Beijing or Bangalore? The race hots up

June 10, 2005

<h4>Beijing or Bangalore? The race hots up </h4>

BANGALORE: Every time I visit India, Indians always ask me to compare India with China. Lately, I have responded like this: If India and China were both highways, the Chinese highway would be a six-lane, perfectly paved road, but with a huge speed bump off in the distance labelled ‘‘Political reform: How in the world do we get from communism to a more open society?’’ When 1.3 billion people going 80 miles an hour hit a speed bump, one of two things happens: Either the car flies into the air, slams down, and all the parts hold together and it keeps on moving — or the car flies into the air, slams down and all the wheels fall off. Which it will be with China, I don’t know. India, by contrast, is like a highway full of potholes, with no sidewalks and half the street lamps broken. But off in the distance, the road seems to smooth out, and if it does, this country will be a dynamo. The question is: Is that smooth road in the distance a mirage or the real thing?

At first blush, coming back to Bangalore, India’s Silicon Valley, that smoother road seems like a mirage. The infrastructure here is still a total mess. But looks can be deceiving. Beneath the mess, Bangalore is entering a mature new phase as a technology centre, starting to produce its own high-tech products, research, venture capital firms and start-ups.

‘‘The ecosystem for innovation is now starting to be created here,’’ said Nandan Nilekani, the CEO of Infosys. For several years now, when venture capitalists funded companies in the United States, they insisted that the R&D for the products be done in India. But now, increasingly, Western companies will come up with a new idea and then tell Infosys, Wipro or Tata, India’s premier technology companies, to research, develop and produce the whole thing. As one Wipro executive put it, ‘‘You go from solving my problem to serving my business to knowing my business to being my business.’’ What will be left for the Western companies is the ‘‘ideation’’, the original concept and design of a flagship product (which is a big deal), and then the sales and marketing.

‘‘We’re going from a model of doing piecework to where the entire product and entire innovation stream is done by companies here,’’ Nilekani added. All of this means that innovation will happen faster and cheaper, with much more global collaboration.

The best indication that Bangalore is becoming hot is how many foreign techies — non-Indians — are now coming here to work. P Anandan, an Indian-American who worked for Microsoft for 28 years in Redmond, Wash., just opened Microsoft’s fourth research centre in Bangalore, following the ones in Redmond, Cambridge and Beijing. ‘‘I have two non-Indians working for me here, one Japanese and one American, and they could work anywhere in the world,’’ Anandan said. He added that when he got his engineering degree in India 28 years ago, all the competition was to get a job abroad. Now the competition is to get an IT job in India: ‘‘It is no longer, ‘Well, I have to stay here,’ but, ‘Do I get a chance to stay here?’’’

In the past year, Infosys received 9,600 applications from abroad, including from China, France and Germany, for internships and accepted 100. I asked one of these interns, Vicki Chen, a Chinese-American business student from the Claremont Colleges, why she came. ‘‘All the business is coming to India, and I don’t see why I shouldn’t follow the business,’’ she said. ‘‘If this is where the centre of gravity is, you should go check it out, then you become more valuable.’’

Even more interesting is how Indian firms are taking the skills they learned from outsourcing and using them to develop low-cost products for the low-wage Indian market — a medical insurance plan for the poor for as little as $10 a year, a $2,000 car, a $200 laptop, supercheap cell phones, a low-fare airline ($75 one-way for the three-hour Bangalore-Delhi flight) that sells ticket from Internet kiosks in gas stations. Indian companies know that if they can make money producing low-cost technology for poor Indians, it gives them an incredible platform to then take these products global. (Imagine the profit potential if they work in the West?) China is doing the exact same thing.

Indeed, I now understand why, when China’s Prime Minister Wen Jiabao visited India for the first time last April, he didn’t fly into the Capital, New Delhi — as foreign leaders usually do. He flew directly from Beijing to Bangalore — for a tech-tour — and then went on to New Delhi.

No US President or Vice President has ever visited Bangalore.

----THOMAS L. FRIEDMAN