The New Face of Global Competition

By: Keith H. HammondsWed Dec 19, 2007 at 12:39 AM

Not so long ago, India's Wipro Ltd. sold cooking oils and knockoff PCs. Now its 15,000 technologists cook up vital software applications and research for Ericsson, GM, the Home Depot, and other giant customers. Are you prepared to go head-to-head with the best the world has to offer?

Can this explosion be sustained? In a study commissioned by an Indian tech trade group, McKinsey & Co. estimated that the IT-services industry will continue to grow at a rate of more than 30% a year, reaching $77 billion and accounting for 7% of India's GDP by 2008. That growth, McKinsey & Co. predicts, will create more than 4 million jobs.

Even so, that many jobs would make just a dent in the nation's poor, uneducated population. While Bangalore's streets are packed with students in prim uniforms, very few rural kids make it past primary school. Just 6% of the population get to the university level.

To extend the boom's impact, India must educate more of its people. And therein lies the conundrum: As schooling and employment improve, incomes will go up. But it's the nation's poverty, in essence, that makes it so appealing to IBM, Oracle, and other companies as a source of low-cost labor. A higher standard of living, so desirable on one level, will threaten India's competitive advantage. That's why the next decade will pose a delicate dance for India. The country could fashion itself into an enormous economic power. Just as easily, though, it could price itself out of the outsourcing business.

Keith H. Hammonds (khammonds@fastcompany.com) is a senior editor based in New York. Learn more about Wipro on the Web (www.wipro.com).