Why it is time for Indian Product companies?

Please consider the table below. Infosys, the bellwether Indian tech company's numbers always look great compared to any other tech company in India. But, Company X, another well known Asian Tech company seems to beat Infosys is many key parameters (Ref: FI '05 Annual Reports). There in lies a story.

	Infosys	Company X
Revenue (FI '05)	$ 1.5 B	$ 5.9 B
% Export Sales	99%	58%
Y on Y Growth	51%	47%
R&D Investment (% of Sales)	1%	10%
Original Research (% of Sales)	0%	1%
Patents Filed	0*	11,000**
Process Maturity	CMM Level 5	CMM Level 5
Number of Employees	36,750	29,000
Annual Revenue per employee	$40,820	$206,276
Annual Profits per employee	$11,401	$23,483
No. of years to reach $ 1 B Rev.	22 Yrs	11 Yrs

* There is no mention of patents filed by Infosys in 2004 or 2005 Annual reports. And, 20 patents are filed as per FI 2006 AR.

** 11,000 filed till end of 2005 and 1,844 patents granted till then.

For all the technology talk in Indian entrepreneurial scene, there are hardly any innovative product companies of serious size, especially in the technology front. I mean innovative new tech product companies with annual revenue north of $ 100 Million, growing fast and blazing a new trail. Product companies in India have generally been technology transfer stories in the past with a few honorable exceptions. And, what is a product company worth if it has no serious R&D of its own! But, I have a strong suspicion that something is about to happen in this front. The time has really come for strong product companies to emerge from India and grow big during the coming decade.

Design services companies - a mature industry now; and no new path breakers.

The just published 3^rd quarter results (Dec ‘06) show that the IT services companies have done very well again. One wonders if their growth will stop at all and what they have next in store. Indian technology scene is dominated today by IT/design services companies developing and testing products and systems for the world. They have transformed India’s brand across the world. There are six IT companies with annual revenues in the range of $ 1 to $ 5 Billion and growing steadily at 35 to 40% year on year. And there are about 16 second rung companies with annual revenue in the range $ 100 M to $ 1 Billion. Some of the second rung names you won’t even recognize readily. That is the point. They are not so exciting any more! You are unlikely to read about another Infosys or Wipro or TCS being built ground up. Today, IT services Industry is a mature one in India. It is a done thing.

A couple of years back, Michael Marks, then CEO of Flextronics, made an observation after a day at NASSCOM leadership forum 2005. He was a bit puzzled that every company he listened to had a “strikingly similar story to tell”. He said, in the US, if he went to a forum of technology companies, he would listen to so many stories – each differing and unique from the other. CMM Level 5, efficient processes, great team of engineers, global deliver model, multiple core competencies – the usual ware presented by Indian IT services companies has the same common thread across all. Having founded and run a moderate-sized design services company for about a decade, I felt it was so because the key value proposition of all these companies is the same. In spite of a lot of talk of climbing up the value chain, building innovations, etc., if you peel all the layers, you will find at the core strategy is built around a common theme: labor cost arbitrage.

Why product companies?

I was always passionate about building a Billion $ Indian product company. Am I doing a wishful thinking because of that? No! Let me explain why I believe it is the right thing to happen and why it is surely going to happen. And now, let us consider the table at the beginning of this posting which gives an interesting comparison between the performances of two Asian technology companies at the end of FI 05.

Company X seems to have done better than Infosys in practically every parameter. X does far more original R&D and is building its own IPRs of sustainable value. Unfortunately, X is not an Indian company. If it was, it would be commanding one of the largest market caps in India. It is however an Asian company. Let me let the cat out of the bag. Company X is Huawei, China’s best tech company. And, Infosys is considered India’s best tech company. There are dozens of product companies in China with multi Billion $ revenues with emerging strong brand names. They are gradually getting better and their western competitors are beginning to get worried. And let me add, Infosys is respected a lot not just for its numbers, but its work culture, ethics, systems and processes. But at the end, numbers are the key. Innovation is the way to the future. You can’t overlook them.

This is not to undermine in anyway what IT services companies have achieved in India. They helped build an India brand, they brought global work cultures, took the standard of corporate governance to new heights. Probably that was the right thing to happen over the last decade. But, though they are globally successful companies, their revenue productivity is not global, and that gives away the core business model of labor cost arbitrage. And I am afraid they are not innovating enough. And imagine if there were a product company like Huawei in India with the same organizational ethics and work culture as Infosys! It will be a very diffuclt value proposition to beat.

I see the following advantages for the product companies compared to the IT services companies:

• Higher Revenue Productivity: Product companies can generate far higher revenue and profits per person using engineering talent far more efficiently. In a simplistic point of view, Engineers' effort is sold at "high end hourly rate laborers" by IT service companies, while product companies use them to build R&D innovation with sustainable advantages.The argument that the IT services companies generate more employment by lower revenue productivity does not hold much water. In fact, the flip side is, currently they are sucking in the entire engineering talent in the country, creating a serious crisis, and starving most other industries.

• Rapid Growth: Product companies can grow much more rapidly than the Services companies. They can grow non-linearly with time and staff strength and generate wealth much faster. Successful ones grow exponentially – “hockey stick” style.

• Higher in Value Chain: Product companies are much higher in the value chain.

• Better wealth distribution: Product companies produce better wealth distribution. They create employment to a more diverse set of people. In addition to engineers and scientists, a product company uses an army of manufacturing, installation, sales and support staff, who include school pass, diploma holders and general graduates. IT services companies on the other hand employ largely BTechs, MTechs and PhDs and poorer families can’t easily produce these qualifications.

• Large Home market: Product companies can feed into a huge domestic market with its inherent advantage. And the economy will get more stability.

• Own job creation: However much they defend it in a so called “Flat world”, IT services companies continue to get accused of stealing jobs from other economies that created the jobs in the first place. It is a touchy issue. There is a consequent fear of backlash. Product companies create their own jobs in this economy. They can’t be accused of taking away jobs from other economies.

• All round competence: Product companies build an all round competence like customer requirement anticipation, full life cycle design, branding, marketing, sales, packaging, distribution, support, and in case of boxes - mechanical, plastics, thermal, manufacturability, testability, supply chain management and scores of other disciplines that are very useful for the gene pool of any large and growing economy.

Why do I feel the time has come for Indian Product companies?

• Funding: There are many VC funds chasing India today. While it is still not easy to get a new product company funded and we are a long way to build a Silicon Valley type funding environment, things have improved significantly over the last 10 years. Now, for a good idea, there are funds available. And it is getting better by the day.

• India Brand: India is a hot brand today. Indian products have much higher chance of being accepted in international markets than ever before.

• Core capabilities: Indians have proved to be excellent entrepreneurs. There is no license raj to hold them back now. Indian design services industry has helped build strong of design skills in the country. Indians with rich product design experience around the world are returning home.

• A booming stock Market: The Indian stock market is booming. While there is some nervousness of overheating, the fundamental story seems sound. Quarter after quarter, the corporate performance is impressive. And the market is keenly looking for emerging new stories.

• It is a wide open space: There is no dearth of opportunities. The ground is empty. Telecom, Consumer Electronics, White Goods, Industrial systems, Capital Equipment, Non-conventional Energy, Software systems and tools, Food processing, Financial systems, Instrumentation, Automobiles… the list is endless for building strong branded goods from India and selling to the world.

• Large home market: One of the problems till recently for an Indian product company was a small home market. With a swelling middle class with increasing disposable income, a huge captive home market gives a big advantage for a new product venture. For example, Indian telecom market is the fastest growing major market in the world today. Indian cellular subscriber base grew by 98% between 2005 and 2006. For the same period, the broadband connections grew by 133%. And there is hardly any Indian Telecom product company larger than $ 100 Million in revenue. There is easily space for four or five with Billion $ plus revenue.

