A PARADIGM SHIFT

When it comes to academicians-turned-entrepreneurs, there’s no telling what to expect.  Chennaibest.com’s interview with Dr Sankaran P Raghunathan, Founder, Chairman of  Blueshift Inc, (a leading IT solutions provider) was all about paradigm shifts with a difference. Dr Raghunathan is an MBA from XLRI and a Ph. D in international business from Temple University, Philadelphia. He is on the faculty of Emory University, Atlanta.

The Brain drain phenomenon can be reversed in two ways.

Firstly, by arresting the leak, and retaining people within the country.

Let’s look at the background of the situation. Software companies involved in exports are given a 10-year tax holiday. So they don’t focus on the domestic market. Firstly, because it doesn’t pay as well as the international market does. Secondly, whatever it pays is taxable. So the government’s tax-holiday policy leads software companies to look outside, instead of within the country. And worse still, the policy is applied indiscriminately; not just for company exports through work done in India, but also for exports through work done overseas. That means that in the name of software exports, companies are exporting people.

Of course, the government did not intend this to happen. But with such policies, there will obviously be a Brain drain. In India, software companies enjoy tax holidays and other concessions because they are involved in export. Also, there are reduced duties and taxes on inputs like computers, software etc, but there are no such concessions when it comes to people. So the benefit reaches only the company and its shareholders, while there is no gain to employees or the country.

We can make people stay in India if we ensure that the tax concessions reach the individuals who work in India, doing work for export. This way the people involved in exports, but staying here in India, reap rewards and find an incentive to remain here and hold on to jobs within the country.

The second way in which we can reverse the Brain drain is by increasing the inflow of outsiders into the country.

If other countries can lure our people out, there’s definitely enough magnetism in India to lure outsiders to come in and work in India. In the United States, it takes less than two years for an Indian to realise the ‘American Dream’ (a house with a two-car garage, one wife, two and a half kids and a dog).  If they can allow outsiders to achieve their dream without restriction, why do we create problems for foreigners to come in and do the same here? We allow Chinese products to flood our market. We allow a whole lot of international commodities to flow in. Why not encourage foreign people to come in?

We grew last year at a rate of 6%. When Chidambaram was Finance Minister, we were looking at achieving a 10% growth rate every year, with a minimum investment of $ 10 billion in each sector. Foreign investment has not come in. What prevents us from bringing competent foreign people in? They can add value. Bringing in competent people with world-class skills, and then getting others to work with them will ensure tremendous value addition to everyone concerned.

Essentially, we need to understand that reversing Brain drain into Brain gain need not mean merely encouraging Indians to come back to, or remain in, India; it can also mean attracting foreign brains in.

While many companies claim they are moving up the value chain, the fees they charge do not reflect that proclaimed value. If fees are any indication of value, the low fees our companies charge doesn’t match the value claims. Unfortunately our entire approach to the international market is based on a low-cost USP. We are a low cost country. We do not speak of quality, or scalability. We focus almost entirely on quantity and low-cost. In another ten years, our labour cost will get equalized with international labour costs. What will we do then?

Any organisation or country that builds its strategy for success, on the labour cost differential will not get far. Look at what happened with the Tigers of Southeast Asia; countries like Malaysia, Singapore, Philippines and South Korea. They capitalized for a while on the low labour cost advantage. But soon the advantage vanished once their labour cost levelled with international costs. The lesson is clear. If we continue to build our strategy on the positioning of low labour cost, we are not likely to get India out of its present morass.

Now one might be prompted to ask how these countries have made it good when they took advantage of the low labour cost advantage. Why have we not been able to do even that? The main difference between these countries and us, is that after using the low labour cost advantage as a USP and getting business, they executed all of this work from within the country. This benefited them in two ways. One – they retained and consolidated skills and; Two – they ensured maximum fruitful employment within their countries.

It is precisely because we market ourselves as a low cost (low value) service provider, that the global market is throwing us crumbs – conversion work, porting work and testing jobs. (This is not to say that there are no high-end projects being handled by Indian software companies. But the bulk of projects are not much to write home about in terms of their position in the value chain).

So what do we do to change this? We must position ourselves, first, as a country that can deliver high quality. As a country that can meet resource requirements at short notice. As a world-class service provider in the real sense.  If global players buy this, then we can throw in the cost advantage. Our low cost factor must be presented as an incidental advantage.

The other way to do this is to urge other countries to open up their borders to people. If we are opening up our borders to ‘free trade’, why can’t the developed countries do the same? After all, free trade does not involve only goods. It can also mean people. When we ‘export’ people to the US, they put down a quota for entry. And because there is a restriction, folks here are even more enticed by the ‘forbidden fruit’. So everyone wants to go abroad.

If we force them to open up their borders, then free movement of manpower is ensured and wage levels will equalise. That is what the developed countries are afraid of. They fear that with free movement across borders, wage levels will come down and their standard of living will drop.

Let me elaborate. A Lancer (tradable) in India costs $ 6,000 more than in the US. But a haircut (non-tradable) costs $ 13 in the US, but is only $ 2 in India. So, while, on the one hand we are under-valuing our people (and their service), on the other hand we are making goods less affordable to them. A classic case is our hotel tariffs. Food and services are priced low, but hotel rooms are priced as high as in New York. If we ourselves undervalue our people, how can we expect the world to place a high value on them?

Firstly, as a community, Indians have low consumption levels; whether it is drinking Coke or using the telephone. Secondly, there is a peculiarity in our consumer/seller behaviour.

If we are not comfortable buying and selling on the phone, how will we be comfortable doing it on the net? Forget consumers buying for the moment. Even sellers are not comfortable doing business on the phone. The buyer does not even get the information he needs, to make his purchase decision on the phone. There is a lot of distrust when it comes to commerce without ‘seeing’ (on the phone).  So imagine what levels of distrust are there for commerce without ‘seeing’ or ‘hearing’ (through the net). It’s there in our culture; this inherent distrust. It has nothing to do with technology.

Going further, let’s assume we get over our distrust. Then there’s the problem of poor physical infrastructure. For example, toll-free calls, which can be a huge marketing tool, are prohibitively expensive in India. Worse still, even after the allotment, only four digits are allowed in the number. That limits the total figure of toll-free numbers in each city to only 10,000. How we managed to mess up the number system to limit the availability of numbers, passes understanding.

Chennai has some good IT professionals. But compared to global standards, there is much to be desired when it comes to quality. Yes, when we compare ourselves with other cities in India, Chennai is probably better off in terms of IT manpower quality. But we are not competing with a Hyderabad or a Bangalore. We are competing with the finest in the world when we talk of a global market.

Why is this lack in quality IT manpower? Probably because preciseness just isn’t there in our culture. Quality does not come to us when we join a company. It has to be built into us right from kindergarten. So what we need is a massive change in inputs at home, at school and at work. The achievement of global standards is not about a technology change or an infrastructure change…it is about a cultural change. A transformation of mindset.

It will definitely take a long time. But hopefully, new-generation parents will teach their children these essentials. Then imitative behaviour will probably help raise our standards to those practised globally.

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