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Do IT Clusters Foster Inequality ?

A few months ago, walking out of the Infosys Technologies Bangalore HQ from its main road exit and towards the car parked off the bustling Hosur road, one couldn’t help but notice the little `bazaars’ doing brisk business on the side lanes, mostly with locals. The vendors range from robust young men hawking pots and pans to frail old women haunched over small heaps of leafy vegetables, eking out a surely less than modest living.

The contrast between the dollar riches generated behind the fortified walls of Infosys just metres away or for that matter the scores of other high technology campuses and the living and working standards (it may not be poverty) of the people bordering them has existed for a while, but has rarely been seen as a contradiction, not to us folks living here at least.

The reasons are well known. IT companies have created thousands of high paying jobs, given a terrific leg-up in India brand equity and, collaterally, become a beacon for doing business the right way, individually and collectively. Their detached existence from the immediate environment is, rightly, seen as an imperative for their efficiency and success.

Time For Tough Questions ?

Yet, for all the glory and gains the hi tech companies and the clusters they inhabit have brought to the country, perhaps its time to play devil’s advocate and ask some questions. First, do hi-tech clusters really benefit the local populace and economy over the long term And second, should Indian IT in this regard take a few lessons from manufacturing ?

Former prime minister Deve Gowda’s recent outbursts against Infosys in specific are worth viewing in this context. Whatever his intentions, is Gowda, like all shrewd and perceptive politicians, attempting to bring to the fore undercurrents of discontent that are already flowing in the polity. If so, should not the IT industry find and focus on the basic premise here rather than the battle. And see Gowda’s tantrums as a warning bell of sorts.

Before addressing these points, its instructive to revisit the IT (particularly the big guys) industry’s two-pronged approach to development. The first is to run highly efficient, world class enterprises that create jobs, attract more capital, fuel local GDP and create prosperity. The second arm of the model involves returning the profits generated, or parts of it, in some way to the society.

There are two aspects to the second arm. Most if not all the time and effort expended for this is intermediated either individually or through trusts. For instance, Infosys’ CFO Mohandas Pai drives Akshay Patra, a successful, privately funded mid-day meal scheme that has its genesis in Bangalore but is now a nation-wide effort. Infosys and Satyam Computer both have independent trusts that work with villages in their respective states and do commendable work.

We Want A Quick Flow, Not A Trickle !

So, it cannot be said that IT companies or their employees are not working for or with society and the like. But it could be stated that the “We believe in the trickle down theory” corporate approach may not mesh well with a polity that is increasingly demanding gratification here and now. “There is no patience for trickle down. In this age, inequity cannot be tolerated for more than a day,” says Boston Consulting Group India chief Arun Maira.

A chance meeting recently with German politician (Member of European Parliament) Dr Jan Christian Ehler threw up some interesting thoughts. According to him, from a government-state point of view, every Euro spent on overall infrastructure had brought back greater gains over time than have hi-tech clusters, at least in Germany. His argument; hi-tech clusters do not work over the longer term, at least in isolation.

This writer tried to follow that thought up with Harald Bathelt, Professor of Economic Geography at University of Marburg (also in Germany). Bathelt, who has studied clusters in many parts of the world, says the front and back linkages between knowledge clusters and their environment are very weak. “They are good for the economy but in many ways they are cathedrals in the desert,” he says.

Onus On Government As Well

Whose problem is it ? Tough to answer that because hi-tech clusters can grow `accidentally’ or be strategically driven. The government may be involved at genesis or a later stage of development. A good example of the former is Tidel Park in Chennai while Whitefield in Bangalore or Hi Tech City in Hyderabad reflect the latter.

In a short term politicians may well demand: what has a certain industry has done for the local economy ? The answer to that lies with both. For the government, the challenge is to de-risk quickly. Says Bathelt, “A single industry focus is not healthy, there can be changes in world markets, business cycles and so on. The Swiss government focused too strongly on the watch industry and everyone suffered when there was a downturn.”

So, instead of being seen as only working for IT, governments must visibly work on creating multiple enabling environments. The Karnataka government’s current focus appears to be to de-risk Bangalore rather than the industry. So while its good news that fresh IT investments will go towards Mangalore and Mysore, what is also perhaps required is a conscious, visible attempt to draw in investments in other sectors here.

