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11 , 2000 VOL. 26 NO. 31 | SEARCH ASIAWEEK
wealthiest man believes information technology will transform the nation
W hen the stock price of Bombay-listed information technology company
Wipro hit an all-time closing-price high of 9,800 rupees ($218) earlier
this year, its founder Azim Hashim Premji became the planet's second-richest
man after America's Bill Gates. Premji's 75% of Wipro translated into
paper holdings worth $37.5 billion. On July 28, Wipro was trading at $54.85
per share, which means Premji's stake was worth just $9.4 billion. He
remains India's wealthiest man, but 54-year-old Premji could not care
less. The Wipro chairman lives in Spartan simplicity. He travels economy
class and refuses to stay in five-star hotels. The Stanford-educated Premji
spoke with Asiaweek's Arjuna Ranawana in Bangalore.
India is increasingly being seen as an information technology superpower.
Over the years the Indian software industry has grown in both volume and
international acceptance. The success stories of companies such as Hotmail,
Exodus and eCode provide examples of Indians who have taken Silicon Valley
by storm. To me, the biggest opportunity is the change in the nature of
critical resources needed by an organization and the nation. Material
and capital resources characterized the manufacturing economy. The power
of the mind is the critical resource in the information age. This is where
we as a nation have a major competitive advantage.
How will this change India?
Typically India was seen as a country with a lot of poverty and other
problems. I am not saying the new image has displaced the old, but it
is supplementing this old view. That is a major morale booster from the
country's point of view, and is going to have a major overflow into a
number of other industries. Particularly in the technology area, there
is a self-confidence building up. Self-confidence is a prerequisite for
a country looking into the future. Indians in the IT (information technology)
sector have the confidence to say that this millennium belongs to us.
With the momentum we have generated, IT is one industry where India has
become a global brand.
But brands, like people, need nourishment to sustain and enhance values
and competitive advantages. India needs to nurture its talent like never
before. We must forget dogmatic ideas of the past and provide freedom
and entrepreneurial space for all. We will have to build globally competitive
and compatible infrastructure. Only this infrastructure can make us invincible
and sustainably invincible. Government must take bold visionary steps,
as we have nothing to lose but our poverty. If we win, we will create
immense national wealth to be shared by everyone.
Yet much of India is still mired in poverty and illiteracy.
The IT industry can transform the wealthscape of our country. Information
technology is in the business of creating wealth and redistributing wealth.
The logic is very compelling. The creation of 1 million additional IT
jobs will earn us $20 billion in net foreign-exchange revenue. This is
three times our trade-account deficit. This revenue alone adds about 5
percentage points to our national GDP. With current multiples in the stock
market in India and in the U.S., these jobs conservatively add $200 billion
to the national wealth, thus creating more than 10 million millionaires
Other countries have IT ambitions too.
The dominant competition will come from China and East Europe, and also
places like the Philippines. They will eventually take up market share
from India. But the nice thing is that even in a country like America
today, there is a shortage of between half a million and 1 million IT
professionals. Indian companies will only be niche players in the product
area, where you build massive brands. But they will and should dominate
the services area.
Where does India's IT industry go from here?
The leading players are concentrating on higher quality services, whether
in technology, telecom and e-commerce. The second area where the industry
is focusing is vertical expertise. That is, you build industry expertise
in retail, in the stock exchange, in manufacturing, in energy and in other
sectors so that you are able to understand customer requirements. You
can add value in terms of the solutions you have to offer. You can take
more independent responsibility, because you are not overly dependent
on the customer to explain his industry to you all the time.
The third area is taking more turnkey responsibility for projects which
are executed offshore. If we execute a project overseas, the compensation
we pay has to be commensurate with salaries in those countries. If we
can do 70% to 80% of the work here, then we can offer more competitive
pricing. The next area is what is termed IT-enabled services. We [at Wipro]
run a global support system for a global operating system. This is a very
specialized IT area. But it could become broader. For instance, if an
AOL customer wanted some help, he can get it from an Indian operator,
one who is well trained and speaks [English] with a globally understood
accent. A person in other countries may cost you $30,000 a year. Here
you would pay him $2,000. You can see the cost arbitrage more than
one in ten. These are low-end services, but they are also volume generators.
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November 30, 2000