India is a young country that can still move quickly in the world economy.
Question: What makes doing business in India different than doing it in the West?
Cyril Shroff: Well, a number of factors which highlight differences between doing business in India and doing that in the west. Firstly, in India, Indian entrepreneurs have historically had to even now have to struggle to a fair amount of bureaucracy and still make it, make it to the top. So they have two functions and there are more constraining policy conditions but nonetheless they have entrepreneurial energy and the familiarity with the landscape helps them to still walk through the system.
They are able to take advantage of a number of structural factors in India such as our demographics, the availability of skilled professionals and just to share energy of a very young country. Other differences include the ability to move quickly. In India’s growth has primarily private sector entrepreneur-driven. Unlike--I don’t want to bring in the China comparison too early--but China’s growth has been largely driven by public sector and governmental intervention but it’s probably the exactly the other way around as far as India is concerned. Businessman who would never have heard about 10 to 15 years ago, are amongst the top 10, 10 or 15 businessmen incorporates in India. So that’s one big difference.
The other cultural difference between doing business in India and doing business in the West is a fair amount of informality in terms of how structures work. There is a very high proportion of promoter and family-controlled businesses. Most of corporate India barring a few is promoter and family-controlled. So that brings with it, some special cultural dimensions to it as well, not necessarily in a bad sort of way but it allows this kind of businesses to act quickly in a more entrepreneurial format. So they are less institutional and more entrepreneurial.
Question: How did India come to dominate outsourcing?
Cyril Shroff: We have benefited tremendously from the outsourcing opportunity and initially it began as a cost arbitrage because the cost of hiring skilled professionals in India was significantly lower than in the West. But more recently we moved up the value chain quite a bit. So today, we’re not just outsourcing low end jobs like call centers but have moved up the value chain in terms of research and development facilities and more complicated functions, financial, and other functions which are being outsourced to India. A number of global financial institutions for instance have their back offices in India handling very complex financial models, handling some of the global accounting practices, so it’s. . . . We’ve just tapped the tip of the iceberg at this point, and there is much more to come. The problem today in India is that despite our large population there are still not enough skilled professionals which can allow us to truly exploit this opportunity.
Recorded on: April 29, 2009