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OCTOBER 16, 2000 VOL. 156 NO. 15

Dilip Mehta/Contact Press Images for TIME.
Raj Kondur and Ashish Dhawan met at Harvard but fulfilled their dream of returning to India to take part in the IT revolution.

India's IT Bonanza
As the Internet bridges distances, the sleeping giant seizes the opportunity to create new jobs and wealth

Wave of the Future: Villages get hooked up
Interview: "Our Net revolution is here to stay"
Viewpoint: Why India, not China, is a high-tech whiz

Rakesh Dubey did what many young Indians have done to get a future: he went abroad. In Dubey's case, it was to the U.S. for a master's degree in genetics. Then Dubey made a major error: he came home to find a job. He was flexible—"I would have taken anything, anywhere in India," he says—but 80 job applications landed him nowhere. Many companies shunned him precisely because he had gone abroad and returned to India. "They were suspicious," Dubey says. "They wondered, 'Unless there was something wrong with the guy, why would he come back?'" Girls didn't want to date the 30-year-old, unemployed scientist either.

In March, a labor-hungry Internet portal based in New Delhi gave Dubey a job editing online stories about, of all things, women's fashion. It was his first work since getting off the plane 18 months earlier. Within a couple of weeks, two more Internet-related companies tried to poach him. Today, two jobs later, he makes $475 a month, three times the salary of a junior doctor, and his parents are getting marriage offers from families with available daughters. All because he entered, by serendipity, India's Internet industry. "The best thing about the whole Internet phenomenon," Dubey says, "is that it has created hope for so many people. The traditional qualifications for jobs were so narrow. But now, an Internet company will say, 'You're bright, motivated—you've got a future.'"

India's prowess in information technology (IT) isn't a new phenomenon, of course. For years, the southern city of Bangalore has stood out as a high-tech crucible in a no-tech land, with Indians writing code for international tech giants and exporting software to the world. But the development of the Internet now promises to push the IT boom into the mainstream, creating jobs for millions of Indians and contributing mightily to the nation's economic development. "India always had the talent, but with the Internet, we've found the delivery mechanism to transport this talent around the globe," says Prakash Gurbaxani, who set up his own dotcom consultancy 24/7 five months ago in Bangalore.

COVER: The Great Web Bonanza
India has unexpectedly and unintentionally found a future through the Internet, one fueled by the largest pool of engineering talent in the developing world
Wave of the Future: Villages get hooked up
Interview: "Our Net revolution is here to stay"
Viewpoint: Why India, not China, is a high-tech whiz

TAIWAN: Rookie Mistakes
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Burma: The generals battle the disease by lying about it

MALAYSIA: All the News That's Fit to Surf
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CINEMA: In the Mood for Wong Kar-wai
Fifteen months in the making, the Hong Kong director's latest film leaves viewers both delighted and mystified
On Location: A long night on the wild side

BOOKS: A Walk on the Wild Side
An entertaining biography examines the man who has chronicled Bangkok and its sex scene for 35 years

TRAVEL WATCH: Check into the past at one of Asia's Grand Hotels

Can this be happening to the slumbering giant that for decades has shrugged off the economic miracles to the east as something exotic, slightly distasteful and utterly irrelevant? Lessons from the outside world didn't apply, tut-tutted Indians of all stripes, because the country was so populous and so sloppily democratic. Anyone desiring prosperity or hope—like Dubey—should find them abroad. Being Indian, you see, was a unique condition.

Say goodbye to all that. India has, unexpectedly and unintentionally, found a future. The Internet snuck through the barriers India erected against the outside world. What it found was the largest national pool of engineering talent in the developing world, a good proportion of which speaks English, the lingua franca of the New Economy. Those engineers' underemployed sisters and cousins have proven willing to work cheaply at a new crop of labor-intensive jobs made possible by the distance-bridging technology of the Internet. "Finally, India has something to show to the world," says Dewang Mehta, president of the National Association of Software and Service Companies (NASSCOM). "This is our tryst with destiny," he adds, echoing the famous phrase coined by India's first Prime Minister, Jawaharlal Nehru, as the country got its independence from Britain.

