“The IITs became islands of excellence by not allowing the general debasement of the Indian system to lower their exacting standards,” noted The Wall Street Journal (April 16, 2003). “You couldn't bribe your way to get into an IIT... Candidates are accepted only if they pass a grueling entrance exam. The government does not interfere with the curriculum, and the workload is demanding... Arguably, it is harder to get into an IIT than into Harvard or the Massachusetts Institute of Technology... IIT alumnus Vinod Khosla, who co-founded Sun Microsystems, said: 'When I finished IIT Delhi and went to Carnegie Mellon for my Masters, I thought I was cruising all the way because it was so easy relative to the education I got at IIT.'”
For most of their first fifty years, these IITs were one of the greatest bargains America ever had. It was as if someone installed a brain drain that filled up in New Delhi and emptied in Palo Alto.
And then along came Netscape, the 1996 telecom deregulation, and Global Crossing and its fiber-optic friends. The world got flattened and that whole deal got turned on its head. “India had no resources and no infrastructure,” said Dinakar Singh, one of the most respected young hedge fund managers on Wall Street, whose parents graduated from an IIT and then immigrated to America, where he was born. “It produced people with quality and by quantity. But many of them rotted on the docks of India like vegetables. Only a relative few could get on ships and get out. Not anymore, because we built this ocean crosser, called fiberoptic cable... For decades you had to leave India to be a professional... Now you can plug into the world from India. You don't have to go to Yale and go to work for Goldman Sachs [as I did.]”
India could never have afforded to pay for the bandwidth to connect brainy India with high-tech America, so American shareholders paid for it. Sure, overinvestment can be good. The overinvestment in railroads turned out to be a great boon for the American economy. “But the railroad overinvestment was confined to your own country and so too were the benefits,” said Singh. In the case of the digital railroads, “it was the foreigners who benefited.” India got to ride for free.
It is fun to talk to Indians who were around at precisely the moment when American companies started to discover they could draw on India's brainpower in India. One of them is Vivek Paul, now the president of Wipro, the Indian software giant. “In many ways the Indian information technology [outsourcing] revolution began with General Electric coming over. We're talking the late 1980s and early '90s. At the time, Texas Instruments was doing some chip design in India. Some of their key designers [in America] were Indians, and they basically let them go back home and work from there [using the rather crude communications networks that existed then to stay in touch.] At that time, I was heading up the operations for GE Medical Systems in Bangalore. [GE's chairman] Jack Welch came to India in 1989 and was completely taken by India as a source of intellectual advantage for GE. Jack would say, 'India is a developing country with a developed intellectual capability.' He saw a talent pool that could be leveraged. So he said, 'We spend a lot of money doing software. Couldn't we do some work for our IT department here?'” Because India had closed its market to foreign technology companies, like IBM, Indian companies had started their own factories to make PCs and servers, and Welch felt that if they could do it for themselves, they could do it for GE.
To pursue the project, Welch sent a team headed by GE's chief information officer over to India to check out the possibilities. Paul was also filling in as GE's business development manager for India at the time. “So it was my job to escort the corporate CIO, in early 1990, on his first trip,” he recalled. “They had come with some pilot projects to get the ball rolling. I remember in the middle of the night going to pick them up at the Delhi airport with a caravan of Indian cars, Ambassadors, based on a very dated 1950s Morris Minor design. Everyone in the government drove one. So we had a five-car caravan and we were driving back from the airport to town. I was in the back car, and at one point we heard this loud bang, and I thought, What happened? I shot to the front, and the lead car's hood had flown off and smashed the windshield-with these GE people inside! So this whole caravan of GE execs pulls over to the side of the road, and I could just hear them saying to themselves, 'This is the place we're going to get software from?'”
Fortunately for India, the GE team was not discouraged by the poor quality of Indian cars. GE decided to sink roots, starting a joint development project with Wipro. Other companies were trying different models. But this was still pre-fiber-optic days. Simon & Schuster, the book publisher, for instance, would ship its books over to India and pay Indians $50 a month (compared to $1,000 a month in the United States) to type them by hand into computers, converting the books into digitized electronic files that could be edited or amended easily in the future —particularly dictionaries, which constantly need updating. In 1991, Manmohan Singh, then India's finance minister, began opening the Indian economy for foreign investment and introducing competition into the Indian telecom industry to bring down prices. To attract more foreign investment, Singh made it much easier for companies to set up satellite downlink stations in Bangalore, so they could skip over the Indian phone system and connect with their home bases in America, Europe, or Asia. Before then, only Texas Instruments had been willing to brave the Indian bureaucracy, becoming the first multinational to establish a circuit design and development center in India in 1985. TI's center in Bangalore had its own satellite downlink but had to suffer through having an Indian government official to oversee it-with the right to examine any piece of data going in or out. Singh loosened all those reins post-1991. A short time later, in 1994, HealthScribe India, a company originally funded in part by Indian-American doctors, was set up in Bangalore to do outsourced medical transcription for American doctors and hospitals. Those doctors at the time were taking handwritten notes and then dictating them into a Dictaphone for a secretary or someone else to transcribe, which would usually take days or weeks. HealthScribe set up a system that turned a doctor's touch-tone phone into a dictation machine. The doctor would punch in a number and simply dictate his notes to a PC with a voice card in it, which would digitize his voice. He could be sitting anywhere when he did it. Thanks to the satellite, a housewife or student in Bangalore could go into a computer and download that doctor's digitized voice and transcribe it-not in two weeks but in two hours. Then this person would zip it right back by satellite as a text file that could be put into the hospital's computer system and become part of the billing file. Because of the twelve-hour time difference with India, Indians could do the transcription while the American doctors were sleeping, and the file would be ready and waiting the next morning. This was an important breakthrough for companies, because if you could safely, legally, and securely transcribe from Bangalore medical records, lab reports, and doctors' diagnoses-in one of the most litigious industries in the world-a lot of other industries could think about sending some of their backroom work to be done in India as well. And they did. But it remained limited by what could be handled by satellite, where there was a voice delay. (Ironically, said Gurujot Singh Khalsa, one of the founders of HealthScribe, they initially explored having Indians in Maine-that is, American Indians-do this work, using some of the federal money earmarked for the tribes to get started, but they could never get them interested enough to put the deal together.) The cost of doing the transcription in India was about one- fifth the cost per line of doing it the United States, a difference that got a lot of people's attention.
By the late 1990s, though, Lady Luck was starting to shine on India from two directions: The fiber-optic bubble was starting to inflate, linking India with the United States, and the Y2K computer crisis-the so-called millennium bug-started gathering on the horizon. As you'll remember, the Y2K bug was a result of the fact that when computers were built, they came with internal clocks. In order to save memory space, these clocks rendered dates with just six digits-two for the day, two for the month, and, you guessed it, two for the year. That meant they could go up to only 12/31/99. So when the calendar hit January 1, 2000, many older computers were poised to register that not as 01/01/2000 but as 01/01/00, and they would think it was 1900 all over again. It meant that a huge number of existing computers (newer ones were being made with better clocks) needed to have their internal clocks and related systems adjusted; otherwise, it was feared, they would shut down, creating a global crisis, given how many different management systems-from water to air traffic control-were computerized.
This computer remediation work was a huge, tedious job. Who in the world had enough software engineers to do it all? Answer: India, with all the techies from all those IITs and private technical colleges and computer schools.