• World class manufacturing: Slowly and steadily, over the last two years, all the global manufacturing giants are setting up shops in India. Flextronics, Foxcon, Jabel, Solectron, Selestica, all the world leaders in manufacturing are here now. They come with their global experience. For example, Flextronics manufactures most of HP’s printers and Nortel’s Telecom equipment in their plants worldwide. And Foxcon manufactures all the DELL Laptops and Apple IPODs. So, you now have as next door neighbors global EMS leaders who can deliver world class manufactured products if you give them a good design. Yes, supply chain is still not fully there; but it is beginning to build up. And for what you don’t get, just call up a vendor in East Asia and they will deliver your components in good time.
  

• All successes from developed economy are getting played out here one by one: Twenty years back we would have never imagined Indian IT and Telecom would reach this size today; The automobile industry is transformed and is on the run up; the airlines industry is booming; the steel and infrastructure industries and growing fast; Even the railways is beginning to look good. And it is time for big branded product companies. It is waiting to happen.

But one can argue that product companies are risky. They need a higher level of innovation. They need better branding and selling skills which we lack. Yes, they are difficult. It is not my case that it is easy. But bigger risks always leads to bigger rewards. And conquering IT was not easy either. We learnt our IT processes from the west – Carnegie Mellon University’s DOD funded program to improve software process maturity actually helped build India’s software process maturity. The same way, we will learn what is required. We are already doing that. And Indian entrepreneurs are building an good reputation for themselves.

And, one thing is still missing - the early leaders! Any phenomenon is triggered by a few. Then, slowly many others follow to set a new trend. I see a number of young entrepreneurial ventures focusing on R&D, trying to build innovations and IPRs; and not taking the easier path of just selling intellectual labor. They are building innovative Indian technologies – whether products or solutions. I am impressed with what I see. A few of them will break out and succeed, get noticed, set a new trend and become a leader - “Infosys of a new space”. And once there are a few early successes there will be more followers. I think the world is ready to accept an Indian branded product. Now is the time! It is time for an Indian brand in the lines of a Motorola, Toyota, or Oracle coming out of India.

Malcolm Marshal in his best selling “Tipping point” demonstrates that when a set of favorable parameters fall in place, something dramatically new happens “all of sudden”. I think the Tipping Point has come for Indian Product companies. And, it is about time!

The winning attitude - Enterpreneur's essential

I met my good friend Ramamoorthy after more than two decades. We went to engineering school together. He soon sent me an interesting message on being a winner. I thought it was so apt for an entrepreneur – to whom this blog is really dedicated. An entrepreneur needs a strong attitude to win and the message captures very nicely the winning attitude:

The Winner is always part of the answer;
- the Loser is always part of the problem.
The Winner always has a program;
- the Loser always has an excuse.
The Winner says, "Let me do it for you";
- the Loser says, "That is not my job."
The Winner sees an answer for every problem;
- the Loser sees a problem for every answer.
The Winner says, "It may be difficult but it is possible";
- the Loser says, "It may be possible but it is too difficult."
When a Winner makes a mistake, he says, "I was wrong";
- when a Loser makes a mistake, he says, "It wasn't my fault."
A Winner makes commitments;
- the Loser makes promises.
The Winner has a dream;
- the Loser has a scheme.
The Winner says, "I must do something";
- the Loser says, "Someone must do something"
The Winner sees opportunities;
- the Loser sees problems.
The Winner believes in win-win;
- the Loser believes for him to win someone has to lose.

My sincere thanks to Ramamoorthy and the anonymous author of this message.

Entrepreneurial values - Nice people can finish first!

Recently, I was involved in a discussion with a friend on entrepreneurial ethics and values. With both my children already having become entrepreneurs, this is something I keep debating with myself – on how to articulate this best. Here are some of my beliefs and thoughts.

Intellectual honesty: It is the first thing one expects from an entrepreneur. An entrepreneur is dealing with wealth – which can be dangerous and tempting. I would say, in order to qualify to build and handle wealth, intellectual honesty is a prime attribute an entrepreneur must have. It is like the cashier of a company, who handles large cash regularly, is expected to have an impeccable integrity with cash.

Walking the talk: On ethics and values, if you do not believe in them deeply, it is easy to talk and far more difficult to walk that talk. You will have to strongly internalize and believe on the values deep from the guts, for you to honestly practice and demonstrate in your day-to-day actions.

Unwritten promises: There are many written agreements and contracts. But the key issues are often unwritten. An entrepreneur known to me was in a situation where one of his venture investors wanted to be bought out at a very nominal value. It will be a virtual write off for the investor. It was a new investment manager taking over and he wanted to clean up the stable. The entrepreneur believed the company is turning around. He could have easily allowed the investor to exit, making himself and the other shareholders richer. But, he asked for a meeting with the head of the investment firm, pleaded with him and convinced him to stay for another year so that he can provide a better exit. The investor was impressed and agreed. And one year later, he exited with an attractive IRR. I think there was no other way in which the entrepreneur should have behaved. The entrepreneur had accepted funds to generate value in return. If the investor pulled out for whatever reason with a negative return, the entrepreneur has failed in his most important and sacred duty and promise to return ROI - that was an unwritten promise.

Returning value to community: I can’t agree less with Guy Kawasaki when he says “an entrepreneur has to make the world a better place and reap some economic rewards for doing so.” The entrepreneur surely has profits and wealth creation in mind. But he has another noble duty of building value for the community; he has taken the responsibility for using some human and financial resources put at his disposal, in an ecosystem provided by the community around him. Without the community, he would be dead. We are not saying the extreme left view of putting wealth distribution far ahead of wealth creation. But there is a problem when the created wealth stops with the entrepreneur and does not reach the community. Of course, by the simple act of building a successful enterprise, an entrepreneur pushes oxygen into the society – increased cash flow and economic activity through the community, creation of new jobs, taxes that are put to useful results by the Govt., etc. One can argue, “My job as an entrepreneur is to create wealth. It is the job of the Govt. by means of the taxes they collect from me to serve the community.” I disagree. There has to be a conscious effort by the entrepreneur more than just paying his taxes. The entrepreneur is an innovator and problem solver. He is in a position to solve many problems directly or indirectly. He mustn’t shy away from those opportunities. Often, such actions don’t affect his primary responsibility of building wealth. On the contrary, they will be beneficial for the enterprise in the long run. When considered carefully, the enterprise can always make an impact on the community.

Sharing the wealth: Create massive wealth and also share them with everyone – starting with the employees. I read an article last fortnight in NYT. Goldman Sachs’ 2006 compensation for its people was up 40% and reached an average of $ 623,000 per employee. I have no idea how much Goldman Sachs thinks of the community. But I am impressed with the distribution to its employees. A secretary gets $ 120,000. The shareholders can’t complain; they are very happy too. The company generated an average of $ 350,000 as pre tax profits per employee. It is more than GE, Microsoft, and Google, another very successful wealth generating machine. As a % of revenue, they took much less as compensation compared to the industry peers. And, their fixed comp was much lower than their competitors. They did not gain at the cost of the shareholders. They have outperformed everyone else. On the other hand, it may sound a bit obnoxious though – how can people take such a huge pay, while even in the US, there are people who are starving and working at far lower wage levels; the inequality it creates is worrisome. But having a large group of highly paid employees is far better than building a single super rich Billionaire owner. And, capitalism rewards those who take risks and adapt best to change and create profit opportunities. As an old adage goes, “Capitalism is surely the worst economic system on the planet except for all the others”. When employees get part of the wealth, it spreads. Equity stock options are another key wealth distribution mechanism. When you make your employees rich, the sharing begins, and it percolates out. Some of them may go out and start another successful venture themselves. That is good for the community. By treating fairly your vendors, your service providers, your clients and others the sharing continues.

Treating the vendor fairly: Two of India’s top companies differ dramatically in the way they treat their vendors. Both negotiate hard and get the best terms. In the case of one, every vendor is an unhappy soul. The vendor feels cheated; treated with no consideration; promises are never kept; and never paid in time. In the case of the other, the vendors respect the company; they are treated fairly; and when it is time for payment, the company calls the vendor asking to collect the check. And the latter is the far more respected and successful company in the country. Vendors as well as other eco system of business need to be treated well. This does not mean don’t negotiate. Negotiate hard. But treat them fairly. The vendor is part of the system and is a partner in a way and he has to benefit. It is not a zero sum game.