To date, the bonanza for India has come from the equivalent of the Internet's boiler room: writing code and other labor-intensive work. But that's big business in its own right. Ramalinga Raju, chairman of Satyam Computer Services, who recently made Forbes magazine's list of billionaires, says those opportunities could give India 5% of the worldwide opportunities in IT, and that could create up to 50 million jobs in the next two decades—enough to help India attain its goal of becoming a solid, middle-class nation.

Of course, frogs don't actually turn into princes with a kiss, and India's warts are all too apparent. Consider these: a nationwide dotcom frenzy collapsed last April with the worldwide crash of high-tech stocks. It's easy to see why. You can't even talk about "penetration" of computers into Indian households: the country of 1 billion people has only 4.3 million PCs. The phone network is Third World at its worst. With a minute proportion of the population owning credit cards, e-commerce is but a distant dream.

But get this: India's cities, where the middle classes live, are cable-wired like no others in the world. The cables are strung across balconies and laundry lines, but they work—and now they're being converted into Internet connections. There are already 30 million cable connections—compared with 20 million telephone lines—and 2 million people in Bombay have high-speed access to the Internet. India's consuming class is more populous than that of most countries, and cable will allow them to connect to the Net via televisions, not expensive PCs. (There are 75 million TVs in India.) India could turn into a country of Net users, and there are a whole lot of people trying to make that happen, including Enron and Hughes Telecom, which are building fiber optic networks in India. Dubey, the former geneticist, is content manager for a portal aimed at Indian farmers. Jobs like his didn't even exist in India 18 months ago.

India's New Economy bonanza is, in truth, a happy accident. In the past, the country's vast army of engineers was something of an embarrassment because so few found decent jobs. The use of English, a legacy of British colonialism, still prompts a prickly combination of pride and nationalistic unease. (Novelists who write in English constantly feel the need to defend their choice.) Now the country's assets are working. IT got into India not because of a national policy, but because it vaulted the barriers India's bureaucrats instinctively mount against business trends, especially foreign ones. When Coke and Pepsi were banging on India's door in the late 1980s, Texas Instruments was already employing technicians in Bangalore, cranking out software that it beamed to the U.S. by satellite. Coke and Pepsi needed numerous permits to set up factories and import concentrate; Texas Instruments, involved in a business unlike anything the bureaucrats had seen before, needed virtually none. "If the IT boom had come 30 years ago," says Bhaskar Pramanik, managing director of Sun Microsystems India, "the state would have nationalized the software industry."

The current government of Prime Minister Atal Behari Vajpayee has learned to talk the IT talk. "What we need is not adequate bandwidth," proclaims Pramod Mahajan, who heads the Ministry of Information Technology, created just last year. "What we need is excessive bandwidth." India has neither: its capacity for international telecom traffic will this year reach 780 megabits per second (mbps), a mere 1.4% of what's available in China. No problem: never has a modern Indian government sounded quite so with-it; never has the ruling class seemed less defensive about what India didn't need from the outside world. And never has the "transforming power" of the Internet, that chestnut phrase of the New Economy, seemed so tangible and breathtaking. "The next 20 years belong to India," says Satyam's Raju. "We have the people, the language skills and a deep understanding of information technology." Here are the tales of Indian lives already transformed—and those helping to change the fate of their country.

Rohini Ramdas and Rohit Mani are a nice young Bangalore couple, married just eight months and facing the usual struggles of trying to furnish an apartment and make the monthly car payments. They like shopping for CDs and ordering in pizza—and in these seemingly normal lives one finds the bedrock of the Indian IT bonanza. Ramdas and Mani are software engineers at a subsidiary of ANZ Grindlays Bank. They work long hours: Mani slogged through an entire weekend shortly after the couple's honeymoon. "Rohini understands," he says. "She's in the same kind of work."

The Arabs found oil under the sands. The Internet revealed to India its own vast natural resource: people. For decades, India's universities and training institutes churned out an army of engineers, most aiming for a government-related job in the defense industry or civil engineering. Some of the training was superb, such as that offered at the six Indian Institutes of Technology, or IITS. Other schools were undeniably shoddy. Either way, there weren't enough jobs in the government or heavy industry to accommodate even a fraction of those people. The best and the brightest went abroad; the rest lived in poverty or on the tiny salaries local engineers received.

