Fortune
November 24, 2003
By Justin Fox
Where Your Job Is Going
A visit to Bangalore, India, a city where tech is hot, the drinks are cold, work is
plentiful, and the salaries are a lot lower than yours.
Every weekday, as the tropical sun begins its swift descent over the Deccan plain,
fleets of what the Indians call "multi-utility vehicles" fan out across Bangalore. The
Tata Sumos and Toyota Qualises bump along the potholed, muddy residential streets
of India's fifth-largest city, stopping to pick up young men and women and carry them
to work. Then, as business hours begin in the Eastern U.S., thousands of these
young Indians don telephone headsets and do their enthusiastic best to help the
American people get their Internet service working, figure out their credit card bills,
and order tacky limited-edition collectibles.
After years of wondering what all those fiber-optic cables laid around the earth at
massive expense in the late 1990s would ever be good for, we finally have an
answer: They're good for enabling call-center workers in Bangalore or Delhi to sound
as if they're next door to everyone. Broadband's killer app, it turns out, is India.
It's not just about call centers. In Bangalore some 110,000 people are employed
writing software, designing chips, running computer systems, reading MRIs,
processing mortgages, preparing tax forms, and doing other essential work for U.S.,
European, Japanese, and even Chinese companies. Intel, Cisco, Oracle, Philips, and
GE are among the multinationals with significant R&D facilities there. AOL,
Accenture, and Ernst & Young have big operations in town too. Scores more Western
corporations outsource work to Indian companies like Bangalore-based IT services
firms Infosys and Wipro.
Meanwhile, GE Capital employs more than 15,000 people in Delhi and other Indian
cities who answer calls from credit card customers, do accounting work, manage
computer networks, and the like. In Chennai (formerly Madras), a staff of 350 design
the PowerPoint presentations that McKinsey consultants around the world show their
clients. In Mumbai (Bombay), Morgan Stanley has been hiring equity analysts to help
cover U.S. companies from 102 time zones away. There are more than 350,000
people working in IT services and outsourcing in India now; the number is expected
to pass one million before 2008.
The attraction of the Indian knowledge workers who get those jobs is that they're paid
10% to 20% of what Americans would expect for similar work--and in many cases
they do it better. That has stoked understandable alarm in the U.S. Together with
China's rise in manufacturing, it is bringing protectionists out of the woodwork. It is
also causing even those of a less reactionary bent to wonder just what it is that
Americans will do for a living now that even knowledge work can easily be sent
overseas.
And what do those young Indian knowledge workers (they are, overwhelmingly,
young) think about this turn of events? Sitting on the terrace one pleasant October
evening at a swank Bangalore bar called the 13th Floor (which is in fact on the 13th
floor of an office building on M.G.--short for Mahatma Gandhi--Road, the city's main
drag), I pose the question to a group of young managers and engineers from Wipro:
"Do you feel bad about taking jobs from Americans?"
Several of them respond with a torrent of economic reasoning that would have made
David Ricardo, the 19th-century English apostle of free trade, proud. Trade enriches
all, they say. The American economy will take the money it's saving by outsourcing
and invest it in the growth industries of the future. Besides, the U.S., Western Europe,
and Japan will all face labor shortages in a few years as their populations age.
"Try explaining that to the customers I'm talking to," retorts Sapna Sudhir, a 28-year-
old with a razor wit who manages IT projects for retailers, mostly in the U.S. "'Let's
talk about the transition process,' I tell them. 'I'm going to transition your job to India.'
...There's a lot of hostility." Sudhir waxes conflicted about this for a few moments.
Then she slips into the tougher language of her colleagues. "It's Who Moved My
Cheese? The cheese has moved. You'd better move along too. This is a capitalist
economy. He who bids the lowest gets the job."
That is what the world has come to. An ambitious young woman from a nation that
spent the first four decades of its independence floundering in a semi-socialist
economic miasma is lecturing Americans on capitalism in the language of a cheesy
American business bestseller. And she's doing it at a slick night spot on a road
named after the saintly ascetic who won India its freedom. Isn't it magnificent?
So let us step back a moment from the current plight of the U.S. The long-term fate of
the earth rests largely with the 95% of humanity that doesn't happen to live within
America's borders. About a sixth of the world's people live in India. That's why I've
come to Bangalore, a South Indian metropolis of almost six million, where
globalization and digitization are having the just the kind of transformative impact that
hyperventilating Silicon Valley seers were predicting a half-decade ago.
That India may turn out to be one of the winners of the digital, global, interconnected
economy has of course come as a surprise to many people--not least the Indians.
The Mahatma had envisioned the nation he helped create as a land of self-sufficient
villagers who grew their own food, spun their own cloth, and turned their backs on
industrial modernity. India's first Prime Minister, Jawaharlal Nehru, was all for self-
sufficiency too, albeit on the national level. And while Nehru felt India had to
industrialize to achieve this self-sufficiency, he didn't trust industrialists.
