An Ernst & Young delegation visited India to explore the possibility of doing business
INDIA’S ECONOMIC growth continues to defy expectations. Gross domestic product (GDP) is predicted to grow by 8.5 per cent this year, while exports will power ahead by 15.9 per cent.
Inflation may be high at 7.9 per cent and house prices in the east of the country are rising rapidly but, almost uniquely in this age of massive sovereign debt, the fiscal deficit as a percentage of GDP is actually falling.
For a variety of reasons, Irish firms are not embracing opportunities in this vast country, with its population of almost 1.2 billion. Irish trade with India was worth about €1 billion in 2009, up 7 per cent on the previous year – but commerce with China in the first 11 months of 2009 alone was worth €3.9 billion.
“We are concerned that we are missing a trick with India,” says Frank O’Keeffe, the Ernst & Young partner in charge of the advisory firm’s Entrepreneur of the Year programme.
O’Keeffe led a delegation of about 60 business people to Mumbai last week – the 24 companies nominated for this year’s awards as well as nominees from previous years – in an attempt to open their eyes to the possibilities on offer.
An address by Irish Ambassador Ken Thompson didn’t pull any punches. Thompson described comparisons between India and China as a “futile parlour game”, and urged the entrepreneurs to rethink whatever they may have heard about India.“This country is an obstacle course, as you’ll find as you go about your work here,” Thompson says. “Set aside your prejudices; set aside the idea that somehow things in India have to function like they do in China or as they function in Europe. Just set that aside, and go for the business.
“Once you strike up a harmonious relationship with Indian partners, Indian clients, you will find that business will just flow and grow.”
Kiran Mazumdar Shaw, one of India’s richest women as a result of founding Asia’s largest biotech firm Biocon, knows the power of business partnerships with Ireland. Biocon began in 1978 as a joint venture with a Cork firm and has morphed from a maker of industrial enzymes to become the largest maker of insulin in the region.
Mazumdar Shaw, who acts as the honorary Irish Consul in the tech hub of Bangalore, credited Biocon, a small firm from Carrigaline, for “looking east” in the 1970s – which was a key factor in its acquisition by Unilever in 1989.
“Irish entrepreneurs have looked west as it’s very comfortable for them, and they had opportunities in terms of growth in North America,” she says. “India is a great opportunity, but also a very complex market. A partnership with an Indian company can help unlock those doors.”
Openet, the telecoms software firm, has two major operators as customers in India, having developed a partnership with Tata Communications Service, which resells its products locally. “It will take at least twice as long to seal the deal as it will in Europe and four times as long if you are dealing with government,” says Joe Hogan, Openet’s chief technology officer. “The price negotiations are very drawn out – you might have 10 rounds versus two or three in Europe, and there will be several last and final offer rounds. You really need a local partner.”
Openet has a sizeable office in Kuala Lumpur, which is able to service the local market and support Tata Communications sales efforts. That relationship has won it a deal with Tata’s telecoms arm.
Jim Breen, chief executive of Kerry e-learning company PulseLearning, was using the trip to cement relationships. Although his company has outsourced work to Bangalore in the past, he is forming a partnership with a Calcutta firm to sell PulseLearning’s niche products to the healthcare and defence sectors, which are both growing rapidly.
“The innovation we have is around mobile and e-learning,” Breen says. “If we can apply that in healthcare and defence here, we have the ‘right to win’. In growing markets, I won’t say emerging; the ‘right to win’ has to be based on innovation that they don’t have.”
Cathal Gaffney, chief executive of animation studio Brown Bag Films, says his firm uses studios in India to handle components of its production because of the lack of available talent here. He says Brown Bag are the “architects and interior designers” on the productions, with the Indian studios acting as “bricklayers”.
“If you are thinking of doing business in India you need to spend time on the ground,” advises Gaffney. “You can go to all the courses and read the guidebooks but you really need to immerse yourself in the country.”
You don’t have to scratch the surface much though to throw up the challenges of doing business here – particularly during the monsoon season, when torrential rains stretch infrastructure to breaking point. Filthy slums knock up against modern skyscrapers around Mumbai and the papers are full of stories relating to the fall-out from corruption – whether related to the recent Commonwealth Games or the “2G spectrum scam”, which has implicated senior ministers for taking bribes over the awarding of mobile phone licences.
The entrepreneurs got a chance to experience the disparities first hand when they were transported from the upmarket Westin hotel to the slums near the airport made famous by Slumdog Millionaire. There they saw Unicef’s deepshikha programme, which empowers adolescent girls through peer education and making them aware arranged marriages in the slums do not have to be their only options.
After a four-hour bus journey to the university town of Pune, 150km to the southeast, most of the Ernst & Young delegates visited Infosys, the Indian technology powerhouse. Founded in the city in 1981 by seven engineers, it now employs 25,000 people on two campuses locally, has 130,000 employees globally and has shed its legacy of low-cost outsourcing.
While motorbikes, cars, buses, trucks and three-wheel auto-rickshaws, known locally as tuk-tuks, battle chaotically for space on the two-lane road outside, the campus could just as easily be in Silicon Valley – once you pass the armed members of the Central Industrial Security Force. The pristine lawns and modern office facilities are in sharp contrast to the poverty just down the road.
Mritunjay Singh, head of the Pune development centre, delivers a presentation showing how Infosys is now a global player. Competition for jobs is fierce: he says fewer than 3 per cent of applicants are successful, and workers who don’t deliver are asked to leave.
At Pune University, with 650,000 students and a 17,000-strong teaching faculty, the Irish visitors are impressed by the quality of research. This ranges from an environmentally friendly anti-mosquito coil made with cow dung to a vertical wind turbine generating domestic power at low wind speeds. The academic staff talk proudly about the university’s achievements, including a partnership with Cork Institute of Technology, but you can’t help but be struck by the poor condition of the college buildings. They bring to mind 1950s Ireland. Prof WN Gade, a director of the board of college and university development, says the challenge now, with rapid economic growth, is that students want to study the applied sciences so they can be guaranteed a good career. The university and government are looking at putting incentives in place to encourage more students to study basic science and carry out research.
Clearly there is great potential for Irish business in India at a time when exports are the lifeblood of the economy. “Irish-India business relationships are really underdeveloped, but a lot of Irish entrepreneurs will now take it seriously,” said Ernst Young’s O’Keeffe. “Over the next few months, as we monitor it, time will tell if India is just too vast or if it’s just too difficult for them to do business here.”
Business chiefs relax with Ernst & Young
THE CHIEF executives’ retreat is an annual part of the Ernst & Young Entrepreneur of the Year competition, and is open to that year’s nominees, as well as business people who were shortlisted in previous years.
This year’s trip to India was not just about building business links, although the Irish delegation met 150 Indian entrepreneurs at a two-day conference.
They also visited the slums around Mumbai airport, where much of Slumdog Millionairewas set, to see the work that Unicef is doing to empower local women and girls.
Delegates also spent a night at the Vedanta Academy, where they heard a lecture on how eastern philosophy can help with stress and rose the next morning for 6am yoga with the students. US academic Kellie McElhaney ran a course on responsible leadership.
Ernst & Young’s Frank O’Keeffe said these additional elements were not to challenge the participants but to bring what they learn back home for the benefit of their own firms.
“At the start of the week I asked them to think about what India can do for you; not what you can do for India.”
