If only globalisation and software could be understood in easier terms, the world would be a lot easier to live in. But such is the complexity of the world economy and the information technology industry today, that anything said casually can be countered.
This week, it is time to raise some hard questions: Is India really an IT super power? Where is it going or can go in the software industry?
A study commissioned by Business Software Alliance (BSA), a global industry association that champions the cause of IT, has come out with a surprising finding that India ranks a lowly 46 in the global IT business in terms of competitiveness.
The study based on benchmarking of countries was conducted by the Economist Intelligence Unit (EIU) for BSA, and is aimed at highlighting the strengths and weaknesses of various countries in the IT business, in both hardware and software.
What comes out of the study is a simple truth: software is much more than coding as a service, in which Indian companies have been excelling. Software engineering at low cost is the key driver that has marked the rise of companies such as Infosys, Wipro and Tata Consultancy Services (TCS). But when it comes to output in a global economy, a variety of factors determining output in terms of the value generated in dollars.
India and China are definitely counted seriously among emerging powers in IT, but competitiveness, as defined by the EIU study is a much more complex game.
The study measured 64 countries on a number of factors including the overall business environment including the policy regime, IT infrastructure involving features like broadband penetration, human capital including the education scenario, legal environment including the patent regime, R&D (research and development) environment and support for the IT industry including features like the availability of finance.
With different weightages assigned for various such features and their sub-plots, the study focusses on the overall environment that could help countries "move up the value chain," jargon for increasing profit margins through more innovations, patents, better business models and deeper skills.
Not surprisingly, the United States emerges as the most IT competitive nation in the world, followed by Japan and South Korea. Even in labour productivity, measured in total output generated per IT employee, Taiwan, South Korea and Ireland come out at the top, and India is down at 22 rank, well behind China (10) and Brazil (19).
"It is about how capable a country is in producing technology as against how it is using technology," says Goh Seow Hiong, director, software policy, Asia, for BSA. "Although labour productivity in China and India are high, the environment has not caught up…We can't rely on low labour costs for long," he adds.
Even within the Asia-Pacific region, even Thailand at the 41st position in global rankings is ahead of India, though China at the 49th position in global rankings is behind India.
India's hardware and software output per industry employee is at $39,033, while for Taiwan, with its humongous hardware manufacturing and electronic component companies, is at $386,413 and China at $136,506.
The factors that pull down India are the overall business environment, in which India ranks 47, and IT infrastructure, in which India is ranked 62.
But this should not surprise one because the study uses 'computers per 100 people' and 'broadband connections per 100 people' among the criteria. With more than 100 crore people, any such factor in India has to be measured per billion citizens, and naturally, India becomes a laggard in such terms. PC penetration, for instance, is only 22 per 1,000 people.
But the situation is fluid. "Countries high in the index may not be there five years now," remarks Jeffrey J. Hardee, BSA's regional director for Asia.
In human capital, India ranks 35th, ahead of China, Malaysia, the Philippines and Vietnam., but in legal environment, India's rank is 48, below its overall ranking at 46, thanks to its patent regime that does not recognise product patents for software. Also, BSA officials say patents need to be better administered in India, because court cases can drag on and courts are not best equipped to handle complex cases related to intellectual property rights.
"Legislation is very good but enforcement is not as good as it could be," says Hardee. BSA officials say India could set up special courts to try intellectual property cases, as Malaysia, Philippines and Taiwan have done, to improve the legal environment.
The legal environment also impacts the research and development (R&D) environment, in which India ranks 49th, behind China and Malaysia. The measurement relies on patents filed locally, though it is true that Indian engineers are behind dozens of patents that have been filed by US-headquartered companies like Google and Microsoft.
Companies may be headquartered in the US, but work gets done all over the globe. In such a scenario, a country's competitiveness cannot be isolated from that of a company. As wages spiral and talent becomes scarce, patents, innovations and deeper skills may separate the men from the boys of the Indian IT industry.