Transparency: It is said about justice - Justice must be done and it must also be seen to be done. The perception is equally important. The transparency in an entrepreneurship makes a huge difference to the investors, employees, shareholders and others. It is not a secret society with key decisions being known only to the top man. In a transparent environment, all decisions can be related to the core values of the enterprise.

Fairness: The entrepreneur is often told that he has to be ruthless to succeed. This puts many in the wrong path. Yes, you will have to be tough, and be ready to make difficult calls; but there can be an underlying fairness in whatever is done. Chenghis Khan built the biggest empire in human history. He was very successful in doing that. He was considered ruthless. But, he also had a great reputation for being fair. That was a key reason for his success.

Well, will all these make it difficult to run an enterprise? Will the enterprise end up making less profit and fail in a basic commitment to the shareholder? No. It is hardly so! In the hands of a good entrepreneur, all these will add to additional value for the venture. A transparent and community conscious company will be respected more in the equity market; vendors when treated well will never let the enterprise down; they will give that extra effort; employees, treated fairly, will stick to the company and treat it as their own; they will go that extra mile. It all adds up. You really need not be mean to be successful. It is possible to be nice and also come first. Look around carefully, and you will find many examples.

India Vs China – the contrasting giants, as the economic power swings back to Asia

For the last few decades, I was always focused on the United States. Running an Indian IT company, life was almost US centric. Business in technology space can never afford to ignore the US. Most clients were in the US. Most funding came from the US. The technology business culture came from the US. And I had some of my best friends living there. I used to visit the US at least once every quarter to meet clients and to drum up new business. But I realize for the past one year, I have been to the US only once while on the other hand, I have traveled about six times to China and more within Asia. I would have never imagined this a few years back. Something surely has happened in global economy and it is so powerful it has touched my own life! In India and China, there is so much excitement in the air – it was like the way I always felt when I stepped into the Silicon Valley - a lot of positive energy, enthusiasm, and optimism hanging in the air. Now it is in the Asian air!

How did this sudden change come about? Well, it had to happen and it was inevitable! Six hundred years back, 75% of world’s GDP was produced by India and China. And then with a combination of Guns, Germs and Steel to start with, (Guns Germs and Steel: The Fate of Human Societies - By Jared Diamond, published by Norton and Company), and with the industrial revolution and colonization, the world was “conquered” by Europe and later more recently by the US. By 1950, only about 5% of world GDP was being produced by India and China. Now the pendulum is swinging back. It is predicted that in the next few decades, 50% of world GDP will come from “ChIndia”, the increasingly common new term. These are two nations of great opportunity today. They are the new engines that will power the world economic growth. No wonder everyone I meet in the US today looks at me as a person coming from the most exciting place on the planet. For a long time, the feeling has just been the reverse.

With its GDP galloping, China is ahead of India by a clean 15 years – they started liberalization that many years ahead. After Mao’s death, Deng Xia Ping, the ultimate “practical man” made many pragmatic changes. With his now famous pronouncement – “What matters is - does the cat catch the mouse, and not whether it is black or white in color”, led the country away from dogma and into practical wisdom. And, India is finding its feet too. In 1992, pushed to the wall, an unlikely combination of leaders pulled the nation in the right direction. But, what an interesting contrast today – the two economies!

I had visited China on and off over the past decade. But, in 2004, when Flextronics acquired Deccanet, the Bangalore IT venture I had co-founded, I was asked to be the “custodian” of the China design operation of the company. Ash Bhardwaj, the man who made Asia happen for Flex, told me, “please go and see China and our plants there. The factories are music in motion…man…” he would say. And music it was! The huge manufacturing plants of Flex, by then under the watch of Peter Tan, another wonderful Flex executive who welcomed me and arranged to show around his plants. The plants were very impressive - massive in size, each the size of many football fields, humming with machinery and activity, large teams of young men and women, producing for the world, practically round the clock. Then on, I spent quite some time in China - visiting Flex plants, trying to decide on new locations for the Design operations, putting together new teams, meeting potential clients and so on.

I was struck by the general momentum. Many Chinese friends I met treated me well. India and China had at best a very testy relationship over the past four decades. The 1962 war was always in the memory. Added to that, another touchy issue for India was China’s close ties with Pakistan - the “arch enemy” for India. But, I found the new generation of Chinese was looking through economic and not political lenses. They hardly seemed to relate to the hostile past. For them, India is a country with which they shared a lot of culture, religion and spiritualism in the past, a country with whom they traded throughout history. Now, India for most Chinese is a country of beautiful women, people who can sing and dance at will (Bollywood inspired), good at maths…. There is big respect for India’s achievements in IT. Due to the long break in relationship, India is a mysterious neighbor; a puzzle couched in an enigma. And, it would seem that an average Chinese accepts an Indian far more warmly than an average Indian would accept a Chinese. Hopefully, as time passes, things will warm up both ways.

…India and China are a study in contrast...

India is a services driven economy today, while China is manufacturing driven. Both are powered by cheap labor. Both are facing a dwindling share of agriculture in their economy and are involved in the huge task of redeploying the labor.

Demography: Being the most populous nations on the planet, they have huge demographic advantage compared to the developed economies which find the raising average age and a reducing work force a big challenge. China however is now staring at the problem of a population aging too fast. Its “One Child” policy, while putting break on population growth, has given raise to a unique “1+6” problem. With the increase in average life span, old folks live longer and consequently, an average young man/woman in China has to produce enough to support two parents, and four grandparents. Some feel China is aging much too faster than it is building prosperity. On the other hand, India is aging slower and will continue to have a dynamic young population for decades. For the next 50 years, India will have a much younger population than its neighbor. But in case of India, the real problem is its poor record on education and basic infrastructure. A large population of illiterates is a huge problem facing India. If you want numbers, try 350 million plus illiterates! Keeping the average age lower does not seem to be a big demographic advantage to me if a huge part of the population can’t read or write. This is especially troublesome in a modern economy that is tending to me more information driven.

The Drivers of growth: The Chinese economy is powered by the Govt. and people are joining in. By contrast, in India, the economy is powered by the people (read entrepreneurs) and the Govt. (sometimes reluctantly) joining in. The Govt. is effective in China in spite of certain level of corruption and all other criticisms. Things just happen! People try and align themselves to the Govt. policies and cash in on new opportunities. I was pleasantly surprised when a lady entrepreneur in China took me for dinner with some key Govt. officials and they were all talking the same language – I mean same theme. China seems to have studied the Singapore model well and seems to have scaled it up to a much larger level. Over the last decade, Shanghai is transformed from a shanty town to a promising “New York of the east”. When you travel around China, you are shown a new metro, a new maglev train, a new expressway, a new airport, a new this and a new that. Things happen at breakneck speed, because the Govt. need not win arguments over every step it wants to take unlike in a coalition ridden polity like India. And, there are no prolonged fights to acquire lands for new factory, or road – good or bad. The Political leadership in China is savvy, nationalistic and with a clear problem solving mindset. Most of the top leaders in china happen to be engineers from their top schools. Engineers are essentially problem solvers. Look at the contrast – Shanghai and Bangalore started talking about new airports 15 years back. Shanghai now has a 12 year old world-class airport. And Bangalore just decided where to locate the airport and started work on it. Our politicians and bureaucrats have been pulling at each other, unable to move.

So, have I fallen in love with China? No, not exactly. I just think there are a few things India could learn from China. As I would say, China can pick up a few ideas from India too.

While there is clear case for improving the governance, India has a very large participative democracy. We can call our leaders names, and throw them out of power when they seem seriously flawed. We have a fourth estate that is very active and powerful. If grave injustice is done, like in the case of Jessica Lal, it can really put the Govt., police and judiciary on the mat and get things corrected. India is one of the few countries in the world that has built democracy first and is then building Capitalism– a far more difficult option than the reverse. While China has a fairly homogeneous population, India has a very diverse one. Many languages, cultures, and religions divide us. And we have to carry the old baggage of caste, which with its history of 1000s of years, may take another fifty to hundred years to disappear. With these, disadvantages we have done remarkably well.

