Posts from — November 2009

The Financial Times reports that the French services company Cap Gemini now has 21,000 employees in India compared to 20,000 in its home country of France.  Hiring in India is not new to multinationals. Siemens, General Electric, Hyundai, Samsung, Haier, Unilever, Citi group, Hewlett Packard, and many more companies have been hiring thousands of employees in major cities across the Indian subcontnent for several years.

But one company is ahead of all of them. IBM Corporation has close to 100,000 employees in Bangalore, Gurgaon, Kolkata and locations across the country.  A senior VP at EDS (now part of HP), told me that they used to lose employees to IBM, with whom they shared a building at one time, over smoking or snack breaks.  In 2001 IBM employed under 3,000 staffers in India.  In fact my first employer in India built a factory on land that IBM had bought then discarded when they quit the country back in 1978. What a change! IBM is already India’s largest multinational by headcount and India is already the second largest IBM country by headcount.

The day is not far when the Armonk giant will have more employ more in South Asia than in North America.  We could see similar stories with General Electric, if you count their now minority holding of the call center/BPO business. Accenture’s hiring in India continues to increase.  And there are more companies that will follow, giving a new meaning to a mutlinational corporation. But companies like Phillips, Danfoss, Shell and others have employed more outside their home country for decades. What is new is that the large employment is now in an emerging country.

The Wall Street Journal reported on Oct 27th  that Tata Motors profits doubled in Q3, as as raw-materials costs fell and sales increased in India.  This followed a report ten days earlier that India’s largest software services exporter  TCS posted an unexpectedly robust 29% rise in its profits  and margin conscious Infosys, recorded a 7.5 percent increase in quarterly profit and raised its full-year outlook.

At the same time hiring in some sectors resumed its vigor prompting India’s leading business magazine, Business World to declare, “The Jobs are Back” and support it with an effusive cover story, see here.

We think the celebration is premature and a bit too loud. India did not suffer as much from the downturn of 2008 and its internal financial systems was not exposed to the US mortgage crisis. But domestic overexpansion in real estate and retail in particular have resulting in widespread job loss that is unlikely to be reversed by the gains of low-cost IT services providers.  Large fiscal deficits and a credit crunch continue to throttle Indian entrepreneurs.  Hopefully a stable government, elected in May 2009 can make up for these factors and dreams of 10% growth can become real.

The trajectory of innovation in countries such as India  is taking a different path from the Industrial Revolution in the West.  Communications technology such as television and cell phones have leaped across to India.  Bottom-of-the-pyramid thinking had created huge markets based on $20 cell phones and $0.02 sachets of shampoo. But microfinance and technology are teaming up to drive further innovation into rural markets.

Outlook Business (India) has an excellent article  on the subject. Pictured on the bullock cart below are the $70  red “refrigerator” called ChotuKool (Little Cool) designed by Indian company Godrej & Boyce. Next to it is a blue carton containing the battery-powered portable water-purification system called Pureit, designed and sold by Unilver’s India unit.

MicroFinance institutions suchas SKS Microfinance and Basix are enabling the purchase of such devices in rural India, where 700 million people make less than $2 per day.  Often these institutions enable women to become entrepreneurs.  In the long run this will improve nutrition,  literacy, create smaller families and contain population growth in addition to improving the lots of rural consumers.

Read the entire article here.  Western media is also starting to report on the same phenomena but their reporting carries culturally silly terms such as “reverse innovation”. The implication somehow is that Innovation from India is backwards.  The term is attributed to Jeff Immelt of General Electric, who knows better since most of his company’s revenue and profits comes from outside the USA. You wouldn’t call those “reverse profits”, now Mr Immelt?  Having heard Jeff speak about globalization before, I am sure that the Journal probably took his comment out of context. But the India Expert cautions its readers to not proliferate the term, especially in conversations with Chinese and Indian counterparts.