you can get a predictably similar kind of services, day after day, week after week. And that is what the Indian IT industry has been able to establish. It’s been able to establish very high standards of quality, reliability, and delivery, and being able to ensure and assure customers that their data and their software is safe and secure. What we would probably call the whole aspect of cyber-security, which includes data privacy, protection and safeguarding of intellectual property rights, and of course, network security. Taken together, these are important.

So the Indian IT industry has been able to assure its partners that it is, as I said, a very reliable partner who can deliver high quality at a given time as required by them, and to do so in a very secure manner, and also—not unimportantly, though this is not number one any longer—to do so at a cost that makes it very competitive. At the end of the day, it’s value for money, and that’s what’s driven this industry all the way through.

The driving factors, the kind of things that have made this success possible, have been substantially related to the human resources available in India. It’s not just the quantity of human resources, but equally, it’s been the quality of the human resources, the motivation levels of the people who work in this industry, and their ability to work with great sincerity and put in the kind of hard work that this industry demands. And that, together, has meant that we have been able to provide what we need to do on an ongoing basis.

Equally important from the point of view of many, many customers is not only the skill sets, but the scalability of the skills, the fact that you can go from a few dozen people in a particular area to a hundred or a thousand without scraping the bottom of the barrel, without compromising on quality, these have been the facets that have given the kind of human resource aspect of the industry.

There have been one or two important factors that helped us to get where we are. One of them, certainly, has been a very conducive and industry-friendly policy band a regulating framework. There are incentives for exports, which enable and facilitate the export growth; there are incentives for investment, which enable and help people to come in and make the investment in this industry; and there is, overall, an environment in which the industry is encouraged to grow, and indeed, the Indian government has been very helpful, and we work jointly with them to create this industry-friendly environment, an investor-friendly environment, which, at the end of the day, helps our partners around the world.

We’ve also had the good fortune of having a large part of the market being _____ by us, which understands and speaks a language with which we are familiar, and that is English. This has helped us make initial breakthroughs in initial markets in the US and the UK, and has helped us keep the momentum. Now, of course, the Indian IT industry is going beyond that: we serve many, many customers in continental Europe in a number of languages, we work with customers in Japan, in Southeast Asia, and a whole host of countries where English is not necessarily the first language. But the advantage of English and the major markets which come from English-speaking countries continue to sustain us, and frankly, that’s been our biggest export destination.

The industry in India employs about a million people directly, and this includes the business process outsourcing industry and the software services industry, together about a million people directly, and probably double that number in indirect employment. We are also able to make sure that the kind of input in this industry continues to come from the universities. The universities turn out about three million graduates a year, of whom about ten percent are graduates of engineering and technology who are able to take up high-end work.

And increasingly, customers and partners around the world have realized that what is special about Indian talent is not just numbers or, as I said earlier, the ability to speak English or work with high motivation, but the fact that you are able to get very high-order talent in India. And that has made this industry far more receptive to doing product development or research and development work. More and more companies are coming to set up units in this area.

In the area of business process outsourcing, the theme and focus of this conference, Indian companies have broadened the scope and focus of what they offer, starting with fairly simple call centers which do basic work. They have evolved to doing more sophisticated work. The call centers have moved towards providing technical help desk services; the back-office processing work has moved from very simple work to very sophisticated financial analysis work, or even to actuarial work in the area of insurance. We’ve had interesting so-called BPO work in things like analysis of X-rays or CAT scans, so you get people who are qualified radiographers, people who can interpret the data and have the necessary certifications to do so, when it comes in from a country abroad and when we send back the analysis.

So the industry has grown in width and the kind of things it does. It’s also grown in depth; we do more and more work of a similar kind. We have developed a level of expertise over a period of time. And that means that the BPO industry now is widely based and growing in terms of its sophistication. We continue to see strong growth in this area in India. The industry continues to grow at 40% per annum, in the business process outsourcing area, and we’ll be looking over the next few years for sustained and continued growth in that field.

I want to spend the next few minutes, having talked about India and told you about the Indian industry, and some of the figures and facets. More importantly, in the context of this conference, what are the possibilities and what are the prognoses of the Philippines and India working together, and what is the global outlook for this?

