India's Unequal Access

India's urban infrastructure is at the breaking point, threatening its tech boom--and the fortunes of its many Western customers. The challenge is much bigger than money: It requires addressing the frustrations of 700 million rural Indians who have been left out of the prosperity.

Electronics City is a glittering, 330-acre office complex just outside of Bangalore that exemplifies the technology boom that has remade India over the past 15 years. Over 100 companies have offices here, and the carefully manicured grounds at some of the bigger campuses could make the most coddled American developer jealous.

In an office whose expansive glass windows do daily battle with India’s relentless sun and heat, Selvan D., senior VP for talent transformation for outsourcing giant Wipro, talks about how he is addressing the challenges of explosive growth. To tackle the issues of attrition (the turnover rate for the major outsourcing companies is in the mid-teens) and a potential labor shortage—he uses techniques like hiring and training people before they even graduate college, bringing in 3,000 nonengineering students to learn about technology and offering an array of training programs for existing employees.

In the middle of D.’s explanation, the room suddenly goes dark—except for the glow of the computers, which are protected by generators. Yet D. continues talking without so much as batting an eyelash. It happens again a few minutes later and thus a Western reporter is introduced to one of the facts of life in Bangalore: Just as people who live in an oasis have to deal with the occasional sandstorm, companies in India’s outsourcing industry still have to deal with, well, being in India.

Power problems are just the beginning. Office parks like Electronics City are reachable only by old roads that are forced to carry five times the traffic they were designed to. The result is that a six-mile commute takes more than 90 minutes. Competition on the roads is so cutthroat that most outsourcing companies hire drivers to shuttle all of their employees to work so that they will not arrive completely exhausted and stressed out. (Another major Indian outsourcing company, Infosys, is planning to build a new campus complete with housing so that workers can walk to work.) Power goes out so routinely in Bangalore that generators are considered a necessary expense for homes as well as businesses. And the airports look like relics from the 1950s.

"India’s infrastructure has not kept pace with its growth," says Kris Gopalakrishnan, president and COO of Infosys. "[It] is a bottleneck to our growth."

Someone needs to pay the price for these problems, and that someone is you. Bad roads, power outages and vintage airports all add expenses, reduce productivity and increase turnover for outsourcing companies. These costs ultimately make their way back to the customer. As India’s outsourcers become increasingly intertwined with the core business processes of their customers, their infrastructure problems will be felt in the West. CIOs need to understand the issues that affect their outsourcers’ performance—and ultimately, their own.

The Hidden Obstacle to Modernization The lack of infrastructure has urban India near a breaking point. But if it were simply a matter of money or willpower, India undoubtedly would be farther along the road.

Instead, the improvements are being held in check by those who have yet to see the benefits of globalization: rural India.

While India’s economy has been growing at close to 10 percent a year, the growth has been confined to urban India. "Rural India, where 700 million people live, has been totally left behind," says Ashok Jhunjhunwala, a professor at the Indian Institute of Technology in Chennai. A Wipro employee in Bangalore can log in to a server in the United States to do work for a customer, but that same employee probably can’t call his parents in his home village—just 20 percent of rural villages are reachable by phone cable, and just over 5 percent of Indians have a landline. In other words, while the world may be flat, India isn’t.

But unlike most countries, where the poor and isolated are often denied political power, India’s rural population—about 70 percent of the country—has a solid majority in the government. "If India is going to continue growing, we need to do something in rural India," says Jhunjhunwala. "You can’t concentrate on 30 percent of the population and ignore the rest because politically it will create a serious backlash."

Gaining Political Points with IT In fact, that backlash has already begun. In 2004 the BJP, the political party that jump-started India’s technology sector with special economic zones and tax incentives, was voted out of power—in large part because rural voters felt it was focusing too heavily on urban areas. And to this day the rural majority will simply vote out any politician who supports, say, a new highway in Bangalore, says Montek Singh Ahluwalia, deputy chairman of the planning committee and the author of India’s latest five-year plan.

The Indian government is desperately seeking ways to extend the benefits of the information economy to rural India. Consequently, the government has declared 2007 "The Year of Broadband" and has set an ambitious goal to establish high-speed Internet-enabled computer kiosks—called Common Service Centers (CSCs)—in 100,000 of India’s 600,000 villages by March 2008. "The whole idea is to bring rural India into the mainstream," says Aruna Sundararajan, CEO of the CSC project for Infrastructure Leasing & Financial Services, the firm that the government has chosen to manage the project. The CSC project has a budget of $1.3 billion, about 30 percent of which comes from the national and state governments.

But despite the money, this project falls firmly into the easier-said-than-done category. Getting the computers working will be hard enough, but the project leaders also need to create demand for new IT services among the villagers, most of whom have never even used a phone, let alone a computer. And those services will need to have real economic or educational value—and be profitable for the companies offering them. "If you want to impress people you can do a project in 50 villages," says Jhunjhunwala. "If you want it to scale, it has to be a business."

The Search for Valuable Services A potential cornerstone for building valuable IT services is the Bhoomi, or land record. The vast majority of Indians are farmers and, thanks to laws designed to preserve the rural way of life, there is a cap on the amount of land any one person can own. The Bhoomi is essentially a statement of a farmer’s worth and his ticket for everything from securing a loan to settling disputes. But Indians aren’t allowed to hold the original Bhoomi. They can only take copies and the copies have a limited period of validity, which means farmers are constantly needing new ones.