The Big Perception Game

The need to do this has not escaped planners now or in the past. Andhra Pradesh has prepared exhaustive plans for massive job creation in the textiles industry, Maharashtra even wants to develop wine ! Unfortunately, this is a bigger perception game than reality. So, while a strong automotive cluster is blooming near Mysore (thanks to Toyota), not much will be written or talked about it.

On the flip side, for sure no one will ask what Toyota has done for Karnataka or Hyundai for Chennai, because, intrinsically, these industries have built stronger linkages with the local environment, unlike IT. And they don’t work out of glass buildings ! Which brings us back to the questions posed earlier, particularly since onus will often rest more on industry than on government.

Maira says IT ought to take a few lessons from manufacturing. He quotes his own example, working with Telco (now Tata Motors) in the late 60s and 70s. “Before we built the plants near Pune, then managing director Sumant Moolgaonkar (regarded as the architect of the company's truck business) built a training school and planted trees, showed the local people what the company would do. We also realized that villagers who sold us land did not want money as much as they wanted jobs and a future for a family member.”

Build Schools & Equity ?

Maira says for every glass fortress IT companies erect, they need to build bands in between with schools, clinics that attract ordinary people, not the high skilled workers that will drive their enterprises. “We built a training school in Telco which by the way did not guarantee jobs in Telco. But it gave the people vocational training and the confidence to go elsewhere,” he says.

This is not an argument that goes down well with most IT industry folks, as this writer knows it. There is one solution perhaps. That is to take a walk outside their campuses on Hosur Road and talk to the old lady selling vegetables. And see in her eyes whether she has benefited from the billion dollar balance sheets. She has not. And one day she will be Gowda’s biggest weapon.

This article appeared in the Bombay edition of Hindustan Times on Tuesday. The author can be reached at govindraj@datelinebombay.com

Comments

Arun Cavale said…
Good thought provoking post!

The societal impact of IT industry is not a simple issue to analyse. And as you rightly point out, much of this complexity is due to the fact that industry-society linkage in the case of IT cannot be identified or evaluated as directly or as easily as in the case of, say, manufacturing. There are really 2 views one can take on this matter:

View #1: IT sectoral development, atleast in Bangalore, has had an indirect, but positive, impact of the earning potential of society. A case in point is the salaries that Domestic helps / maids seem to demand and get these days. With IT professionals - most of them single bachelors earning phenomenal salaries but with few financial committments to burden with - willing to pay more than "usual" prices for just about every service/product, auxiliary services such as domestic help have seem better income levels.

View#2: Markets are great levelers! Alongwith income levels, cost of living also has gone through the roof. And this is the really issue most non-IT folks seem to have in Bangalore. It's virtually impossible for a local Bangalorean not employed in IT sector to buy a house anymore. Or even aspire to rent / lease a good apartment, for that matter.
Increasing cost of living, and deteriorating infrastructure have contributed to a gradual build-up of "local" resentment. And this resentment has taken the form of anger directed towards not only IT sector, but everything that is not local ("North Indians", "Non-kannada" and so on).

I am an IT professional who enjoys the fruits of the boom, but sadly, must agree with Deve Gowda on the core points that he has raised, if not the intent or method he has employed.
Rajesh Rana said…
It's a great
blog...

Reagrds,
Rajesh
http://www.rajeshrana.blogspot.com
Venkat Ramanan said…
Hi Govind!
Excellent Article!!
Heard you are part of the CII-YI team which is on a visit to China. Please write more about your China visit. We need to learn a lot from them!!
Reg,
Venkat
Anonymous said…
i agree with user AC there is a huge north indian/non kannadiga and local divide and some of the statements written in by IT captains(urging bangalore to dilute their CULTURE!!) havent helped matters at all and cant help but feeling that people like me who even though dont support reservations for locals in IT are beginig to ask whether deve gowda has raised points that need attention
Leelayz said…
Would appreciate if you read my article on a similar topic(I am from the very company that you are talking about...been working for arnd 2 years....):

http://acidnirvana.blogspot.com/2005/11/where-do-we-go-from-here.html
Most insightful Suvajyoti, you've given me an idea or two for further gyan..i was in Bangalore last month talking to some product technology companies and they spoke of an increasing disconnect between younger techies and their organisations..you've effectively highlighted some reasons..will come back with a take on China's software story soon ! Keep up the writing !
thanks for the infomation

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