The driving force for India has been its entrepreneurial spirit which is extremely strong. A foreign Joint Venture partner of mine came to India on my invitation. I showed off India to him – basically Bangalore and Chennai - the cities, the people and the companies. At the end of the three day trip, his comment was: “the infrastructure here is far worse than” what he expected. He just couldn’t understand how such smart people can’t solve this problem. But on the other hand, the companies he visited were “far beyond what he expected to see. The quality of people and the systems and processes are very impressive.” It is the entrepreneur who is the driver in India. And, today, the entrepreneurs do not come form a small family of industrialists; on the contrary, they are sons of school teachers, farmers, middle class working families; they come from every where; from a wide cross section of people.

And, we are a young nation as far as entrepreneurship goes – it is just 14 years old, when we broke finally from a socialistic past to respect individual entrepreneurship. In a way, we were really reborn as a nation in 1992. Then on, what we have achieved “in spite” of our leadership and Govt. is remarkable. We are really building our nation bottom up – with a massive participation from people. It can be very powerful and sustainable.

Big opportunities in the junction between India and China…

So, India and China are moving from practically nothing to account for 50% of world’s GDP amongst them in just a few decades. The two economies are very complementary in many ways. There are a lot of opportunities in the junction between these two economies. There is a strong case to start engaging each other. We must complement each other and “exploit” each other’s strengths. This will lead to a lot of new wealth being created. And that will spread prosperity to large sections that are yet to taste the fruits of development and growth. China can be a big market place for India. If they tried a bit harder, Bollywood for example, renowned for its packaging of emotions can have the whole of China eating out of their hands. China has a very weak entertainment industry. Indian services industry, running into a serious labor crunch at home for engineering manpower can exploit the relatively better labor position in China. And Chinese product companies could bring their product culture to India. Emerging product companies of India can use the strong supply chain of Chinese. A complex PCB today may take a month to turn around by a hard pressed PCB maker in India while in China, they can deliver in a matter of days. Yes, the opportunities are immense!

Twenty years back, my dream was to start a company in the US. Today, nothing could be less exciting and more daunting than that. Eight years back, I didn’t give China a second look. Today I am visiting it with increasing frequency. We are surely living in changing times, with fast changing equations. US does continue to offer a lot. The level of innovation, the entrepreneurial energy, the academic institutions, business dynamics are all there to see. In US everything seems to have “happened” though; one needs to make something dreadfully innovative to capture attention there. But, there is something very simple and exciting about Asia today. You do almost anything well enough, and you will be rewarded.

The trade between India and China which was at a few hundred million $s a few years ago, stands at $ 20 Billion now and is expected to cross $ 40 Billion by 2010. These are big strides. Time to engage with China!

And in my own scheme of things, I am trying to do just that. Of the many new ventures I am currently involved in, two are in China. It is not easy. Language, culture, systems, ethics, everything is different. But it is interesting to learn; and it is not impossible. At the bottom of it all, engineers are engineers and businessmen think business. If you look hard and stop typecasting and generalizing, you can find good people everywhere.

Two economies, different in their own ways, fast emerging to occupy key positions in a new emerging world – positions they always deserved. Time to learn; and time to engage!

Primary education in India - Applying entrepreneurship

Every one is gung-ho about the Indian economy. In the quarter ending Sept ‘06, the GDP grew by 9.1%. India is part of the BRIC (Brazil, Russia, India, China) economies, considered the most promising ones for the next 50 years. Asia, it is increasingly believed, is running on two engines – China and India; and these twin engines are expected to pull the world economy to new heights over the next few decades. Indian IT industry is making waves, and is continuing to grow at a robust pace. And, they are now undisputed world leaders in their space. At long last, manufacturing too is beginning to grow fast. Indian Telecom industry is healthy and has shown strong growth – among the fastest growing in the world today. Large investments are happening on infrastructure. $ 300 Billion is getting pumped into the infra sector in the near future. The new generation Indians don’t have the defeatist attitude of the earlier generation. The entrepreneur is driving the nation forward. There is hope and enthusiasm everywhere. There is a new “can do” spirit. With the developed nations getting older and running out of workers, Indian demography seems to have suddenly become an advantage. Is this going to be a “happily lived ever after” story?

Well, there are some dampeners – the most serious is education. The available data implies a very poor state of affairs indeed. I confess, I have not done a very serious research on the subject. A casual research on the web brought out the following data. I don’t want to split my hair on how accurate some of these are; but the general conclusion is very clear. We have a serious problem! And, I come from a very small village myself; I went to school every day walking 6 KMs each way as a child. And when I go back to my village today and see the school, I feel very sad because the quality of education today is far worse than what I received 30 years back.

2001 census concludes that our literacy rate has reached 65%. Every second woman in India is illiterate. And, nearly every third man is illiterate. It means a huge population can’t even read or write their names.

How do we stack up against others countries? Even within Asia, most are ahead of us. South Korea at 98%, Japan at 95%, Vietnam at 93%, Srilanka at 91%, Indonesia at 87%, China at 85%,...every one has done better. We can feel better only by comparing with Pakistan at 43% and Afghanistan at 36%. In Infant mortality, we are behind Pakistan, China, Brazil, and even Nigeria. Literacy rate among Schedules caste and schedules tribes – one of the poorest sections of Indian society is 42% and 35%. There is wide disparity between states - Bihar has 38.5% literacy (comparable to Afghanistan), while Kerala has 90% literacy. States like Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Rajasthan and West Bengal still have several districts where female literacy is less than 30 %.

According to the findings of the Public Report on Basic Education, the PROBE report, (Please see a brief summary in ashanet), only one to five per cent of out-of-school children are actually involved in earning significant wages. Many of the children working up to eight hours a day were not earning any significant income as they were involved in jobs like looking after their siblings, cattle grazing etc. and not in wage-earning labor. One heartening finding was that 98 % of parents felt that education was necessary for boys, and 89 % felt it was necessary for girls. It is not factual, therefore, to cite poverty and ignorance as the main causes for poor school attendance and large-scale drop outs. The increase in drop out rates is mainly due to the unattractiveness of the school and teaching processes. The PROBE report recorded startling data about the lack of or dysfunctional state of basic amenities in many schools. As many as 52% of the schools lacked playgrounds, 89% did not have toilets and 59% did not have drinking water. As for teaching aids, 26% did not have blackboards, 59% had no access to maps and charts, 67% lacked any kind of teaching kits, 75% had no toys for the small children, and 77% of the schools had no libraries. Absenteeism is rampant among teachers.
For a country that has such a large stake in winning the battle against illiteracy, India's expenditure on education is extremely low (3.5% of GNP). While it may be argued that decline in central spending is a step towards decentralisation, there is a general fear that in the new economic climate, government spending on primary education will remain stagnant, or even decrease. This will put education out of the reach of the poor families. Please see Infochange India.

And by the way, what is the definition of literacy? It is not obviously a school pass! The National Literacy Mission defines a literate person as one who can "with understanding, both read and write a short simple statement on his/her everyday life." However, it is true that in many cases, literacy ends with being able to sign one's name. As per the Indian HRD ministry data, the present illiteracy is ONLY 37% or 430 million people, while as per UNICEF and UNDP it is nearly 60% or 650 million people. Education is a state subject – the centre only gives policies. The implementation is bad in some states. More than 50% of kids drop out of school by the time they reach 5th standard.

Buoyed by stellar economic performance over the past few years, the mood in the top echelon of the country is defiantly self-congratulatory. India almost wants to grow up overnight and shed all the baggage of the past. Powered by a press, that like everywhere else in the world, reports only from the booming city centers, India is seen as chugging ahead full-steam – a land of engineers and management graduates.

From an agriculture based economy, the world has moved to industrial economy early in the 20th century and become knowledge economy now. The new millennium is dominated by knowledge, and we have a huge population of illiterates amongst us who will find it very difficult to participate in this. If we do not make them productive, the GDP can’t grow at the true promise and poverty will be slow to disappear. Even if the GDP does grow at a decent rate, and create a large consuming middle class, it will leave behind a huge mass of people – who can not grow with the economy, who will continue to be hungry, who may very well take up extremism at the one end or suicide at the other. Reservations, the easy tool for the political class, is not going to help solve this problem.

Well, I really didn’t want to depress you. But the status is pretty bad.