The software industry changed that in the late 1980s. Satellite links allowed companies in the West to employ low-wage engineers in far-off India to write software. A new industry sprang up, unhampered by government interference and immune to the normal pitfalls of doing business in India, such as miserable ports and roads. Then the Internet kicked in, and word got out fast. Today, most of the 120,000 yearly engineering graduates in India concentrate on computers or software. A lower tier of schools produces 1 million technicians a year with basic programming skills. By comparison, the U.S. trains 75,000 engineers annually.

To see the changes in India, take a look at Ramdas and Mani. Their combined income—and there are many engineer couples in the industry—is nearly $17,000 a year, and annual raises can reach 50%. "This industry is so cushy, so comfortable," Mani says. "My peers in manufacturing have to claw their way up the ladder." Mani recently took his mother to Melbourne for a holiday. Ramdas spent three weeks vacationing in Singapore last year. The couple bank 25% of their earnings.

Mani and Ramdas, who are both 24, are on the low end of the ladder. An experienced programmer might earn $700 a month. Software giant Infosys Technologies gives stock options to its employees. As a result, more than 200 of its workers have become U.S.-dollar millionaires, and nearly 2,000 have become Indian rupee-millionaires. "The IT industry has created more millionaires in the past five years than all of India's industries put together in the past 50 years," says Azim Premji, chairman of Wipro, another big software house.

In the Old India, such wealth funneled up to a tiny clutch of individuals and businesses that shrewdly abused the byzantine system. By contrast, the top software billionaires have become national heroes. Their riches are fantastic, of course. Wipro's Premji became, for a brief period this year, the second richest man in the world after Bill Gates. (Wipro's stock price subsided in April, though Premji's net worth is still estimated at more than $11 billion.) But they are admired because, unlike the industrialist heroes of the past, they earned fortunes in one of the world's most competitive industries without any under-the-counter help from Indian bureaucrats. "Playing to win," says Premji, "is not the same as playing dirty." In the early 1990s, in fact, the software lobby got the government to remove import duties intended to protect local firms from software products sold in India by Western companies. "We said that if we can't compete with multinationals in India, how will we ever be able to compete outside," says NASSCOM's Mehta. It was a winning strategy. Indian software exports should total $6.3 billion this year, and the quality is world-class. The Software Engineering Institute of Carnegie Mellon University in the U.S. gives a "top-quality" ranking to only 32 software companies around the world: 17 of them are based in India.

"Technology has a big role to play in a vast, resource-starved country like India," says Infosys chairman N.R. Narayana Murthy, 54, one of the software billionaires. Murthy, son of a mathematics teacher from southern India, won a scholarship to the iit in Kanpur and in 1981 set up Infosys with $1,000 of savings he pooled together with six other founders. "It took us a year to get a telephone," recalls Murthy. "It would take two years to get a license to import a computer." He almost folded the company in 1990 but managed to hold on until the early round of economic liberalizations came through in 1991. Today Infosys has a market capitalization of $10 billion, and Murthy played host to Gates in India last month. "We've got to go global," Murthy says, although his lifestyle is anything but Silicon Valley-flash. He doesn't employ domestic servants, which is unusual for someone of his stature in India, and begins his day by cleaning the toilets in his spartan, two-bedroom house in Bangalore, a practice inspired by Mohandas Gandhi. "Life is incomplete in a society like ours unless you make an effort to reduce the difference between the haves and the have-nots," Murthy explains.

Software is only the more prominent half of India's IT bonanza. A glimpse of the other big new line of business can be found at Selectronic Equipment & Services, a three-year-old New Delhi company where young Indian workers are paid to watch American TV programs like ER and Chicago Hope. They have more rigorous duties as well. Selectronic hires stenographers to transcribe medical records for doctors in California, Georgia and Pennsylvania. Without the Internet, that vast distance was unbridgeable; with the Net in place, a whole range of labor-intensive work—or "IT-enabled services"—can be done anywhere on the globe. Ireland and the Philippines have also caught on, but India is becoming the country to beat.

