How Big Is the Link Between India's IT Spending, Innovation?

Ann All

Obviously there's more potential for growth in less mature global economies with big populations and rising income levels. So companies with the ability to compete in such markets are going after countries like India and China in a big way. The Hackett Group's Michel Janssen laid out a pretty clear globalization picture when I interviewed him in February. He told me:

 

... In China and India right now, they're having recessions too. But their growth is going to go from 10 percent or 11 percent down to 7 percent or 8 percent. So those economies are still expanding. We haven't touched that kind of growth (in the U.S.) for a long time. The point we are trying to make here is that the growth for businesses is going to come in the global sphere. We're saying that globalization is what will drive America out of its recession if we take it seriously. If we try to get protectionist, we will lose jobs over the long term.

 

So it's not exactly a surprise that Surjit Chana, VP of marketing for IBM's General Business division, shared his opinion in a recent interview with the Press Trust of India that "India is poised to lead the second wave of IT adoption." Indian companies are faring better than others in the current recession because "they seem to be more forward-looking than their counterparts in the West and round the world," Chana said. In particular, he stresses the importance of small and mid-size businesses as a key to India's economic growth.

 

InformationWeek's Bob Evans wrote about Chana's remarks and a recent IBM survey that found a more bullish attitude about IT investments among Indian companies than their global peers. According to the survey, 37 percent of all respondents said they had slashed their IT budgets during the global economic downturn, although only 15 percent of Indian companies had done so. Forty percent of Indian companies said they'd like to be among the first adopters of new technologies, while only 11 percent said they wouldn't.

 

Evans seems to think IBM may do some backpedaling on Chana's remarks, since IBM is taking some heat for laying off workers in the U.S. as it rapidly expands its presence in India and elsewhere. He hopes not, he writes, because "competition makes everyone better, and every once in a while it's not such a bad thing to have someone smack us across the face with a 2x4 to ensure we've got our eyes open, our attention focused on the right things, and our sense of risk and reward properly calibrated." Fair enough. It's a point well taken.

 


Evans levels some criticism at both U.S. CIOs and CEOs for the roles he says they've played in perpetuating a risk-averse culture afraid of making IT investments. He writes:

 

... The CEO rants and raves about not spending so much of the IT budget on internal operations, but then fails to vigorously support new initiatives from the CIO that threaten the established order and processes. Meanwhile, a lot of CIOs seem reluctant to step out of their comfort zones and take the uncomfortable and, yes, often risky approach of committing to sweeping changes without which the organization will continue to dawdle along, incrementally moving a couple of nickels from over here to over there, blowing smoke in executive committee meetings by yapping about all the cool new things being put through proofs of concept, and all the while reinforcing the status quo.

 

While I agree with Evans that U.S. companies need to be a little bolder if they hope to compete with companies in emerging economies who have the budgets (and more important, the mind set) to take chances, it's worth remembering that innovation doesn't necessarily have to be expensive. Yet too often vendors like IBM and Oracle make it sound as if innovation is inextricably linked with a desire to spend money like there's no tomorrow.

 

I found a reference to the survey Evans mentions on an Indian site called DARE. There are a few clues as to why India's IT spending may outpace those of other countries in the coming months. Most Indian companies mention supply chain management (SCM), information management and security management as top priorities. Nothing wrong with that, but these are areas in which many U.S. companies have invested heavily for years.

 

In contrast,U.S. companies appear to be considering IT investment in two areas: technologies like virtualization that can yield a quick and hard ROI, and technologies like business intelligence that, while they are important and can lend competitive advantage, qualify as "nice to haves" rather than "need to haves." It may be easier to delay those purchases in a time of economic uncertainty.



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