Saturday, February 13, 2010

I am proud of Indian Software Services

I am generally proud of the Indian software services industry - there was a business model that the pioneers caught on and developed into a mega money-making, and value delivering exercise. I have been in services since 1999 and I do NOT believe that:
- the services industry does not serve Indian society
- the services business itself is non-innovative compared to creating products
- the work that services companies do is uniteresting or boiler-plate.

I believe that all of the above are myths; many of these opinions - including calling IT employees as coolies - arise out of plain resentment than any substantive reason.
For example, one claim is that cost differences beween India and the USA have been the sole reason for the dominance of Indian services industry. People who say this seem to think cost differences are somehow not the right reason for doing business. That is absurd, of course. The whole idea of competition is the ability to gain an advantage by showing better value - and lower cost is a HUGE value.
I also see nothing wrong with "body-shopping". It is pure propaganda that selling labor is "low" compared to selling products. The reason why we think that way is simple - that way leads us to accept free trade in products and not free trade in labor.
Let me explain better - for the past 50 years since the founding of the GATT and later WTO, developed countries have gone around preaching free trade and in many cases succeeding in opening up borders so that their products can compete with local products (and many times decimate them). They have justified this pointing to consumer choice and lower prices.
How can business in a country like India compete with this? We found our own competitive advantage - we have plenty of cheaper labor and we have managed to turn that into a business model.
I don't see how this makes Indian services industry "lower" in the hierarchy.
In fact, logically, we should have free movement of labor across borders (just as we have for products). That is the logical and fair conclusion of free trade. But guess what? Politicians in the West (who preached free trade to everybody all these years), have suddenly discovered the virtues of tight immigration policies. So you find the Democrats in the USA threatening to abolish the H1B work visa (while simultaneously calling for legalizing illegal immigrants).
Trading labor is equally valid as trading products. The only reason we think otherwise is because the West benefits one way and not the other.

The IT Industry is Built by IT Workers
The truth is also that this industry has been built not just by business founders - but by the individual employees all across India. Since the business model is built using labor, the model's success is a vindication of the quality of this labor.
This is why I always thought it weird that the average IT worker is never congratulated or appreciated in the media. They celebrate Ramalinga Raju or Subrato Bagchi or Narayana Murthy. Actually most of the credit in IT organizations should go to the IT workers, developers, leads, architects. managers - all of them.

I have only heard complaints about IT workers - that they push up rents; that they are all showing off; that they are working and creating value for foreigners, not India. Then within the industry itself people blame them for job hopping; fake certificates; asking for too much salary and so on.

The average IT guy in this industry comes from a rural or urban poor/middle class background. He/she does not know much English. He/she has a family dependent on their paycheck almost entirely. He/she has to work insane hours and weekends. Most of these men and women did not learn about the industry-specific skills until college or after leaving college.
I recently met a fresher who passed out in 2009. He is from a lower middle-class family. He was offered a job in campus by an IT company. Then they got wind of the recession and so just suspended him from joining indefinitely (I am not blaming them for this; just that if the employee had done that kind of thing, he will be accused of disloyalty). His degree in computer engineering only gave him skills in C and C++.
So he learnt Oracle and cleared Oracle certification. He learnt Java and cleared certification in that too.
He has got job offers from every interview he attended. But, they all have caveats:
Company A wanted him to sign a 3 year bond.
Company B wanted him to sign a 2 year bond and give a check for Rs. 2,00,000 at the time of joining. If he left in between, they would take that money.
Company C asked for a 2 year bond and all his original certificates.

All of the above is against labor law and would be overturned in court - but who is going to approach courts?
This fresher and many hunderds of thousands like him join this industry every year. They work hard. They learn the technologies at stake even though those can change from project to project. I have seen 21-23 year old programmers learn the Facebook API in 2 weeks and create excellent applications. I have seen these guys struggle balancing work pressure and family requirements and deliver again and again.

If they had NOT delivered, we would not be holding 60% of the world's offshore outsourcing market share in software.

The idea that, instead, these guys have to be blamed for not "innovating" or not taking risks or having bad attitude is absurd.


Sailesh Ganesh said...

Surprised to see you stand up for free trade the way you did in this post. Well put. Free trade means free trade of all goods and all services. Providing labour is simply another example of a service, so really, there is no logical reason to restrict flow of people across countries.

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Sangeetha said...

Ram, Correct me if I am wrong. During the pre-independence era, the Britons looted the raw materials and dumped us with finished goods at a premium rate. Today, the west is exploiting our knowledge and sells the same finished product at a premium rate to us isn't it?

Ramiah Ariya said...

First labor is not a raw material. Labor lives, learns, becomes better, and enriches other people.
But more importantly, let me explain why you are wrong using economics.
When the British got rawmaterials and then sold it back, it was not necessarily a bad thing economically. What made it bad was that the prices were set by the British (the buyer) who also got it for free. Thus the problem with colonialism is not the "buying-of-raw-material-and-selling". It was that there was no true market where the buyers and sellers were meeting. If you think about it, buying raw materials, processing them and selling them is the basis of ALL economies, irrespective of if the British did it or someone else.
For example, let us say Tamil Nadu bought Sugar cane from Maharashtra and sold back sugar. How is tht a bad thing?
What made colonialism bad was there was no market really. The British basically got the raw materials for free, using corecion, processed goods and sold them back.
The problem with colonialism was the lack of freedom, not the economic transactions themselves, such as buying raw materials and selling goods.
I hope you now see the difference between that and the service industry - the services industry is evolved out of a market need. It is a free economic trade between labor and money. That is not a bad thing.In fact it is as thing should be in a free world.
We trade our labor for money freely - we are not asked to work for food in software companies, with guys with lashes making sure we produce software for American companies.
Colonialism is no comparison to a free market.