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East: Can Postcommunist Countries Compete With India's Information Technology Boom?

  • Jan Jun

In increasing numbers, British and European firms are relocating -- or "outsourcing" -- their information technology (IT) and telephone call divisions to India, drawn by the country's low salaries, computer talent, and English skills. At the same time, many Indian software firms are successfully penetrating British and European markets. Can Central and Eastern Europe -- so "fashionable" in the West during the past decade -- emulate India's success? Some in the field say yes.

London, 27 October 2003 (RFE/RL) -- "Outsourcing" to India has become a strong economic trend among British companies. Accenture, formerly Andersen Consulting, recruits up to 200 skilled employees in India per week. Reuters news agency is also reportedly considering expanding its operations to India, and is considering which of the country's three main "Silicon Valley" cities to go for -- Bangalore, Hyderabad, or Chennai (formerly Madras).

These firms and others -- including British Telecom, HSBC Bank, and British Airways -- say they have been attracted by India's high-skill, high-productivity, low-salary environment. Some experts say that while China is fast becoming the world's light industry workshop, India, thanks to its large number of English speakers, is well on its way to becoming a global center for professional services and computer technology. India has benefited enormously, with outsourcing revenue currently estimated at some $12 billion a year.

Meanwhile, a growing number of Indian companies -- many established by Indians returning home from California's Silicon Valley -- are already successfully penetrating European markets. Some experts speculate there may already be several dozen Indian software companies operating in Great Britain alone.

The India phenomenon may be getting the attention of other technology centers in the postcommunist states of Central and Eastern Europe. These countries tend to have better infrastructure and its populations are learning English fast. Punit Sureesh, a software firm director in London, told RFE/RL that India may soon need to develop a new strategy in order to stay one step ahead of the postcommunist states.

"I am sure the skilled manpower and willingness to work hard is equally there in Eastern European companies," Sureesh said. "It is a matter of time before most of Eastern Europe catches up with Indian companies as far as software is concerned, and we look forward to much tougher competition in the days ahead."

In the years following the end of the Cold War, the governments of Poland, Hungary, and the Czech Republic invested heavily in computer education. From the Balkans to the Baltic states, nearly every country in the region is experiencing rapid growth in its information technology (IT) sector -- often driven by the desire for European Union membership. The region has gained attention further west for the quality of its technology and code-writing levels. Romania alone is home to some 2,000 software-development firms.

The Czech Republic is also setting its sights on the West. Jaroslav Krajicek is the owner of Interactive Server, one of a number of software firms that have sprung up in the central city of Brno over the past decade. He said for Czech firms, the question is not if they will catch up to India, but when.

"I even think that this is already taking place, but not many people know about it. This is again probably the misfortune of the Czech Republic -- that kind of fear of penetrating [into] the open," Krajicek said. "I think there are many very good firms here that have very good products, but when I look at our own product, it has taken since 1992 to develop it, and everyone was calling me a dreamer."

Krajicek said all that has changed. His system, which facilitates direct links between building-material producers and their consumers, has been very successful. He says he is working to improve his English and has lined up a new product to coincide with his country's scheduled entry into the EU next year.

There are other examples of expanding "home-grown" companies in Brno. One, AVG, produces antivirus software. Another, Bohemia Interactive Studio, has won several international awards for its innovative computer games, and has begun exporting its product.

Amitav Banerji heads the Office of the Secretary-General of the British Commonwealth in London. He said he is beginning to see other regions catch up to India in terms of outsourcing. While Western Europe has long used Eastern Europe as a "manufacturing base," he says the region can conceivably shift its priorities to "long-term-growth" sectors like science and technology.

"I think that the bottom line is that in a 'globalized' world there is fierce competition. And if the job does not go to people in India, it might well go elsewhere. Essentially, it is the principle of cost-efficient and effective operations being followed," Banerji said.

A recent report by Pierre Audoin Consultants, a market research group specializing in software and information technology, says that Romania and other Eastern European countries are already the first outsourcing choices for most of Western Europe.