So what is the cause of all this? Looking at the data, it doesn’t need an Einstein to conclude the cause of all this: Poor quality; poor execution; poor funding and to sum it all, poor management of the education system.

Education is in the hand of the Govt. And Govt. has to take a large part of the blame. In India, Govt. means, poor accountability. If you are lucky, you get a Sreedharan to run Delhi Metro, a Sam Pitroda to run Telecom, a Vittal to run Dept. of Electronics, an Abdul Kalam to run the missile program, a Seshan to run the Election Commission and then something good happens; They leave a lasting impact. But, it is by sheer chance! In the last NASSCOMM conference, I was listening to a senior official from the Govt. in a panel discussion on rural education. The official was listing out a series of problems and gave a vague picture of what is happening to rural education. I was very uncomfortable listening and couldn’t stop wondering if someone is really in charge! As Rajiv Gandhi’s famously and correctly concluded, in India, only 15 paise out of every rupee spent by the Govt. truly reaches the real intended end use. We may take a few more decades and still house the world’s most illiterate population. We will have some of the world’s richest people and will also have a lot of the world’s poorest people. This is not acceptable.

OK, so we agree. There is a serious problem. What can we do about it? What could be a workable solution? Pushing and bashing the Govt. alone won’t help. The problem is too important and too big to be simply left to the system.

Now, there are some good lessons from how India created a large pool of engineering human resources. Every year, we now put about 450,000 engineers into our engineering education system. In view of what we see in primary education, this is a remarkable achievement! How did this miracle happen? Govt. had done good job in creating a few elite IITs and RECs. These institutions, while excellent themselves, produce only a small fraction of the total engineering manpower the country needed. Entrepreneurs entered the “business of education” with pure profit motive. Most of these engineering colleges are in south India. Historically South Indian families were more job minded (though it seems to be changing now with increasing number of entrepreneurs coming from the south) and parents were ready to spend money to buy decent higher education for their children which will fetch them a good job. Some of today’s well known private engineering colleges in India started as pure money making ventures. Some of them were pathetic operations to start with. But, slowly, they got better over time and gathered quality. While they are not exactly IITs, many of them produce pretty good quality. Many of the newest colleges today produce barely passable quality though. But, they too will get better over time. If not, they will be forced to disappear by the market forces. I suspect, no one – Govt. or private - really visualised this as a well thought strategy to produce large engineering manpower. There was and is a license raj in education. Whatever happened was in spite of that. Market forces simply took over. May be politicians were part of the market driven forces that helped achieve this. Many politicians run engineering and medical colleges. And they probably helped ensure that the trend continued. It is these colleges that truly powered India’s IT growth.

So, entrepreneurship did work in higher education. But, will that work for primary schools? It is not a straight forward comparison. Villagers do not have too much money to shell out. There is no great profit to be made in short to medium term. Massive investment is required across the country. But, I think it is possible. Let me explain how..

My view is to use entrepreneurship again as solution. The country excels in entrepreneurial spirit. It is one of the greatest strengths of the nation. Now, how to bring entrepreneurship to rural education?

The idea is to build a social entrepreneurship program which has the potential to significantly contribute. Helping a few schools while useful by itself does not have a big impact. There is a need to build something distributed and highly scalable. This concept evolves out of a small rural school I have been running through a social initiative of my first start up venture, Deccanet. The special child labor eradication school is in Laxmipuram, a village in Krishnagiri district, one of the more backward districts in India. We ran the school in collaboration with a Govt. of India program against child labor. It has so far put about 500 children through the program. Now, with the Govt. initiative in this village coming to an end, I decided to continue it on my own. This time, to build something more scalable and by playing a more active role.

The proposed program has four key components: (1) Profit motive to bring an entrepreneurial spirit, (2) Use of effective management techniques to deliver quality education, (3) Good branding to attract quality teachers and ensure more parents are attracted as "clients", (4) Adequate funding from non Governmental independent sources (so that, we complement rather than fight for scarce funds for education earmarked within Govt.).

Over the last 4 years, in Laxmipuram, I found a committed young person who is the teacher and manager of the school. His name is Sivaprakasam. Siva is a graduate; is a conscientious, passionate and hard working guy - a doer. Now and then, he wonders at a corner of his mind, if he should have gone to the city and made a better living. He could easily get a good job in the city and move on; but he wouldn’t. His commitment to the village keeps him going while many others come and go. Our program is around him, and many more such committed young people. When I suggested the idea to him, he got excited and brought the village head and a few others expressing support. When we started looking for a well located land for the school, one of the parents came forward to sell his property at a reasonable price. Incidentally, he was grateful for the school to have saved the life of his young son. (A routine health check organised by Deccanet three years back had revealed a very serious growth in the child’s kidney which we got quickly removed by surgery in a Bangalore hospital). Over the time we had won a strong support system in the village.

Laxmipuram will now have a regular school starting with a funding of about Rs 2,500,000 (about $ 50,000) which I contribute through a non-profit foundation. This funding is for capital expenses as well as operating cost for early period. We acquired a piece of land in the village and it is proposed to build a little school that would support about 100 children to start with. The school will have staff quarters that will accommodate about four dedicated high quality teachers. The teachers will receive a decent fixed salary and a performance linked reward. By providing a house right in the school compound we will ensure a good quality of life for the teachers; they need not travel to a nearby town every day. We can also attract quality teachers retired from regular schools and who now want a peaceful life.

We will work with other NGOs to ensure good training and teaching aids. Obviously, the “investors” (currently it is just me) will never make any money out of this. But the idea is to make Siva make a decent profit as a social entrepreneur. We provide the funding for him. He will run the school like an “entrepreneur.” Parents are his customers, education is a product he provides. If he keeps the quality and productivity high, and satisfy his clients, he will do well and make a decent living.

How does this work? Firstly we create the school infrastructure. Keeping scalability in mind, the school will be designed to get maximum for every Rupee spent. Good class rooms, playground, teaching aids, adequate staff quarters, toilets, blackboards, toys, reasonable computer systems, library, etc. will constitute initial capex. The operational expenditure will be essentially teachers’ salaries and other small running expenditure. We start by subsidizing the opex 100% during the first year. Then how does entrepreneurship work with subsidy?

From a centralised effort common to all schools in the program, we will help ensure effective management of the school. Siva will get good inputs in management. This will include identifying and hiring quality teachers, training the teachers, defining metrics to measure the quality and productivity, collection and analysis of MIS data, regular reviews and root cause analysis of problems, monitoring the hygiene, audits on the operations and finances, periodic evaluations, analysis of dropout trends, staff motivation, modern teaching practices, accounting and cash flow management, branding the school, increasing parental involvement, and others. At the end of the 1st year, Siva’s job is to ensure a good quality of education. And consequently, by the 2nd year, he should be able to begin to charge something nominal from the parents - may be Rs 25 ($ 0.5) per month per child to start. The payments may be in the form of rice, corn, vegetables or whatever. Siva will gradually reduce the subsidy he takes from the foundation and increase the contribution from the parents. As the Indian economy gets better, and branding of school improves, we expect the parents to pay the Rs 200 to 250 ($ 4 to 5 per month per child) as fees. We continue to work with Siva by giving management inputs – which the Govt. schools acutely lack today. With the cost structure so low, we expect it is possible for Siva to make profits at a reasonable level of fees from parents. We will ensure that Siva doesn’t over charge the rural parents.

The foundation will fund the project with a non-profit motive. A number of my friends are very eager to participate when the project takes off. I realy think if we can show this to work well, funding will be no problem. We are really betting on little Siva’s healthy profit motive combined with his desire to provide service to make the day-to-day management of the school very effective. He is expected to keep lowering the subsidy and reach a point when the school is fully self-funded. Based on an evaluation system, the lower the subsidy he takes and the higher the quality he delivers the more rewards we will give him. Eventually - may be in 3 to 4 years, when he takes no subsidy at all, he will start making a decent money for himself –enough to make him not to regret going to the town. He could open a branch school in a neighboring village and increase his income. There are a lot of idealistic young men out there who want to contribute and make a difference. People like Siva are very committed and hard working young men. I am sure he will succeed. Based on this experience, we propose to set up 100 new schools at the next stage – all in remote villages.

