Suddenly there are 'mega opportunities' for information technology companies

Prologue
Growth Rate
Outside World
Dot Com

Prologue

HYDERABAD -- There is not yet much more to Magma Solutions and Vantel Technologies than a couple of new signs, two small offices, a few computers, several dozen employees and the energy and dreams of their owners, Bala Thumma and Prasad and Satya Yenigalla.

But India is on the cusp of a cyber revolution and people such as Thumma and the Yenigalla brothers intend to be among its leaders.

Armed with graduate degrees from U.S. universities and experience in senior research and development jobs for American hi-tech giants such as Intel, Cisco and Oracle, thousands of non-resident Indians, or NRI's as they are known here, are rushing home to start Internet-related businesses in a city of six million people in the heart of southern India which is quickly re-styling itself as Cyberabad.

"We've made millions of dollars in stock options and we've left millions of dollars more in options on the table to come back here because this is an exciting time in India, when global laws are being crushed and there are incredible opportunities in the market," said Thumma, the 38-year-old managing director of Magma Solutions, which is building elaborate security systems for e-commerce.

There were "mega opportunities" for information technology companies in India, said Prasad Yenigalla, 39, the president of Vantel, which is developing high-speed data technologies 1,000 times quicker than anything available today.

His brother, Satya, who is 44 and responsible for Magma Solutions' fledgling U.S. operations, added: "We just had to take this chance. The timing is perfect right now because it is estimated that e-commerce is going to explode into a $1.2 trillion-a-year business in the next few years."

The presence of the gung-ho Yenigalla brothers, who went to Villanova, their long-time friend, Thumma, who went to Southern Illinois, and many other foreign-educated young Indians in what is this country's emerging high-tech centre and in its much bigger, much more established high-tech rival, Bangalore, indicates a sea change in the way Indian expatriots now regard the business environment here.

Goats still graze lazily in many parts of Hyderabad, badly maimed beggars still accost pedestrians and drivers, and some of the slums look as bad as any in Calcutta or Mumbai. But it is almost impossible to drive more than a hundred metres on the main thoroughfares without being bombarded by billboards offering high-tech products, high-tech jobs or luxury products.
 

Growth rate

India is a famous riot of heat, noise and colour and not always compatible religions, languages and ethnic and economic groups. It seems incongruous when this tumultuous exotica shares space with austere, air-conditioned IT offices, where the religion and language are advanced mathematics and the spirit is strongly egalitarian.

However, Hyderabad and Bangalore are no longer that anomalous. Glimpses of the new India can also be seen in Bangalore, Pune, Delhi and Mumbai. Economic growth was more than five per cent in India last year. The targeted growth rate for this year is eight per cent. Alone among Asia nations, India received barely a scratch when the economies of Thailand and Indonesia collapsed 18 months ago.
The oft-ridiculed rupee has been relatively stable for several years. Inflation is below three per cent. Information technology exports are expected to explode from $3.9 billion last year to as much as $8 billion this year.

Thanks to the Internet revolution and India's long acknowledged position as one of the leading producers of brainy computer whizzes, the country hopes to leapfrog far past other developing nations and become as economically successful as the First World.

At least that's the upbeat vision articulated by Andhra Pradesh's chief minister, Chandrababu Naidu, and others in Hyderabad, the state's capital. They are sure to bend Bill Clinton's ear about investment and trade when the U.S. president makes a five-day visit to India next week.

But given India's spotty economic performance since achieving independence from Britain more than 50 years ago, doubts remain. The Economist underlined that cynicism with a wry caption. Above a photograph of a man reading a newspaper on a nearly deserted Indian railway platform it said: "Still waiting for the new India."

In the heady days that followed the trauma and bloodshed of partition and again when India became able to feed itself in the 1980s, Indians and the world expected this nation of nearly one billion people to finally harness its immense intellectual and material potential and become an economic superpower.

However, every time the country seems poised to move forward there has been an ugly burst of violence inspired by religious, ethnic or caste differences. Politicians further complicated matters by giving India's notorious bureaucracy vexatious new duties or inflaming the passions of the masses against the presence of foreign businessmen.

"It is different this time," said Raminder Jassal, chief spokesman for India's ministry of external affairs. "Things can only change here if people see something good in it for themselves and this time they can. We have total food security. Our economic growth is pretty good, there is a democratic framework and there are new job opportunities as the result of investment, especially in the cyber industries."

Although some left-wing political parties still mutter darkly about the westernization of India and the days when Moscow was India's patron, Jassals' enthusiasm for information technologies was shared by everyone I spoke with during four days in and around Hyderabad. Hotel maids, taxi drivers, store clerks, students and swarms of mostly female labourers carrying pails of dirt on their heads, who were helping to bury high-speed fibre optic cables, all seemed somewhat aware and enthusiastic about the high-tech revolution.

"I'm happy with how India is now but I am sure that it is about to get much better," said a street trader who valued the modest stock in his tumbledown portable shop at a couple of hundred dollars. "I do not have the education to participate in this, but the computer age is what is going to make India great."

What has often prevented India from fulfilling its dreams has been its creaky infrastructure and its often absurdly obstructionist bureaucracy. Power blackouts are still common in many areas. The road network is abysmal and the rail network only slightly better. Airplane seats into and out of the country are so tightly controlled by the government that passengers must often wait weeks to catch a flight.
 
