By Michael Kanellos
Staff Writer, CNET News.com
June 27, 2005 4:00 AM PDT
That year, engineers at Tata Consultancy Services found that a set of software tools called CasePac, developed to convert code for IBM, could be used to change the date field in other programs.
"We realized this could be used for the Y2K problem," said Nagaraj Ijari, a senior executive at Tata's offices, located in this city at the epicenter of India's thriving technology industry. Companies from around the world sought Tata's outsourced services to fix the "millennium bug," and the company's annual revenue has climbed from less than $170 million to $2.24 billion in the years since.
The success story illustrates how quickly India's fortunes have changed in just a few short years, as the country's burgeoning technology industry has provided such services at a fraction of the cost of Western counterparts. Building on this foundation, India is now entering an important new phase in its economic evolution.
Once fairly anonymous organizations hired to run support desks and develop server applications for large multinational corporations, Indian companies are raising their profile as brand name suppliers in hardware design, software development, consulting services and virtually anything else in technology. Infused with new blood from a young tech-savvy work force, the new movement is a major advance toward economic independence that carries broad ramifications for a country whose past includes colonial rule, experiments in socialism and devastating poverty.
"There is a huge Indian domestic opportunity and an export opportunity beyond outsourcing," said Rishi Navani, managing director of WestBridge Capital Partners, a venture capital firm specializing in Indo-American deals. "Over the next 12 months, you will see three to four new Indian Nasdaq listings."
India's growing entrepreneurial spirit is reflected in its forays into consumer electronics--a highly competitive market that has long been considered the province of Japan, China, South Korea and other Asian nations, as well as the United States.
Tata recently won a deal to create an environmentally friendly cell phone for a U.S. carrier, for example, while rival Wipro Technologies is designing MP3 players for Europe and a flat-panel TV for an American company. Such entrepreneurial ventures in the consumer market are not confined to the largest players: Mumbai-based Celetronix produces set-top boxes for a U.S.-based satellite TV carrier.
"Our evolution will be similar to the evolution of Taiwan," said Ramesh Emani, president of Embedded & Product Engineering Solutions at Wipro, noting that in India, there would be greater emphasis on hardware design than on manufacturing.
As was the case in China, domestic demand is a significant factor in India's technological expansion.
India has only 100 million phones for its population of 1 billion people--including both cellular and land lines--but that number is expected to grow to 250 million in the next two years. Cellular service costs only about $4 to $7 a month, and future phones will also sport cricket scores, lottery ticket purchases and other types of services seen in South Korea and Japan.
"The volume is enormous," said Sanjay Nayak, CEO of network equipment specialist Tejas Networks, which has won large contracts in India against multinational competitors.
High growth is also expected for the computer market in India, which counts only 14 PCs for every 1,000 people. Several companies hope to court that market with computers priced at less than $250, many of them packaged with residential broadband service that costs about $12 a month for a 128kbps connection.
"It is our fastest-growing emerging market," said Ketan Sampat, president of Intel India. "We've had a growing middle class. PCs are part of that."
Beyond the home, some hardware companies are targeting the enterprise market in and outside India. VXL Instruments, for example, delivers stripped-down desktops to the likes of Air France and Goodyear Tire & Rubber.
New Delhi's FinalQuadrant Solutions sells a server appliance for the travel industry. Travel agents pay only a modest amount for the server but hand FinalQuadrant a small fee for each hotel room night or travel leg booked through the system.
"We're making every single (travel) reseller as powerful as Expedia," CEO Anuj Gupta said. The company, which made $1 million in net profit in 2004, has mostly sold its products in Europe and is expanding to the United States.
For India's service companies, perhaps the most natural expansion is the consulting business. Outsourcing stalwarts such as Tata, Wipro and Infosys Technologies have begun significant consulting operations as outgrowths of their outsourcing work. Each of these "Big Three" companies has seen revenue grow in