Selectronic's business works like this: doctors in the U.S., to protect themselves in malpractice suits, have to keep detailed notes of all consultations but don't want to hire stenographers at U.S. wage rates. Indians charge far less—and the Internet has brought them within reach. A doctor in the U.S. simply dials a toll-free number and dictates case summaries into the phone. Those recordings are transmitted via satellite to New Delhi, where they are typed up by Selectronic's 200 transcribers.

Founder Veer Sagar, who quit a computer company to get into the business, says it has even more potential than software because it can employ Indians with non-specialized educations. "With our huge pool of educated, English-knowing workers," says 56-year-old Sagar, "we have a chance to be No. 1 in the world for IT-enabled services." Some 100 Indian companies are doing medical transcription already, and Selectronic operates 24 hours a day, 365 days a year—a claim that even Indian power companies and telephone exchanges can barely make. There are challenges to the job. Speed is a must: the company promises a 24-hour turnaround. So, too, is accuracy, and that poses challenges for Indians dealing with American English, which is why those U.S. TV programs are part of the training program. One worker couldn't understand a case history that involved a patient having eaten a tortilla—so the company imported restaurant menus from the U.S. for study. "India is in the same position Japan was in during the 1960s," says Sagar, "if we capitalize on our human resources."

In Bombay, 940 people sit in a huge, air-conditioned hall, each with his own computer terminal, working for World Network Services (WNS), a unit of British Airways. They have been hired to perform a slew of long-distance airline functions—tracking cargo, processing reservations, collating sales—for British Airways and other carriers. Qualifications for the jobs aren't high: anyone who knows English and can use a keyboard can apply. Sunita D'Souza, 23, once planned to work for a travel agency but found better pay sitting at a terminal at WNS. "After college," she says, "I didn't know where to go. I was thrilled when I heard about this." WNS general manager Roy Marshall says the company looked at several countries before settling on India. "When we started to add up all the ticks in the boxes," he says, "India came out as ideal." The main reason: there were so many people who could speak English that expansion would never be a problem. McKinsey & Co. estimates that employment in India's software and IT services sector will jump from 280,000 last year to 2.2 million by 2008. "For people who are educated, speak English and have some basic skills," says Salil Parikh, ceo of Ernst & Young's Indian consulting operation, "it will be a great life."

That's a prognosis you wouldn't have heard a couple of years ago, and one that Raj Kondur, 28, and Ashish Dhawan, 31, are banking on. The two met at Harvard Business School and, like many Indians abroad, they dreamed of coming home to do business someday. In the techno-geek Indian expatriate community, there is a cynical equation representing that fantasy. It's called the "X+2 Syndrome." In layman's terms: most Indians living abroad say they're returning home in two years, represented by the numeral 2 in the equation. The X, however, is the variable that keeps changing, or more precisely, growing. In other words, they never go home because there's always a good reason not to: opportunities don't exist in India. Kondur and Dhawan have proven the equation wrong, having rounded up $65 million in cash for a Bombay Internet venture-capital firm called Chrysalis Capital. "A lot of people talk about coming back," says Dhawan. "Thanks to the IT revolution, you can now put your head and heart in the same place."

And what a different place a returning Indian will find. Ask Raghu Shenoy, 33, ceo of Bangalore software company Bit-by-Bit Computer Services. Shenoy enjoys business trips to Europe and holidays in Zanzibar. He would have none of that without the liberating power of IT. While studying at the iit in Madras in 1990, Shenoy contracted tuberculosis of the spine and couldn't finish his degree. He is wheelchair-bound, a fate that, in the Old Economy, killed opportunities for a career or a normal life. No longer. "IT is the only industry where I had a good chance of pulling off a success," he says. With his handicap, Shenoy didn't even think of applying for a job after university. Instead, he went into business for himself and now employs 11 people writing software for European clients. That's an example taken from the real, new, wired world. India has spent 50 years grousing from its self-imposed wheelchair. Watch out world: India is getting to its feet.

Reported by Saritha Rai/Bangalore, Meenakshi Ganguly/Bombay and Maseeh Rahman/New Delhi

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