Thus was India set upon the economic course it followed for decades: The
government owned most major industries, discouraged foreign trade, and--in order to
steer the country's scarce resources away from frivolities--forced anybody who
wanted to manufacture a new product to get permission first. (As Nehru put it, "Why
do we need 19 brands of toothpaste?") In response, India's economy stubbornly
refused to move faster than what came to be known as the "Hindu rate of growth" of
3.5% a year--disastrously slow for a developing country with a burgeoning population.
A currency crisis in 1991 finally put an end to this madness. After being forced to fly
the bulk of the nation's gold reserves to London as collateral for an IMF loan, a
government led by the chastened Congress Party of Gandhi and Nehru finally started
hacking away at India's economic regulations and import tariffs.
Even during the decades of economic stagnation, India did have some things going
for it: Much to the surprise of many skeptics in the West, its democratic institutions--
elections, a free press, an independent judiciary--survived and thrived. While huge
swaths of the Indian populace received no education at all, instruction in the upper
echelons of the educational system was of surpassing rigor. And while some political
leaders tried to impose the North Indian language Hindi as the national tongue, the
true national language of the educated classes remained English.
So while India as a nation remained closed to the global market economy until the
1990s, millions of Indians developed the skills to join it--which many did by emigrating
to the U.S., Britain, and elsewhere. A few multinationals, like Unilever and Citicorp,
began mining Indian talent aggressively. Bhaskar Menon, a former Citibank executive
who now runs an Indian call-center operation called Msource, remembers sitting in on
a meeting in 1985 at which Citi's India chief reported the unit's profits for the year to
CEO John Reed. "John said, 'This would pay for our stationery in New York--don't
worry about it. Your mandate is to export 15 middle-management people to New York
every year.'"
The talent hunt has only escalated--since the mid-1990s global firms like McKinsey
and Goldman Sachs have recruited students at India's top business schools for jobs
in New York, London, Tokyo, and everywhere in between. But starting in the 1970s,
another form of talent export that didn't require outright emigration began to evolve in
the software business. Indian companies that wanted to import computers had to
come up with the foreign currency to pay for them. So the likes of Mumbai-based
industrial conglomerate Tata began sending teams of engineers to the U.S. to work
on software projects for American clients and bring home dollars. Over time, with the
rise of data networks and satellite communications, it became possible to do more
and more of the work remotely from India.
That was the genesis of the Indian IT services industry--now led by Tata Consultancy
Services, Infosys, and Wipro. Foreign multinationals also eventually saw the wisdom
of tapping into Indian talent in India at Indian salary levels: Texas Instruments led the
way when it opened an R&D center in Bangalore in 1985. The rise of big India-based
tech companies, though, has had special significance in a country that has long
associated foreign investment with imperialism (understandably so, as the British Raj
began as a purely commercial venture). Software exports may directly account for
only about 200,000 jobs in a country of one billion people, but the Indian leaders of
the software industry have become hugely influential in the nation's political and
economic life. Their message: Economic openness is good for India, because India is
perfectly capable of competing internationally.
TCS, Infosys, and Wipro now each boast revenues of about $ 1 billion a year. That's
still tiny in comparison with competitors like IBM's global services division ($ 40
billion) and Accenture ($ 12 billion), but it's clear that the Indian pipsqueaks have
caught the attention of the big guys. Accenture now has 4,000 employees in
Bangalore and Mumbai, up from just a couple of hundred a year ago.
"They have the advantage of stronger brands," says Wipro chairman Azim Premji of
his foreign competitors. "We're working on that. They have no experience with the
global delivery model. We're masters at it." Premji, whose 84% stake in Wipro makes
him the richest man in India, has a habit of making such bold, almost smug
pronouncements. "U.S. society is not being reskilled and retooled to stay on top of
the emerging environment," he tells me during my visit to Wipro's headquarters
southeast of Bangalore. "You need to retool your educational system."
A few miles away, on the sprawling Infosys campus, CEO Nandan Nilekani has no
such harsh words for the foreign competition. But he, too, exudes confidence.
"There's a sense that the worm has turned and our time has finally come," he says.
"A lot of people tell me that the air here is like the Valley in 1999."
Ah, the Valley. The world is lousy with places claiming to be another Silicon Valley.
But in Bangalore the claims have an eerie ring of truth. For one thing, as in Northern
California, the climate is a big draw--Bangalore is 3,000 feet above sea level and thus
has the most bearable summer weather of any Indian metropolis. What's more, like
the San Francisco area it boasts fine educational institutions (foremost among them
the Indian Institute of Science, founded in 1909) and an openness to outsiders--born
of the city's status as a big army garrison since colonial days and as the home of
India's defense and aerospace industries since independence. There's even a wine
country (okay, one winery) north of town.
The real clincher is that despite constant complaints about the city's insane traffic,
skyrocketing real estate prices, and fickle workforce--and constant efforts by other
cities, especially Hyderabad and Chennai, to get in on the action--companies and
people keep coming to Bangalore. Which, of course, sounds exactly like Silicon
Valley in the late 1990s. And while Bangalore was a graveyard of failed startups in
2001, just like the Valley, the very corporate cost cutting that has meant continued
lean times in California has brought tons of new business to South India.