They aren’t easy to get. Typically, a farmer has to buy a bus ticket and travel to one of the bigger towns in his area, pay a bribe to the local accountant in charge of managing the region’s records and cough up a 35-cent fee to the government. He then returns to the town a month later and picks up the record—assuming there hasn’t been a mix-up. The whole process can end up costing hundreds of rupees, which is why there is a project under way to digitize Bhoomi records and deliver them electronically to CSCs.

An Expensive Start In Karnataka, a state in south central India, a company called Comat Technologies has set up 800 Internet-equipped centers, each with two computers in villages since last October. And it is in the process of converting all of the state’s 20 million Bhoomi records into digital files at its own expense—it was the only way to convince a reluctant and skeptical state government to release the records at all, says Comat President Sriram Raghavan.

Deploying the Internet kiosks was another matter. Due to the lack of infrastructure, Comat has to negotiate rent in one of the few buildings capable of housing a computer in each village—usually one of a handful of poorly constructed concrete huts. But that’s just the start of it. Since there isn’t a reliable power supply, Comat had to buy a rechargeable battery for each computer that could run on both electricity and eventually, solar power. That cost about $2,300. The computers, printer and other equipment cost another $1,700.

Then there was the matter of the Internet connection. With phone lines almost nonexistent and the limited cell network unreliable for moving data files, Raghavan was forced to buy hundreds of satellite dishes at $1,000 apiece. They work well enough, as long as rural villagers don’t try to hang their laundry on these inscrutable objects—in which case a Comat worker needs to drive to the village and reposition the satellite. But it isn’t a long-term solution.

An Ecosystem of Services The good news is that there is definitely a market for e-Bhoomi. In December Comat’s 800 CSCs averaged 400 Bhoomi records each (a more typical month averages between 100 and 200 records). But Comat gets only 11 cents for each record (the government takes the other 24 cents) after shelling out more than $4,800 for each CSC.

The math doesn’t add up now, admits Raghavan, but he hopes that an ecosystem will emerge around the Bhoomi records. Sundararajan predicts that there are about 20 possible services, such as registering birth and death certificates and making utility payments, for example, that lend themselves to e-government. She is also hopeful that training, education and healthcare services could find a paying audience in the villages.

Money with Nowhere to Go Contrary to the West’s image of starving peasants dressed in rags, rural Indians do have some money to spend. They just don’t have much opportunity to buy anything because of the terrible logistics and communications, says Vikram Tiwathia, CIO of the Confederation of Indian Industry. For example, no one bothers to sell insurance in rural areas because it currently takes months to get the Bhoomi record necessary to approve the loan. With Bhoomi records available electronically, it could create a huge new opportunity for Indian companies—and foreign companies too. India has about 200 million consumers today, but that number is predicted to rise to 450 million by 2010, if projects connecting rural India with the rest of the world are successful.

But there are huge challenges that still need to be overcome, admits Sundararajan, who says that "We need to keep our expectations somewhat conservative." For starters, the projects to date are happening in a one-off way; various companies are building kiosks that don’t connect with each other, even though it is obvious to everyone that rural citizens would derive the most benefits from a single kiosk that did everything. Another challenge is language. While English is the language of business, hardly anyone in the rural areas speaks it—India has 23 official languages and hundreds of local dialects. In order for services to take off they will have to be designed and delivered in the local language. Sundararajan says that some of the CSC project’s budget will go to address this "viability gap."

Will Cell Phones Save the Day? In the meantime, there is another technology that is overcoming the viability gap on its own: the cell phone. Indians are buying cell phones at a staggering pace, and new cell towers are popping up all over the country. The London Business School estimates that for every 10 percent of the population that uses a mobile phone, a developing nation can expect its GDP to grow 0.6 percent a year. The impact is being felt everywhere in India today, says Devinder Kishore, marketing director for Nokia in India. For example, fishermen use phones to find the port with the best prices for their catch, taxi drivers use phones so that they know when to pick a customer up, and tradesmen use them so they don’t have to return to their office after every appointment. Kishore says that the average Indian views the mobile phone as an investment that can pay for itself in a matter of months.

However, developing cell phone–based services that work as well as their counterparts on computers remains a big challenge even in the West. Still, the explosion of the cell phone network is a case of a population finding its own solution to a problem, and the anecdotal returns can’t be ignored. "I have a lot of hope for the mobile phone," says Subhash Bhatnagar, a professor at the Indian Institute of Management, Ahmedabad, and a consultant with the World Bank, who is otherwise skeptical of attempts to bridge the country’s digital divide. "The Internet will play an important role once someone [makes it work well] with the mobile phone."

Yet even if the cell phone network takes off, and even if the government achieves its stated goal of establishing 100,000 CSCs brimming with services that improve rural people’s lives, there is still no guarantee that it will have the political effect that the Indian government so desperately desires: to make rural India feel connected to urban India, which in turn will convince it to support infrastructure projects that the cities need in order to keep growing. It could be a convoluted leap of logic to assume that rural voters will connect all those dots together.

But Tiwathia, the CII CIO, says that long term it is impossible to see how all of India—and all of the world—doesn’t end up benefiting from connecting rural India. "If you want [rural Indians] to become part of your workforce by 2010 or 2020, they need to start developing skills now," he says. Connecting rural India will bring its education system in line with the rest of the world. And India’s workforce will grow by leaps and bounds. In other words, it gives India another way to solve its labor shortage. "It will make it easier to move people and to move work to people," he says. "That’s something that CIOs in the U.S. need to think about."

Copyright © 2007 IDG Communications, Inc.

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