The first area in which I think I see great possibilities of India and the Philippines working together and in the context of where the global industry is, is really to see how we can increase the total work that is off-shored. This is important because if you look at what is being off-shored and outsourced today, it’s but a small part of the totality of work that goes on. In today’s technology, telecommunications and other technologies make it possible to move more and more work outside the core area, outside your office, outside your premises, and the fact that it moves across the street or ten thousand miles away doesn’t make a difference. And therefore, the first possibility of working together, among all those who are working in this area of BPO services, is to see how best we can expand the size of this pie so that there is more work that is off-shored and outsourced. This is an area on which I think India and the Philippines can work together to try and explore new possibilities, new areas, possibly new geographic areas, new markets altogether, new verticals maybe in terms of what we can do. This is something that will be mutually beneficial, an area where we might see how we can put our thoughts and ideas together.

The second area has something to do, as we evolve, with the kind of things we get a little concerned about and that is trade barriers. Fortunately, the world at large seems to be opening up in terms of trade. There’s a realization that free global trade is mutually beneficial to both parties involved, and therefore the facilitation of such trade is good for all concerned. Despite that, occasionally, one sees concerns about trade barriers, particularly non-tariff barriers, and this is something that affects India and the Philippines. I feel it’s an area in which we can work together, we can get our policy-makers and governments together, and try to work with the countries concerned, to try and bring them first a sense of comfort, that this is truly a win-win situation that has mutually benefits to those who outsource, and also try to see how we can take care of any concerns that are there, either with these people or in the media to take forward the agenda of reducing or if possible do away with all the non-tariff barriers.

The third area is very much related to this because in some sense it is a non-tariff trade barrier, which is movement of people. As people in the BPO industry in the Philippines know, almost as well as we do in India, the difficulties that arise when people can’t move across geographies easily make it hard to deliver services. Despite the fact that we are in the business of providing services remotely, we do need people to travel. And to the extent that such travel is impeded either by difficulties or delays in issuing visas makes it extremely difficult to deliver these services promptly and efficiently. This is an area in which we might be able to work together, working through the WTO framework and the GATT’s negotiations that are going on, if we can look at some kind of special resource which enables service providers to move freely across—purely as service providers, this has nothing to do with immigration or long-term stay, it just has to do with providing a service remotely and the necessity for people to move to provide that service, I think it will be useful. And I do see the need and the possibility for India and the Philippines to work together with other countries that are similarly placed to try and reduce these barriers.

Finally, I definitely see the possibility of our working together in terms of global delivery. This is an area which is increasingly gaining momentum around the world, where companies are no longer working from a single base or a single country from which to deliver services. This is a global delivery model evolving at the level of the BPO as it has already evolved in IT services, where services are delivered from multiple locations, and the choice of location for a particular job depends on the availability of talent, on costs, and a whole host of other factors, maybe the proximity to the customer.

Given this, I see a good possibility for Indian companies possibly trying to work together with their Philippine counterparts to see in what kind of situations and contexts would an Indian company like to establish a base in the Philippines, to work in the Philippines and to partner with Filipino companies to try and see how we can work together to deliver services. So that one can pick and choose which services are delivered from India and which are from the Philippines. Taken together, one has synergy and efficiencies which will help the customer and help both our countries. I think this is a possibility that’s beginning to emerge when we try to see how we can build synergy between companies working in both these countries and trying to see where areas of specialization fit in well, so that comprehensively, we are able to do deliveries of special value to customers.

This will go back to the first point I made, that if we can deliver greater value, we will see the market expanding and the pie expanding. As I see it, looking ahead, yes, there will be some competition between different countries, particularly between different companies, but the pie is expanding so fast, and we can together make it grow so much faster that I don’t think anybody is going to feel the pinch. Everybody in this business can grow and grow together. As they say, a rising tide will raise all boats, and I see that as a distinct possibility. I just wanted to share these brief thoughts with you this morning. Had I been there, we’d have had the chance to have more interaction, but I do look forward to seeing how we can do this and I look forward as I said earlier, the possibility of personal participation, actually, and not merely virtually, in the future conferences in Cebu, I do want to wish you and the conference a great success, and finally I do want to say that I look forward to working closely with our counterparts in the Philippines to see how as we might even compete in several areas, we cooperate in a host of other areas with mutual gain and benefits. Thank you very much, goodbye.

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