India's IT frontier still growing strong
Minneapolis Star Tribune, Tuesda, December 20, 2005

Tuesday, December 20, 2005

Asked for a sound check at a function in Delhi this month, Bill Gates eschewed the "1, 2, 3 ..." favored by ordinary mortals. "One billion, 2 billion ..." he counted. They think big, these IT moguls, and especially, these days, in India.

Microsoft later announced plans to invest $1.7 billion in India during the next four years, about half of it in adding to its existing research and development and technical-support operations.

"The only thing that limits us in India," Gates told the local media, "is the speed at which we can recruit."

A few days earlier, Intel, a giant chipmaker, had unveiled plans to invest more than $1 billion in five years, much of it in expanding its R&D center in Bangalore. In October, Cisco Systems, the world's largest maker of the routers and switches that direct Internet traffic, announced its own plans to invest $1.1 billion in India.

The euphoria is confined neither to U.S. multinationals, nor to information technology. It also encompasses India's own IT industries and the expanding range of other back-office services that now can be performed remotely.

The three biggest Indian IT services firms -- Tata Consultancy Services, Infosys and Wipro -- each are recruiting more than 1,000 people a month. And to take just one example of the other services now moving to India, investment bank J.P. Morgan Chase this month revealed it is to double, to about 9,000, its staff in India.

Anyone who assumes J.P. Morgan simply will be doing low-level "back office" tasks in the country -- a bit of data entry and paper-shuffling -- would be flat wrong. One task for the new recruits is to settle complex structured-finance and derivative deals, what one insider calls "some of the most sophisticated transactions in the world."

All these investments illustrate that a third stage of the great Indian services-export boom is well underway.

In the first stage, firms such as TCS developed world-class expertise in software application development and maintenance, and their low-cost developers became the preferred partners of many Western IT firms. In the second, Indian firms and the local "captive" operations of multinationals started offering low-end back-office services that could take place a continent away -- telephone call centers, transcribing medical records, processing insurance claims and so on.

In the third, in both IT and the broader spectrum of other "business processes," ever-more sophisticated functions are happening in India.

In business-process offshoring, the big industries will remain banking and insurance. But rapid expansion also is expected in other areas, such as legal services.

The law, in fact, illustrates how vast is the untapped potential market. About $250 billion is spent on legal services worldwide, about two-thirds of it in America. So far only a tiny proportion goes offshore. Forrester, a research outfit, has estimated that by 2004, 12,000 legal jobs had moved offshore, and forecast an increase to 35,000 by 2010. India, with its English-language skills and common-law tradition, is well-placed to secure a big share of the business.

It is not just a question of "paralegal" hack work such as document-preparation. Sanjay Kamlani, of Pangea3, a small Indian firm, calls it "real lawyering" -- drafting contracts and patent applications, research and negotiation. His clients are both big law firms and in-house legal teams.

India's fundamental attraction has not changed since it first drew software developers: fantastic cost savings. With American lawyers costing $300 an hour or more, Indian firms can cut bills by 75 percent.