e-Clouds over India

Paul Saffo of the Institute for the Future in Menlo Park, California believes that the Web is creating an ever expanding electronic cloud, rife with new commercial opportunities. In a Business Week interview in 2004, he said:

“I've been to places in Shanghai where people are laboring away at online-game personas that they're selling on eBay. If I had told you 10 years ago that someone would be selling an EverQuest character for $12,000 on an online auction system, you would have looked at me like I'm crazy. But it's real enough to be supporting businesses. We've reached the point where we're trading in clouds of electrons.”

In India, the electronic cloud has spread into Information Technology Enabled Services (ITES) sectors in cities like Bangalore, Gurgaon, Hyderabad, and Pune.

In the current stage, cost-cutting and quality-seeking Western, mainly American, firms scout the world for offshore solutions to the problem of lower their costs. India quite often emerges as the source of such solutions.

Like everything else, this too will change. At some point, India will find that it is being outbid for outsourcing work by firms from Vietnam or China, or there are automation-oriented process enhancements that do away with the need for offshoring of processes altogether.

The situation is not too different from that of a Carpenter or a Plumber, who – after considerable success during a building boom – finds that there are other cheaper tradespeople undercutting the project bids. The only way to survive in such a situation is to offer greater value than the next fellow – to become the Carpenter or Plumber to call upon when the project requires high quality work.

In such situations, it also becomes essential for the originally successful craftsman to become a creative design advisor – a purveyor of not merely skills but sagacious advice. In fact, the best among them may even take some risks and build speculative or “spec” houses – attractive high-quality properties that buyers would flock to and pay premium prices for. Building a “spec” house is not just a skilled act – it is an act of orchestrating many different skills and multiple resources relating to finance and marketing.

The software-ITES sectors in India have reached such a stage. Like the skilled game players of Shanghai, who are creating “spec” online game characters that could command good prices, the software-ITES shops of India have to create strong and growing “spec” divisions. These are the units that would go out on a limb and create “tomorrow’s breadwinners.” Innovation and speculation are inherently risky and dangerous activities – they do not offer the reassurance and safety of a cost-plus contract. But India’s IT sector has little choice in this regard – the e-cloud is spreading globally, and it could as well bring showers of dollars, euros, and yens to the parched IT service fields of Ghana and the Philippines as to the lush IT fields of India.

India, and other aspirants to information technology enabled global services, have to handle the e-clouds with care. With the proper mix of efficiency, effectiveness, and innovation, these e-clouds would bring gentle nurturing rain. When there are lapses in any of these dimensions, the e-clouds could turn ugly and unleash destructive thunderstorms.

Nik Dholakia