It is proposed to have a smart bunch of committed people as part of the central organisation, working on systems, processes, and all other management inputs. We will initially work with other agencies in all these. Eventually, we will brand this chain of schools and make some positive noise so that in future schools, parents come seeking us. It will require about $ 7.5 Million over a period of time to manage upto 100 schools and then scale it up and speared it all over the country. If done well, sky is the limit.

I met the young local collector of Krishnagiri when beginning to work on the project. I immediately saw an ally in him. Many young IAS officers all over the country want more people to get involved. Often, they are practical folks and are ready to give whatever support in getting school recognitions and other stuff. We will hopefully find strong allies among them.

Why do I believe this has a chance to succeed?
1. Profit motive of an entrepreneur: The social entrepreneur like Siva will make around Rs 15,000 a month from one school – 5 times his current salary. He will lose his sleep to make his school a success and work hard to realise the target – provide good quality education and let the “market forces” drive it. If he succeeds, he will scale up and manage a small chain of schools. He is entrepreneurial, he is local and he will marshal enough support. He is also committed. The choice of Siva is important.
2. Management inputs: The project will address management systems effectively with a central team working on it and helping to lay down systems and practices. This will ensure that the program is well managed. We may have smart MBAs supported by domain experts working on these at the central level - people who live and breathe effective management. We will invite eminent academicians, eminent thought leaders, successful entrepreneurs, and institutions to be associated with the project as it grows.
3. Funding and direction: “Investors” will make no profit out of it. The reward is only the satisfaction of paying back to the community. Initial funding will come from me and my close associates. Once we prove the concept, a larger funding will be arranged. My take on this is, if you prove first few school run well, funding the scaling up is not an issue. So many people and organization want to make a difference.
4. Set an example: By successfully setting up and running the initiative, we also set an example for others emulate. If some one copies the concept, it is good. More the better. It is a huge problem. Copy cats will be most welcome. We will share all our experiences and systems in due course with others for emulating the success across the nation.

This is a long haul project. A lot of patience and perseverance is required. For further progress on this, keep an eye on billionways > ventures > social entrepreneurship. If you wish to be put on my mailing list for being kept updated on the progress, please leave your comments and email address.

C-DOT - How to set crazy goals, reach them and get fired?

CDOT – the early days: How to set crazy goals, work hard, get great things done and get fired for it?

This is about the years I spent in CDOT – the best years of my life. This posting is a bit longish. But I tried my best to keep it short — just couldn't. Because it is also a key part of the great Indian telecom revolution!

1984-92 is a period during which a new family of complex central office switches got designed, manufactured, and deployed in the Indian telecom network. The network got readied for privatization of telecom sector ahead of all other sectors.

In 1983, as the cliché goes, “half of India was waiting for a telephone and those who had one were waiting for dial tone”. If you wanted a telephone line, you would have to wait for about 5 years to get one. But, by the '90s, Indian telecom was world class. Today, India is an exciting economy. Of course, there are many things that are still getting fixed. Telecom is however one area which has been “fixed”. Indian telecom now is one of the most dynamic and fastest growing in the world — in August 2006, India added 5.9 Million new lines and broke many a growth records exceeding China in telecom growth rate. C-DOT’s role in bringing about this transformation is unique and indisputable.

For those who came in late, C-DOT was a great experiment started by the Government of India in 1984. The first phase of C-DOT’s existence ended in the early 90s with the successful development of a family of central office switches. Nothing like that happened before or after. Starting from scratch, C-DOT successfully built a suite of switching products – from small Rural Automatic Exchanges (RAX) to huge metro switches (MAX), and achieved large deployments across the nation. At one point of time, more than 50% of the Indian telecom network was running on C-DOT switches. Billions of $ worth of C-DOT designed switches got manufactured and deployed. That human capital spread everywhere – into Indian tech. and services companies, MNCs in India, and some like me became entrepreneurs.

But C-DOT’s nightmare began when Rajiv Gandhi lost the 1989 elections. And then the great Indian political game took over. The new minister for telecom came hammer and tongues on C-DOT. He saw in the high profile Sam Pitroda - a Rajiv political appointee and in CDOT - a Rajiv Gandhi pet project and not a national achievement.

Starting a new technology experiment …

Well, let me start from the beginning. Sam Pitroda was a telecom visionary. Son of a Gujarati carpenter; born in Orissa, he ends up in Chicago, builds a new telecom company and becomes history’s first person to build a switching system using microprocessors, files a slew of US patents (the last count exceeded 60) in telecom designs and becomes part of the who-is-who in telecom in the US in late 70s. His company gets acquired by Rockwell International and he makes his millions at a time when the glass ceiling for growth was pretty low for Indians in the US. He gets an urge to do something for India. Flies down to Delhi and asks for a one hour appointment with Mrs Indira Gandhi, then Prime Minster. While he was waiting at the PMO, in the last minute, he is told the meeting was curtailed to 15 minutes. He offers to go back and wait for another three months or whatever time it takes for the promised one hour time slot rather than get just a 15 minutes audience. PMO, a bit surprised at his guts, relents and he meets with Mrs. Gandhi. Sam is a great communicator, he convinces Mrs G to take a bold new step - to get India to design its own family of switching systems, build an Indian telecom product industry and modernize Indian telecom. Rajiv Gandhi, who was listening, likes what he heard. And, there begins a lasting friendship. Sam gets an OK for his project. He asks for a budget of Rs 360 Million (About $ 15 Million then). He gets it. He personally takes a salary of Re 1 year ! He, along with Mr G.B.Meemamsi of TRC and Dr MV Pitke of TIFR puts together a core team of about twelve.

I was part of that core team. Sam was talking of total liberalization of telecom back then (much before Narasimha Rao’s liberalization) and I am sure Rajiv Gandhi was thinking alike. Against stiff opposition, he brings in the ubiquitous STD PCO, a novel concept those days and which helped dramatically improve “Telephone accessibility”.

A family of switches from 128 terminal Rural switch (RAX) to 100,000 terminal metro switch (MAX) got designed and deployed. It took about 2,500 man years of combined effort and it continues to be one of the most complex hi-tech products designed in India. India became one of the few countries that have achieved such a distinction. The product got manufactured by private and state owned enterprises. With an Indian option available in C-DOT switch, MNC prices started coming down. The telephone density improved slowly and steadily thanks to the cheaper C-DOT switches and much later the advent of mobile telephony. And eventually, the next big step is taken – telecom becomes the sector earliest to be liberalized.

And, today in retrospect, among all key infrastructure segments in India - Telecom, Power, Transportation, Roads, Airports, Education and Health, Telecom has been fixed first. It is already world class. Today, Indian Telecom is the fastest growing in the world. Among many things, C-DOT and Sam Pitroda played an important role in the whole scheme of things. C-DOT demonstrated that “we can do it”, set on motion a technology capability building, and gave a boost for an industrial eco system for electronic products. It was sad a manufacturing industry didn’t take off as it could have. More about that later…

In the 80s, the work environment at C-DOT was fabulous. It was most unlike any Govt. funded R&D. It was better than the best private enterprise. Flexible, but extremely result oriented, very democratic, hard working, demanding as well as giving. It was a highly performance oriented culture. And, things were a bit idealistic - almost Utopian. For example, for many early years, the library in C-DOT was never locked and most times unmanned. It was open 24 hours. People were working practically round the clock. Hardly any book was lost. People called each other by first names - something very new then; there was certain air of irreverence to hierarchy; bosses tolerated healthy dissent; and there was respect for doers. And, people worked like mad – almost possessed. A set of very young people (average age 25) with no prior experience were trying to build a complex set of products which had taken Billions of $s and much longer period of time in the west. The PBX and RAX hit the production lines first. RAX was an instant hit. In many quarters that were skeptical to start with, a grudging admiration set in.

