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IT just gets better

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December 12, 2005 13:41 IST

During this week the world's leading chip manufacturer, Intel, and the leading software company, Microsoft, have between themselves announced plans to invest over $2.3 billion (Rs 10,600 crore) in India over the next four or five years.

While this is in line with India's information technology (or IT) focus on software and chip design, hitherto neglected hardware manufacture is also attracting investor attention.

A group of non-resident Indians (NRIs) through SemIndia and AMD, the global chip maker and main volume competitor of Intel, last week signed a technology transfer agreement for SemIndia to fabricate chips in India.

Though this, like the earlier proposal by another group of NRIs under the banner of IEMC to set up a semi-conductor facility, is some way from taking off, it seems fair to say that global IT majors in both software and hardware are turning towards India as a place to invest in for the future.

It is proof, if proof were needed, that the Indian IT story gets more and more substantial every day.

As if on cue, this coming week Nasscom (the National Association of Software and Service Companies) and McKinsey will unveil the second update of their study that in its first version, in 1998, unveiled the dramatic goal of Indian software exports reaching $50 billion in a decade, i.e. by 2008.

The tech bubble burst in 2000 and the resultant global IT slowdown put a question mark over that goal, but the industry's outlook now is as buoyant as could ever have been imagined.

The game plan behind the large investments by Intel and Microsoft gives an idea of where Indian IT and the overall Indian economy are headed.

Intel will spend over $800 million on expanding its business and more particularly its R&D activity in India. With Intel's next-generation chip already being developed in India (reportedly code named Whitefield, after the Bangalore suburb where it is located), the investment indicates that Intel's R&D work in India will become more critical and high-end. But more than the numbers, it is Intel's decision to set up a $250 million venture capital fund dedicated to promoting IT start-ups in India that can really take forward the Indian IT ecosystem in the long run.

Intel has already made significant venture capital investment in India through its existing funds but its latest decision indicates that India is emerging as an innovation geography that requires dedicated nurturing with clear business goals in mind.

Microsoft, for its part, will spend $850 million to upgrade and expand its R&D facilities in the country. It is going to set up its first innovation centre in the country in Bangalore, as part of its existing technology centre, to work in areas like local language computing solutions and affordable access to technology.

It will also set up outlets and offices to promote its regular lines of business. Thus Microsoft will be promoting both its mature business and seeking to expand its market for the future by taking computing to those who cannot yet afford it.

All this indicates that India is no longer just a source for affordable skills for global tasks. The world's IT innovators are seeking to make it affordable to very large numbers of Indians, who are seen as part of a key emerging market of the future.

BS Bureau
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