Friday, December 16, 2005


From Macaulay to McKinsey

(Nasscom McKinsey report 2005)

The foundation for the present Indian educational system is widely acknowledged to have been laid by Thomas B. Macaulay in 1835. In particular, his "Minute on Indian Education" gives the rationale for an educational system based on English. A few of the more interesting statements are quoted below:

All parties seem to be agreed on one point, that the dialects commonly spoken among the natives of this part of India, contain neither literary nor scientific information, and are, moreover, so poor and rude that, until they are enriched from some other quarter, it will not be easy to translate any valuable work into them. .

The relegation of local languages to the background and the prominence given to English in our educational system, owe their origin to the above sentiment. It is ironic that post Independence, the decision makers consciously chose to agree to the above logic and set up an educational system that creates a large number of uncreative, and till very recently, unemployable persons.

And I certainly never met with any Orientalist who ventured to maintain that the Arabic and Sanscrit poetry could be compared to that of the great European nations. But when we pass from works of imagination to works in which facts are recorded, and general principles investigated, the superiority of the Europeans becomes absolutely immeasurable. It is, I believe, no exaggeration to say, that all the historical information which has been collected from all the books written in the Sanscrit language is less valuable than what may be found in the most paltry abridgments used at preparatory schools in England.

This is a bold statement to make, even for one who represents the ruling class of a subject nation.

I feel with them, that it is impossible for us, with our limited means, to attempt to educate the body of the people. We must at present do our best to form a class who may be interpreters between us and the millions whom we govern; a class of persons, Indian in blood and colour, but English in taste, in opinions, in morals, and in intellect (emphasis added).

Here is an interesting confession from the learned man:

I have no knowledge of either Sanscrit or Arabic.--But I have done what I could to form a correct estimate of their value. I have read translations of the most celebrated Arabic and Sanscrit works. I have conversed both here and at home with men distinguished by their proficiency in the Eastern tongues. I am quite ready to take the Oriental learning at the valuation of the Orientalists themselves. I have never found one among them who could deny that a single shelf of a good European library was worth the whole native literature of India and Arabia .(emphasis added).

Heavy stuff!

170 years after McCaulay´s report, we are at the cross roads. Several people have credited McCaulay´s ´foresight´ in preparing India to become in the 21st century, the back office capital of the world, We have come a long way since then: from producing clerks for the British empire to producing clerks for anyone around the world willing to pay for the services.

As I have repeatedly maintained, I am not placing any value judgement on the worth of a clerk, or the dignity of holding the job of a clerk. The difficulty arises only when the educational system of an entire country of the size of India is tuned to generating good quality Internet clerks, or e-clerks to coin a new name.

Here is where the key recommendations of the Nasscom-McKinsey Report 2005 sound alarm bells.

According to Nasscom-McKinsey Report 2005, “The country will need 2.3 million professionals to meet the $60 billion export revenue target by then. But the present education system will be able to churn out only 7,00,000.”

“The country needs to do with higher education what it did with telecom. Deregulate the sector so that some universities are given a deemed university status, allow flexibility in curriculum, funding, and teachers salaries,” says McKinsey & Co partner Noshir Kaka.

The report predicts that the sector will create 1.6 million knowledge professionals and give indirect employment to another 6.5 million people by 2010.

To suggest changes in the educational system with the goal of improving the number of trained internet clerks is short signted, to say the least. Similar suggestion could come from, say the construction industry, given the huge growths projected for this segment: “Our schools and colleges are not taking away the trained manpower required for the construction industry.” “We need to reorient our education system so that our construction workers could build the best quality roads at the lowest cost.¨ Such suggestions of course will be dismissed with scorn. However in the current situation, I await with dread the news in the next few days that some state governments welcoming these suggestions and promising to offer the maximum flexibility in their educational system as an incentive for ITES/BPO companies to set up shop in their state. “We want to make our state the BPO capital of the world,” will be the accompanying quote from the Chief Minister or the Secretary of IT.

McKinsey & Co partner Jayant Sinha says, “The problem of skill set shortage can be combated by creating certain focussed knowledge zones, as it is more a problem of quality and not of numbers. But India will need 10-12 integrated knowledge cities in the next five years to tackle problems of infrastructure in order to match targets.”

No one can dispute the value of sound infrastructure in improving the economy of a country. However, to plan for improvement in infrastructure so as to faciliatate a market share in outsourced services is dangerous. Abdicating control to outsourced services industry as the determiner of state policy, ranging from infrastructure, education, real estate, retail market and so on, does not augur well for the country. The long term impact of becoming a services hub of the world is much more distrurbing than the above. For this we need to look at the global picture of outsourcing, which I am sure has parallels in history. I just need to dig them up!

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The Indian outsourcing software industry has a big problem - this is scalability. If we start believing the McKinsey reports, there is a potential danger of being drawn into a rapid cesspool of creating an army of e-clerks.

The Indian software industry requires brands and this is the only true way of creating wealth. Though the number of people employed in the software industry appears very large, the per capita revenue is very small compared to Western majors such as Microsoft, Oracle and others. Unless there is globally recognizable software brand from India, that generates several million dollars year after year, we will get into this labour cess pool.

This number of heads you need to scale gets worse as you start trying to scale your revenue up. If you need 4 milllion people to sustain a revenue of $15 billion, you will definitely need more than 8 milllion people to keep a $30 billion revenue stream going. The relationship is not linear and there is panic that the country cannot train enough people to power this profitable industry. Nothing can be farther from truth than this as this model does not help India but the Western nations who benefit out of this cheap labor.

The number of employees maintaining the Oracle database product and enhancing it would perhaps be about 5000. The product generates a revenue of about $8-10 billion dollars annually. You can work the math from a productivity point of view. Oracle does not add 5000 new employees every year!

The software campuses that perform the outsoucing work are in their early stages of evolution today. They are self contained from an infrastructure perspective. With the exception of air travel, gasoline, transportation, they are almost self contained on a day-to-day basis. So far they have been acting responsibly , but it is too early to tell. However, they can become a potential headache for government on several fronts - law and order, infrastructure (sustainable power generation, telecom, transportation etc). The governments have to deal with the consequence of outsourcing their job internally to these companies and there has not be enough thought into the possible implications of this outsourcing model. These campuses can become havens of illegal activity over which the government may have no control given the contractual terms.
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