But, in the midst of all these exhilaration of achievement, unsuspected, a big shock was waiting. The irrepressible Indian Politics came in the way as always. All the good things that were happening in C-DOT were possible only with a strong political commitment at the top. Telecom was not considered as strategic as Nuclear, Space or Defense technologies. India was a large and growing market. MNC vendors across the world were eager to sell to this market – but at a stiff price. In that process, they were denying India a chance to build its own industry. It is not uncommon that global businesses sometimes use dubious means to gain access to a large market. Fortunately, Rajiv Gandhi provided the kind of commitment and support that was needed for an Indian technology alternative – thanks to Sam Pitroda.

The great Indian political game

When Rajiv Gandhi lost the elections in 1989, the new coalition government headed by V P Singh took charge and the story took a sharp turn.

The first problem was quick in surfacing: as soon as assuming office, Mr Unni Krishnan representing Cong (O), the new minister in charge of Communications, had a brush with Sam Pitroda and announced a 13-member committee to “investigate” into the performance of C-DOT and decide on its future. Majority of the members of the committee appeared handpicked and were hostile to Sam Pitroda and C-DOT. The mood was unfriendly. This was a “project of Rajiv Gandhi”. So it was not a favorite of the new dispensation – at least the new minister.

The bane of this country is lack of continuity in Governance - whatever one political party does - whether it was right or wrong - is always opposed by the next Govt. Look at the way successive governments undo/criticize what the previous Govt. did. The Public Private Participation program in Bangalore, BALCO, Economic lIberalisation, India – US accord…..it is a long list. Arun Shourie suggests a simple rule of self-denial among political parties would help: ‘‘Do not block another party from doing what your own party does when it is in power.’’ But that is easier said than done.

I had my second shock when Mr K B Lal, my immediate boss, came out of a “grilling” by the Govt.’s now-feared 13 member committee. He was quite upset. I know him very close as a conscientious engineer-manager. He felt humiliated. “They were unreasonable”, he said “they wouldn’t listen. They kept accusing we have done nothing and we have cheated the nation. Some of them simply without basis, kept insisting that our architecture was flawed and will never work as a large switch”. He felt we were being treated like criminals and cheats with no valid reason.

Was CDOT going to collapse? It will be very difficult to retain all the talent C-DOT had nurtured if the Govt. succeeds in what it apparently wanted to do – “fix” CDOT for being a Rajiv Gandhi idea. Many at CDOT were confused. They are being pilloried while doing a great job. With what they had achieved till then, everyone can easily get great jobs anywhere in the world. It will be very difficult to put together such a team again. I was very worried. I was a middle level manager and part of the core team. I had a dedicated team - some of the brightest engineers of their times from IITs, BITS, RECs and many other good engineering schools across the country. We had motivated our teams, driven them hard, and everyone thoroughly enjoyed all the hard work and challenge- because it was for a national cause. Will all that go waste?

I felt the “system” wanted us to “behave”. CDOT was quite inconvenient at least for some powerful quarters. Back in ’84, very few believed we as a nation can do any serious R&D. Import was the only solution. Technology for the industry always came through “technology transfers” from foreign partners. A few multinationals were allegedly very active to kill C-DOT. And the change in Govt. probably gave them a great opportunity to change the rules of the game.

I called up Sam. He and I had struck a good chord from the beginning. I was responsible for Fault Tolerance - called the Maintenance subsystem - and that was considered an important area. Every time he met me on the corridors of C-DOT or in a review meeting, he would just implore me “What you are doing is critical. I am counting on you.” I knew he must have told the same line to so many others too, but I felt so charged up, and I would always assure him, “Don’t worry Sam, we will deliver!” Now, are we going to fail for a non technology reason? He called me to his home in the evening. Mr Meemamsi, the founder director of C-DOT and Mr K.B.Lal were also there. The discussion confirmed that the new Govt. was wanting to nail C-DOT down for “non performance” and let Sam leave in disgrace. It was a witch hunt against CDOT. It was obviously a political problem – not technical. The only way out was for us was to try and convince the political system while we continue to do everything to convince the obviously biased review committee. “Let us change the political opinion in the country!” - Sam said. It was decided, all of us will do it in whatever means available to each of us.

Easier said than done!

In the corridors of power

Sam had a great rapport with many politicians and journalists. Technocrats and the IAS too liked him. But with the changed political scenario, with the impression that he was too close to Rajiv Gandhi, he now had a disadvantage. I have never met face to face any serious politician before in my life. My home town was represented by a congress MP. That is not going to help now. The new Govt. was a coalition between Janata Dal led by VP Singh, the BJP and the Left. Suddenly I realized I knew somebody. There was a bright engineer, the daughter of a well-known BJP MP, in our RTOS team. I spoke to her and in the next 15 minutes I had a meeting fixed with Mr L K Advani, the president of BJP. It was stroke of luck! I was going to meet the president of the biggest political party supporting the Govt.

I landed up in Mr. Advani’s house at the appointed time. It was scheduled to be a 20 minute meeting. But, it took about an Hour. I did most of the talking. Mr. Advani listened patiently. After the first 10 minutes of my explaining what good things we had done as an organization and why we felt we were being hunted down, his first reaction in his measured voice was “your boss Mr Pitroda identified himself too close to Rajiv Gandhi. So, this was bound to happen!” But, I was prepared for this question. “Sir,” I said, “We all expected that the new Govt. will request Mr Pitroda to resign. It is a prerogative of any Govt. to have a team on which it had maximum confidence. But, here instead, an institution which had done a good job was being pilloried apparently to get at him. We are weak as a nation in building world-class products. Companies always went to the west for “technology transfer” at a great cost. Here is a project that has started delivering complex Indian technology. And some bright young engineers are sticking to India in this project instead of rushing out to the US.” I went on and on.... By now, I was very emotional and had tears in my eyes.

Mr Advani was very gentle, kept encouraging me to continue, I was pleading, accusing the political system, arguing for Indian technology to be built…all at the same time. I kept urging him to do something. At the end of it all, he said, “Don’t worry, I understand. We will support C-DOT. We will not let the good work done so far to go waste. I meet the Prime Minister every Thursday, I will advice him to go careful on C-DOT.” He asked me to continue to be in touch with Mr.Jaswant Singh. When I stepped out, I couldn’t believe myself. I had managed to convince the most powerful politician in the country at that time. I came in with so much anger against politicians. Now, this man has “truly listened” to me. My respect for him went up hugely.

By morning, I received a call from Sam. He had been called by the BJP top brass asking him to give them a presentation at the earliest on what is happening at C-DOT and was promised full support. Sam said, “Venkat, whatever you did, just keep doing!” Mr Meemamsi, the Exec Director too was very pleased. Encouraged by all this, I along with a few other colleagues in C-DOT, formed an informal lobbying group. We went on a carpet-bombing mission on the political establishment in Delhi. People we met included, Jaswant Singh, Jaipal Reddy, Devilal, Arjun Singh, Prof. Madhu Dandavate, Mohan Kumaramangalam, Somnath Chatterjee, President Venkatraman’s office, Rajiv Gandhi…the list was long. Rajiv told us “You guys are doing a great job. Think beyond politics, you must continue your mission.” Meeting him in person, I found Rajiv to be a genuine person. I liked the guy. Everyone including Rajiv felt Sam stepping down would undermine C-DOT completely. We also met most members of the 13-member committee. Many of them were handpicked for their hostility to C-DOT and Sam. There were still a few fair people in the committee to whom we could appeal. They gave us rock solid support - especially Dr R P Shenoy and V M Sundaram. The minister in the meanwhile was getting impatient with all these lobbying. He sacked Mr. Meemamsi and Mr. Mahajan - the C-DOT top management. The review committee split into two - one led by Mr Nambiar said C-DOT was a big failure and its products were seriously flawed while the other group said C-DOT was a great success deserving all the support. We tried desperately reaching the PMO for a meeting with Mr. V P Singh. He wouldn’t meet us. But, I somehow felt that even he was convinced about C-DOT but wanted to handle it in his own way because of the pressures of coalition politics.

Thanks to all the lobbying and other opposition, the telecom minister softened his stand on C-DOT. Now he suddenly claimed that C-DOT had a great team of engineers and an excellent potential. “But they were misled” he said. And he started a personal attack on Sam. It was claimed “the exchequer had been looted" It was alluded Sam had been siphoning off funds. It was the most outrageous and ridiculous charge. I was amazed at the depth to which politics could go. Sam was defenseless. He didn’t know how to defend himself against such a crazy charge.

