A most interesting development for the IT industry has been the recent role of the returnee non-resident Indians (NRIs) and multinational IT firms in the Indian IT industry. Professor Martin Kenney of the University of California, Davis, and I have been jointly studying this evolution. From a trickle in the early part of this century in response to the downturn in western economies, the flow of NRIs has rapidly increased as India’s success has enabled them to do well in India. The lure for the NRIs is strong. As one of them put it to us, “Where else in the world can I work in an environment where growth rates of 30 percent a year are the norm?” Although their number is unavailable and is probably not very large as a percentage of the workforce, their impact has been significant.
The first discussions of NRIs, whether seen positively or negatively, were couched in terms of a brain drain. The criticism was severe because the NRIs had used their subsidized Indian education to do well overseas with no return for their mother country. Of course, what critics failed to state was that, had such persons stayed home, most would have been unproductive and frustrated like those who stayed behind, as documented in Chapter 5.
The leading Indian software services firms, such as TCS, Infosys, Wipro, HCL, and Satyam, were not established by the NRIs, though several of the founders had received degrees in the United States. A few of the early multinational corporations (MNCs), such as Hewlett-Packard, had NRIs in prominent positions, but the population was generally too small to wield significant influence. This suggests that in the early phase the NRIs had only a limited effect on business. They were, however, becoming important as examples of what Indians could do abroad when unfettered by Indian bureaucracy.
... Even in the late 1990s, scholars evaluating the movement of highly qualified personnel from India to foreign nations saw this as a net loss for India. However, during the dot-com bubble at the end of the 1990s, certain scholars revised the assessment of brain drain, which many had viewed as a negative. They began to see it as a positive brain gain, precipitated by overseas nationals who transferred skills they had learned abroad to their homeland.
The true significance of the NRIs is recent and can be roughly dated from the collapse of the Internet bubble, but even more important, it dates from the growth of opportunities in India. From my interviews with managers (often NRIs) of cutting-edge technology firms in India, including branches of such innovative multinationals as Adobe and Yahoo!, it appears that NRIs are valued for their familiarity with US management styles, and Silicon Valley’s in particular. These are rapidly replacing the hierarchical Indian management style. As the founder of an IT start-up in Bangalore said, “The returning NRIs brought with them the sense of execution ethics and accountability that prevails in the US marketplace.
In our interviews with MNC managers and start-up executives, we learned it was this execution ethic and deep understanding of how to organize high-performance product-oriented firms that has turbocharged the movement to higher-end work. Within the MNCs and also the Indian start-ups intent on selling to the global market, NRI managers are particularly important because they have developed world-class management skills abroad. The ability to attract them to India by paying near-US salaries (approximately 60 percent of US salaries for high-level managers) means that seasoned global-class managers are available to manage MNC operations and start-ups aiming to penetrate the global market.
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The availability of global-class managerial talent means that these new operations will not stall for lack of domestic talent trained to take on a global role. In our Indian interviews, we met a number of managers who had career paths that included US education and successful careers at US high-technology firms and start-ups. They were either returning to India permanently or, at a minimum, returning for extended periods. Their role can be conceptualized as roughly analogous to battle-tested veterans guiding an army consisting almost entirely of highly trained and motivated officers and non-commissioned officers. The returned NRIs appear to be performing exactly this function in India. Over time, some of these raw recruits will also become experienced leaders, creating a pool of home-grown leaders to work alongside the NRIs.
Internationally experienced Indian managers play an important role at the interface between the Indian subsidiary and the MNC headquarters. Over the past five years they have been vital in jump-starting the growth of MNCs, particularly Silicon Valley subsidiaries. The value of these professionals cannot be overestimated. They are vital in convincing headquarters that their Indian subsidiaries can take more and more responsibility for high-value-added projects. They perform a similar role as key liaisons in binational start-ups. As Venkat Panchapakesan, manager of Yahoo! India’s operations, noted in an interview we did with him in late 2006, “Prior to 2003, we focused on product extension work. But, around 2002 and 2003, we noticed that we could recruit engineers returning to India after significant work experience in the US. Their availability allowed us to shift from product extension world to taking on components of a project in its entirety.”
Hence, with the returnee NRI have come much more sophisticated management practices that are helping break down a key barrier to services offshoring, the “face-to-face problem”. It is widely known that most services resist remote production because of the need for face-to-face interaction between the provider and the consumer. This is obvious in some consumer services, such as having one’s hair cut. But it becomes a serious issue when firms wish to undertake innovative work through offshoring.
... Google, Yahoo!, and other highly innovative firms in Silicon Valley now rely on Indian teams heavily staffed with returnee NRIs at the managerial level to produce the same level of innovative work that is expected of its Silicon Valley offices. In Yahoo!’s case, 80 percent of its Bangalore managers are returnee NRIs. Google is so confident of its India recruitment that it gives new hires a choice of working anywhere in the world that Google has operations, including its Silicon Valley headquarters.
(Excerpted from the chapter “The Overseas Indian and the Multinational Firm in IT” of India Arrivingby Rafiq Dossani. Dossani is executive director, South Asia programs, at Stanford University.)
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