India is a developing country, and for all its affluence Bangalore is still a city of power
outages (all office buildings and many homes have backup generators), inadequate
roads, a third-rate airport, over a million slum dwellers, and lots of wandering cows.
But it's become attractive enough that Indian expats are moving back.
"In 2002 I thought, 'It looks like India is the place for global IT,'" says Sean
Narayanan, an India-born U.S. citizen whose siblings live in the U.S. and whose
parents spend six months a year there. "I had to get experience here." So he left a
job with Booz Allen in northern Virginia to work in Bangalore for Cognizant, a Dun &
Bradstreet software services spinoff. Narayanan and his wife are clearly ambivalent
about the move--they live in a gated community east of town that appears to have
been airlifted straight from Florida and are currently planning to stay only a couple of
years. But still, they're here. "It's no longer considered hardship duty," Narayanan
says.
For another bunch of Bangaloreans, the call-center workers, the very idea of hardship
is so, well, dated. In the late 1990s, GE Capital pioneered the practice of putting
Indians on the phone with Americans. This first call center was in Gurgaon, then an
obscure Delhi suburb. Now Gurgaon is bursting with glass office towers and glitzy
shopping malls, and call centers have spread to every major Indian city--including
Bangalore. In the process, they've spawned a consumer generation unlike any the
country has ever seen. Indian call-center workers may make a lot less money than
Americans (salaries start at about $ 2,000 a year), but they make a lot more money
than fresh-out-of-college Indians who aren't computer geniuses have ever made
before.
My first encounter with this new India is at the Bangalore offices of Msource, which
runs call centers for financial institutions in the U.S. and Britain. I tell the six young
Msource employees gathered around me that I've heard call-center workers are
materialistic, brand-crazy sorts who drink and smoke a lot. That's right, they tell me. I
ask about their aspirations, if they hope to own a house and a car by the time they're
40. Most nod. "I want it by the time I'm 28," says Anshul Pathak, 23.
Actually, although Pathak still lives with his parents, he already has the car. He joined
Msource a year and a half ago and proved so good at cajoling American deadbeats
into paying off credit card debt that he now trains new hires to do the same. Along
with his Maruti Suzuki 800 subcompact, he has a Bajaj Pulsar motorcycle. His mobile
phone is a Sony Ericsson T610 with a built-in camera. He banks with Citibank. On
nights off he hangs out with friends in bars where he favors the local beer, Kingfisher,
but others go for foreign concoctions like Bacardi mixed with Sprite. Or they go to
Starbucks-like coffee shops where a cappuccino costs $ 1--an absurdly large sum to
older Indians. Pathak watches American movies, That '70s Show, MTV. He brushes
his teeth with Colgate. He owns a pair of Nikes and a pair of Reeboks. While much
has been made in the U.S. media of how Indian call-center workers are trained to
sound more American, the best "training" of all is simply the lives they lead.
It's not all slavish imitation, either. India at its best is a lot like the U.S. at its best--a
nation of staggering ethnic and religious diversity that somehow holds together by
dint of tolerance and a sense of shared destiny. And now that India wants to join the
material world, it seems churlish for Americans to begrudge it entry. "For the last 20
years, you've been telling countries like India and China to adopt free markets and
join the global economy," says Nilekani of Infosys. "Now that we're doing it, you can't
just say, 'Stop it!'"
In fact, we probably really can't. India and the U.S. are already entwined in an
economic embrace far more intimate than that which has traditionally linked trading
partners, one that could be exceedingly painful to get out of. These guys know what
we owe on our credit cards, after all.
FEEDBACK jfox@fortunemail.com
BOX STORY:
LAND OF OPPORTUNITY Outsourced jobs are popping up in every major Indian
city. Next stop: the provinces.
MUMBAI (BOMBAY) Outsourcing and IT workers: 62,050 Focus: Financial research,
back office, software Who's there: Morgan Stanley, Citigroup, TCS, Mphasis, i-Flex
Solutions
PUNE Workers: 7,300 Focus: Call centers, chip design, embedded software Who's
there: Msource, C-Dac, Persistent Systems, Zensar
BANGALORE Workers: 109,500 Focus: Chip design, software, bio-informatics, call
centers, IT consulting, tax processing Who's there: Intel, IBM, SAP, SAS, Dell, Cisco,
TI, Motorola, HP, Oracle, Yahoo, AOL, E&Y, Accenture, Wipro, Infosys, Msource
DELHI Workers: 73,000 Focus: Call centers, transaction processing, chip design,
software Who's there: GE, American Express, STMicroelectronics, Wipro
Spectramind, Convergys, Daksh
KOLKATA (CALCUTTA) Workers: 7,300 Focus: Consulting, software Who's there:
PwC, IBM, ITC Infotech,TCS
HYDERABAD Workers: 36,500 Focus: Software, back office, product design Who's
there: HSBC, Microsoft, Satyam
CHENNAI (MADRAS) Workers: 51,100 Focus: Software, transaction processing,
animation Who's there: World Bank, Standard Chartered, Cognizant, Polaris, EDS,
Pentamedia Graphics