The Fourth Estate steps in

An important political leader from the ruling dispensation advised us that there is an impasse because of the coalition politics. Only the press and public opinion can help us now at this stage. Now there was a debate. Some asked, whose war are we fighting? C-DOT’s or Mr.Pitroda’s? Most of us of felt it doesn’t make a difference. There is no truth in the allegation; And we must call the bluff.

We made a senior Indian Express journalist talk to a top Finance official in the Govt. working right under the minister – the very person who was asked to conduct a detailed audit on C-DOT accounts. The official came out categorically, “I saw some rules being violated by C-DOT to expedite purchases, but I never saw any malafied intention or a paise misused.” Indian Express wrote a story quoting him.

Meeting Arun Shourie at the Indian Express office was the most refreshing thing. The clarity of his thinking was striking. He made a comment at the peak of the C-DOT controversy; “We as a nation are not very successful in building strong institutions. We just want to build heroes and destroy them when not required.” He put one of his senior journalists then, Ms Pushpa Girimaji to work with us on the story. She wrote some brilliant articles on India Express. We went all out with the fourth estate.

Now suddenly my family started getting threatening calls from someone claiming to be from CBI, the secret police of the Govt.of India, accusing me of working against the Govt and warning of dire consequences. Honestly I was a bit rattled. We spoke to Arun Shourie again. He gave me a lot of courage. He did some quick checks and came back and said it is unlikely to be anyone from CBI. And, if anything like that happens to me, he will blast the Govt. He was credited to be a key player in having brought the new Govt. to power. I felt confident and personally realized the true power of the press in a democracy.

We went and met Prof. Indiresan at IIT, Delhi - a respected academician and former dean of IIT, Madras. I have never met a clear headed academician like Prof. Indiresan. He helped organize a symposium of top technocrats from all over the country at IIT Delhi. The experts heard the different views and concluded that C-DOT’s technology was viable and passed a stinging resolution castigating the Govt. asking it to stop harassing technocrats and stop the witch-hunt. They sent out a strong communication to the Cabinet and the Prime Minister. Now almost every newspaper was criticizing the Govt. The press support was very strong. Thirteen editorials were published in the national press all condemning Govt.’s handling of C-DOT, asking the minister and Govt. to stop the witch hunt.

…We shall overcome – and we did..

And, by the next week, the cabinet was reshuffled. While the Telecom Minister was refusing to give up his communications portfolio, the responsibility changed hand and an affable new minister came in the form of Gyaneshwar Mishra, who immediately declared a truce. All of us were relieved. For six months, we had been lobbying with politicians and press. It seemed to have made a significant impact and brought about the change. But, of course Sam had a lot of good will among journalists, the IAS, young technocrats and some politicians. And Mr Meemamsi had a very clean reputation.

At the end of it, in a poignant moment, in Room 919, Akbar Bhavan, Sam Pitroda broke down and was emotional like a child – the man I admired most, who had shown a lot of courage and refused to give up was letting out his emotions at a moment of relief. He said, “you have no idea what you guys have done”. I said, “Sam you have no idea what you have done to all of us.” Not long after, he suffered a huge heart attack. But, he would not go to the US for treatment - against the advice of many and got admitted and operated in Delhi for a bypass surgery. A person who could have easily joined the Billion $ league had he continued in the US, a person who came back to contribute to India, a man who worked at a salary of Re 1 a year for nearly a decade for the Indian Govt. and made a huge impact on Indian Telecom, the system presented in return a heart attack. It was very sad indeed. But still he stuck around, insisted that we too stay around long enough to see through the design and manufacture of the switching products and get the job completed.

By the end of '92, I left C-DOT. The large switch had been succesfully installed, tested and manufactured. I was heading the switching software team, the largest division then. It was a very sad moment for me to leave. But, by then, I felt C-DoT had done its job. Its relevance was over. With the just announced liberalization, it was clear that it was out there in the entrepreneurial world where huge opportunities were waiting - where one can contribute more meaningfully. Among all the people we met during the campaign, Prof Madhu Dandavate, the then Finance minister of India brought a new perspective. While we pleaded with him with emotion and anger for C-DOT, he said “Please realize! It is time you stopped expecting the Govt. to do everything. If you care so much for technology in India, go out and build that yourself.” At first, I was very upset when I heard that; but, I soon realized he was very right - time to move on and start building things on your own! The motivation for entrepreneurship became stronger.

In the whole episode, there was great learning. It was a crusade in which a number of people were involved. There was a great sense of power for all those who were part of it. In this country, when things go bad, if you show courage to stand up and be counted, you can fight all the way for a right cause. While it was politics that brought about the problem, I could see a brighter side. Most politicians were ready to listen. None shooed us away. I was not a very politically aligned person. I liked the positive sides of the people I met whether Rajiv Gandhi, Advani or Arun Shourie.... The press listened and supported us to the hilt. If you had a cause, you can fight for it and win and even change a minister in the Govt. of India. Democracy was fully in play. I always remembered one of Sam’s favorite lines: “It is important that you are a good engineer and a great technocrat. But it is far more important that you are a strong human being who will stand up and be counted.” In the whole lobbying bit, I was not alone; there were many who rallied all around - C-DOTians, journalists, academicians, scientists, politicians and others who were all equally committed and contributing. I didn't list the names for the fear of leaving out any.

Sam Pitroda was a sad man after the death of his friend Rajiv Gandhi. He still stayed on, completed the C-DOT switch deployment as his friend had wanted; and then went back to rebuild his fortunes. He headed WorldTel for a while. Then back at Chicago, he went on to found a new company C-Sam, focusing on electronic valet around Mobile phones. He filed 10 new patents and back to where he started - all over gain. He suffered another stroke and had to undergo a second surgery. He is now forced by friends and family to take it easy. As chairman of Knowledge Commission, he continues his contribution to India.

While Sam was the high profile, public face of C-DOT, there was a strong team of high integrity that constituted the core management team of C-DOT. Mr.G.B.Meemamsi and Dr.M.V.Pitke were the leaders of that core team. And, there was a fabulous team of engineers - some of the brightest of their time.

Pitroda was media savvy, articulate, charismatic and highly motivating personality. He brought with him rapid development experience of digital switching. Above all he was he was able to ensure strong support from he Government at the highest level.

G.B Meemamsi was a strong team builder, egalitarian, quiet, humble but very determined and highly persevering. He brought with him early experience from TRC building SPC switches from scratch. He built a 23 bit Switching computer from scratch using discrete components around the same time when Bell Labs was building their first Electronic Switches.

Dr. Pitke was an eminent scientist from TIFR, easy to mingle with young engineers, very determined to see Indian technology developed and came with a track record in digital switching for the Defence ministry.

G.B.Meemamsi continued as an advisor to C-DOT for another decade, trying everything he could to bring dynamism to the organization. He refused to accept cushy foreign postings or MNC jobs. He is now retired and lives with his wife in Bangalore and guides young companies.

Dr Pitke, the third member of the founding triumvirate, an eminent scientist from TIFR, is retired and lives in Mumbai and helps young entrepreneurs.

Many other wonderful people who were part of C-DOT then are successful and are everywhere now – all over the world, as senior executives in many technology companies, or as entrepreneurs. This whole group will agree on one thing - the time they spent in the early years of C-DOT was the most exciting and rewarding years of their life!

CDOT: What happened to CDOT? At the end of the controversy in ’89, C-DOT lost most of its technology team. Many left disgusted and joined design services companies; some left for the US to find their fortunes. Sadly that destroyed one of the greatest new core competencies that was built in India in recent times. Some stayed back and completed the last pieces of work that remained, saw the products manufactured fully and then moved on.  A few from the core team continue to work with C-DOT and carry the legacy forward. Core competencies are around people. If you lose most of the team over a short span of time, it becomes difficult to rebuild. But, we have faith and hope in our engineers - especially young people. C-DOT is an excellent platform now. They can continue to retain the heritage, the special work culture and achieve great things if they want to - It is entirely in their hands.