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It all began when alarm bells began to ring, warning of impending systems failures at midnight at the turn of the millennium. Every system including the most up-to-date seemed to have this problem. It needed to be fixed and fixed in a hurry to avoid catastrophe.
Systems in the West from 1955 to 1996 had been built without the realization that on Jan. 1, 2000, their automatic internal system clocks might set themselves back to 1900 instead of moving forward to 2000. If this happened, it would be an economic, military and political catastrophe.
Since everybody in the world had copied systems developed in the West, they were all in the same trouble. Three years of studies by the U.S. government from 1992 to 1995 had pinpointed the problem but had not estimated the full extent of remedial efforts needed. They were going to be huge.
U.S. President Bill Clinton began a serious look at the problem immediately after his inauguration and invited industry stalwarts to come up with solutions. There were no easy fixes. Each and every system in existence would have to be fixed (save the newest Dotcom systems) or replaced with revisions.
Rough estimates put the cost of remediation at US$300 billion over four years. The real problem was not the cost but finding trained personnel to do the job. At that time, Western system-related resources were tied up in developing Dotcom systems or in maintaining and improving existing systems. Very few human resources were available to deal with the impeding problem.
Hence they turned to India for manpower to help fill the gap. Ultimately the figure of $300 billion proved too small. Remediation and replacement of software together with replacement of hardware ended up costing close to US$1 trillion dollars.
In the 40 years prior to this realization, India had built a strong education system and a multitude of technical training colleges. Lack of opportunities left young graduates of these technical colleges underemployed. Some had left India for opportunities abroad. When the Y2K labor shortage issue presented itself, India could not pass up this opportunity.
Around the same time India was facing political instability. China was the darling of the West. But the Y2K job could not be handed over to the Chinese, as its people hardly read or spoke English. The Y2K effort required a strong command of English; hence all eyes turned to India.
The effort began with small companies like Infosys, Wipro, Satyam and others offering to undertake the Y2K remediation work in India. Also India would send consultants to the West to undertake the work on site.
Young Indians of the post-1970 generation had already made a big mark in Silicon Valley. Their technical prowess was well known. This led Clinton to advise businesses to seek Y2K remediation help in India. He also asked the U.S. Congress to increase the quota of technical visas granted. This was a bonanza for India.
Populist politicians who had been moaning about a brain drain began to sing the other way round. The Y2K repair became the swan song of the Indian middle class. The United States in 1999 alone granted 195,000 technical visas, of which India got the bulk. Prior to that Indians had arrived on U.S. shores in small numbers, either to join universities or as green card holders. Overnight every Indian systems graduate was preparing to depart to the United States or Europe to undertake Y2K or develop related systems.
Just as Y2K became a major headache for the West, Dotcom fever reached a feverish pitch. Systems consultants were needed for this also and Indian experts were very willing to participate in this work. While Y2K was the immediate and pressing issue, Dotcom was the future. Hence India's human resources were allocated to both remedial and developmental efforts. For Indians, experience in Dotcom would prove to be the most valuable.
The year 2000 arrived without a hitch and the world heaved a sigh of relief. India prepared itself for the next big undertaking, which was to be information technology and business process outsourcing services. Dominating this knowledge-based export business would catapult India into the 21st century.
For this to occur, experience in the U.S. market was essential. This had been achieved when U.S. companies opted for India instead of China. A rightwing government in power in New Delhi from 1999 to 2004 also helped. Indian IT exports, valued at a modest US$300 million in 1997, jumped to $4.3 billion in 2000. From then onward the sky was the limit.
The success of this business was based on three things: cost benefits, operational excellence and a readily available workforce. Within a few years IT giants in India like Infosys, Wipro, TCS and Satyam became multinationals. Indian IT and BPO exports in 2005 jumped to $24 billion, then to $32 billion in 2006. In the current year these are expected to cap $37-40 billion. The future remains bright for these services. A target of $60 billion in exports has been set for 2010, and it is achievable.
The Nasscom-McKinsey Report of 2005 was much more optimistic about India. In this report, the two consulting firms estimated that the worldwide market for outsourced IT and BPO services would be about $300 billion in 2010. India has the potential to capture 40 to 50 percent of this market. Developing this market to its full potential is India's main task. It will require innovation, cost control and good customer service. India so far has everything going in its favor.
No other major player is likely to emerge between now and 2015. China's emergence as a serious threat in this sector is at least a decade or two away. The Chinese have to learn English first. Not to be outdone by India, the Chinese have maintained a huge advantage in IT-related hardware manufacturing. At a later date, it is possible that Indian software could be married to China-made hardware. But this cooperation is in the future. Before that happens, overall trade and security modalities must be sorted out between the two countries.
It is estimated that by 2010, to provide US$60 billion worth of IT and BPO export services, India will employ 2.5 million people directly and 6.5 million people indirectly in this sector. Also, since the software export business has a higher margin it will allow India to quickly bridge the 20-year gap between the Chinese and Indian economies.
In short, the Y2K event changed India's fortunes permanently. This brought in money, which is helping to rebuild India's infrastructure and modernize its industry. It put India's talent on a par with that of the West. It also permanently vanished the begging-bowl stereotype that the West had very cleverly built for India.
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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)
