Saturday, February 21, 2009

Why India Will Replace Silicon Valley in the 21st Century, Part 1 of 2

We are currently standing at the threshold of a new revolution in India.

It is a silent revolution.

But it is a revolution of such tremendous magnitude that its repercussions will be felt for decades to come.

It is the Indian entrepreneurial revolution.

It has been almost 30 years in the making.

But now it is finally happening--ironically--thanks to the current perfect storm in the global economy.

(Note to readers: This is the first of a two part post. In this first post, I will provide some necessary background to this revolution ... a revolution that is largely driven by an unexpected and unforeseen confluence of unintended consequences. I will begin by describing some other such unintended consequences in our history which have served to inadvertently accelerate India's entry into the global economy. And in my next post I will describe the full details of this new silent revolution, and explain why this revolution is happening just now.)

PROLOGUE: Case Studies in the Law of Unintended Consequences

A. British Imperialism:

When The British East India Company first began its imperial rule in India, its motivations were far from altruistic.

In its trafficking of such narcotics as opium throughout Asia, the British East India Company (under full knowledge and authority of the Queen) engaged in practices that would be associated today with the likes of Colombian drug cartels. Its motivation was, to it crudely, to exploit India's resources as much as possible.

And yet, despite all the shameful activities of the British East India company (and it successor, the British Empire), it did unintentionally spread English in the Indian subcontinent. This would have significant unintended consequences later on for India. It would later allow India to enter into global service industries with relative ease, and it would later allow Indian educated immigrants to more easily adapt to, and find success in, places like the UK and the US.

B. The Hijli Detention Camp:

When the British found themselves increasing under siege by masses of Indians fighting against Imperial rule in the early 20th century, they resorted to increasingly violent reprisals, killings, and torture.

The British Government established harsh detention camps throughout India, including the Hijli Detention Camp in 1930. But this detention camp did not last for ever, and once again, the law of unintended consequences struck again.

In May, 1950, Prime Minister Nehru established the first Indian Institute of Technology at that very site and at that very building with the goal of educating India's best and brightest so that they would lead India out of poverty and into a great world power. The construction of the Hijli Detention Camp would indeed also have significant unintended consequences for India later on. It would later create a class of engineers, scientists and mathematicians that have become (and remain) the envy of the world.

C. Technology Crash, Year 2000-2002:

When the first Internet bubble crashed in the year 2000, very few investors or companies could see a silver lining in the dark clouds which had cast their gloomy and lugubrious spectre over the entire technology industry.

Technology companies had invested hundreds of billions of dollars in Internet technologies, but had destroyed an even greater amount of shareholder value in the process. Investors lost massively during this process.

But once again, the law of unintended consequences reared its head.
There WAS one major winner.


As a result of all this investment, the world was now equipped--for the very first time--with an incredible global Internet communications infrastructure.

And it was this infrastructure that enabled the Indian offshoring industry to truly take off. For the first time, IT work could be conducted half the world away with cheap, real time, and seamless Internet communications technologies.

And the pressure on costs brought on by the technology bust made the Indian offshoring value proposition even more appealing than ever.

TODAY'S CONTEXT: The Perfect Storm

And now we find ourselves in 2009, in the midst of perhaps the greatest global financial calamity of the post world war era. And there is no shortage of pessimism, both around the world and certainly in India.
  • Companies are laying off employees by the tens of thousands.
  • Banks are failing left and right.
  • And as a result of significant political pressure, governments such as the US and the UK are severely cutting back on immigration into their respective countries.
  • The gloom over Silicon Valley and Wall Street is perhaps the worst most people have seen in their lifetimes.
  • And as a result, many of the professional employed in the Indian IT offshoring sector are finding their careers and livelihoods at risk

But just as the British East India Company, the construction of Hijli Detention Camp and the first Internet crash ultimate ended up unintentionally benefiting India, this perfect storm will also end up benefiting India.

Indeed, all of this global economic turmoil and dislocation will have the completely unexpected and unintended result of turning India into the Silicon Valley of the 21st Century.

All we have to do is open our eyes to see this happening already. We are now at the beginning stages of India's great silent revolution, one which will catapult India to the very forefront of the global technology industry for decades to come.

And for domestic technology startups, it will mean a true golden age unlike any we have seen before.

Why do I feel this is the case? In my next post, I will describe the early signs of this silent revolution, why they are emerging right now, and what all this means for us Indians everywhere, both in India and abroad.

(to be continued in part 2)