 

Outside world

But where it once took as much as eight months for a firm to import a personal computer, it can now be accomplished in less than an hour.

Six years ago it was almost impossible to establish a computer link from Hyderabad to the outside world. Communication by wireless telephone, fibre-optic cable or satellite is now as easy as it is in Ottawa, Toronto or Calgary.

Microsoft has chosen Israel and this city of six million about 600 kilometres southeast of Mumbai (Bombay) as the two places outside the U.S. where it will conduct research and development. IBM is here. So are Motorola, Oracle, Sun Microsystems and a Who's Who of Japanese firms.

Gautam Anand, manager of the very upmarket Sheraton Hotel, which has become the favourite haunt of the big international information technology executives and investors, said "there is still a lot more hype than substance to this boom but things are obviously moving in the right direction. The electricity, which used to give us so much trouble, has improved greatly and people have become curious about what is going on in the city. We've been getting a huge amount of business from telecoms such as Bell Canada, Nokia and Ericsson. We've had so many international delegations it is hard to keep track of them all."

Although most Canadians and Americans have no idea who he is, Indians have become fond of boasting that the world's second richest man after Bill Gates is native son Azim Hashim Premji. Whether this claim is true or not, Premji's high-tech company, WIPRO Ltd., of which he owns 75 per cent, is valued at more than $40 billionUS, and the businessman certainly ranks among the top five in the world in personal wealth.

Rajesh Desai, a venture capitalist with an MBA from the University of Pittsburgh, who has just moved to Hyderabad from Mumbai, believes many more Premjis are in the making.

"Before too long I think you are going to find a dozen Indians in the list of the world's 50 richest," said Desai, whose new company, HITVEL, is funded by two state agencies and India's central bank.

One of India's multi-billionaires is Ramalinga Raju. His 11-year-old Satyam conglomerate, which includes software, e-commerce and technical services companies, Internet service providers and portals, has a combined value of about $14 billionUS. It is already established in 23 countries, has eight development centres and has a subsidiary in Seattle.

"I strongly believe that in the next decade there is the potential for India to go to the next level economically and to establish a period of unprecedented growth," the 44-year-old tycoon said in a telephone interview at his home in Hyderabad. "Without a doubt poverty will be eradicated over the next 20 years and we will become a developed country."

Nowhere except Bangalore, which has evolved into an information technologies centre over the past 15 years, has the notion that IT is the key to India's future been embraced with such fervour as in Hyderabad.
 

Contradicting India's brief history as one of the most protectionist nations anywhere, it has a federally funded software park with no import duties and a 10-year moratorium on taxes on exports. Since the park opened in 1998, it has become home to 285 high-tech companies, including 160, which are focussed on producing goods for overseas.

Chief Minister Naidu has made a national name for himself by championing the information technology industry, rapidly building a world-class fibre-optic network and demanding that federal politicians and bureaucrats become a lot more business-friendly. With the help of Carnegie-Mellon, Naidu's ambition is to make a quantum leap in the number of IT graduates to 100,000 a year.

"It is a nascent industry and a lot of infrastructure is required but there is already a considerable amount of euphoria," said the software park's boss, Vijay Kumar, a retired 49-year-old army colonel and Russian-trained electronic warfare specialist. "The government is playing the role of catalyst to ensure that the comfort level of this industry is high.

"We feel ashamed. This should have happened years ago. We played around too long. If a bureaucrat like me feels this, the politicians feel it, too. People know that politicians have not delivered the goods. There is now an infrastructure crunch so foreign money is welcomed.

"People still consider India medieval with bullock cars, old dogmas and beliefs and women who are subjugated. Well, they are all there but they are getting less and less. India is waking up. People never used to speak like this but we can openly debate such matters now. We are happy about these transparencies and the greater awareness and information they create. It is all part of nation building."

Jakkampudi Chowdary was a public servant in the Department of Electronics here until 18 months ago. He now heads the Indian subsidiary of California- and Seattle-based Portalplayers Ltd. It develops algorithims for the secure transfer of music over the Internet.
 

Dot com

"This business is conducted in English and we have the advantage of a good English school system. You could call it the final legacy of the British Empire. The dot-com industries provide a tremendous chance for India."

Raju believes that there are as many as 400,000 of his countrymen are software professionals in the U.S. This brain drain has been lamented in India for years but Hyderabad's wealthiest resident has a different take on this.

"I see this as a brain gain not a brain drain," Raju said. "If India forges ahead it will primarily be because of its NRI's.

"It's a lot different than earlier when Indians left for the United Kingdom and the U.S., never to return. A lot of NRI's are coming home now and their success and the knowledge they acquired overseas is creating a lot of confidence here."

Indian computer types are in such demand that Chancellor Gerhard Schroeder appealed for as many as 30,000 Indian IT specialists to bring their knowledge to his country as a new kind of Gastarbeiter in a controversial speech at a computer trade fair in Germany last month.

The invitation caused an uproar because Germany has four million unemployed. But like Canada it has a rapidly growing number of IT jobs it can't fill.

"Step aside guys, India is coming," is Prasad Yenigalla of Vantel's message for those who remain unconvinced that doubt India's cyber industry is taking off.

Source: By Matthew Fisher, Sun Media, Sunday, March 12, 2000