March 24, 2006 || New report:Worldwide IT Spending Will Climb
Worldwide IT spending will jump 6.3 percent in 2006 with growth strongest in the software market at 7 percent.
Hardware and services are both expected to post overall growth of 6 percent this year, according to IDC. Overall IT spending in Western Europe is set to reach 6 percent this year, while growth in Asia/Pacific (excluding Japan), will jump 9 percent. In the US, overall growth in 2006 will be 5.8 percent, a slight decline from the 6.4 percent expansion of 2005. However, India and China are predicted to have double digit growth, with 21 percent and 14 percent gains respectively.
Anna Toncheva, IDC analyst, said the global economy will remain stable and robust with marginal changes in growth compared to 2005. “Although the engines of acceleration will rotate towards Japan and Europe, China and the US will remain at the helm,” she said. “Given the increased focus on productivity and innovation during the current cycle, IT investments will dominate replacement spending in gross investment in the developed economies.”
IDC predicts the strongest growth will be posted in network equipment, outsourcing services and system infrastructure software, including security tools. The firm also expects there to be greater momentum in project-based spending and key application areas including business intelligence and content management.
Friday, March 24, 2006
Worldwide IT Spending Will Climb
Thursday, March 23, 2006
BPO INDIA BECKONS
Till four months back, 29-year-old Ethel Graff worked as a travel manager with an international law firm in Paris drawing about $3,000 a month. A travel professional for the last nine years, Graff knew the job better than the back of her hand. Spare time and weekends were spent travelling, doing inland skating and exercising at the gym. What she does today is no different. Except that three months back, much to the shock and surprise of her friends, she packed her bags and flew down to Delhi - her first visit to India.
Stian Johansen (Norway), Kati koivukangas (Finland) and Ethel Graff (Germany) are part of Tecnovate eSolutions' 30-member European team in Delhi. They work on travel processes for customers in 11 Europeon countries. Tecnovate plans to increase the size of its Europeon team to 100 be December 2003
Graff is not here on a travel break - she is on a one-year work visa to slog at the Okhla, Delhi-based BPO firm Tecnovate eSolutions for under 25% of her European salary. The salary does not bother her. She says: "The cost of living is lower in India. I responded to an online ad and and here I am.'' Tecnovate is a subsidiary of the London-headquartered online travel agency ebookers Plc.
The arrival of Graff and 29 other Europeans (French, German, Finnish, Norwegian, Swedish, Dutch, Swiss and Irish nationals) at Tecnovate's BPO centre has given a new dimension to the evolution of the Indian BPO industry. So far, US and European companies outsourced only English language BPO work to India. In the last 12-24 months, when Indian BPO firms got non-English business, they set up centres in that geography and hired natives to cater to the business. For instance, MsourcE, has set up a centre in Mexico to deliver Spanish work, Progeon will soon be going live in the Czech Republic and HCL Technologies BPO Services already has centres in Ireland and Malaysia from where it services nine languages. While Tecnovate with its European and Indian team offers work in French, German, Swedish, Finnish, Nowegian, Swiss besides English.
In rare instances, BPO firms even hired Indians proficient in a foreign language to cater to the work from India. For instance, Daksh eServices has 80 German-speaking Indians who do non-English work. But the Tecnovate experiment - hiring foreigners to work in India on Indian wages - has been the most distinct. If this trend intensifies, India could well be looking to bite into the $65-billion European BPO market by 2005.
But what brings the Europeans to India? While Graff, who knows English, French, German and Dutch, insists she's here for the challenge of working in the unfamiliar emerging market, others come because now work experience in India matters. Kati Koivukangas, a telesales consultant, says: "I was working as a hotel receptionist in Helsinki. The experience here will add to my CV." That has attracted other Europeans as well. As BPO professionals, they serve their own people from India and also get to travel in the country. They expect the experience to pay off as India is emerging as a global BPO hub. That they are interested is evident from the fact that ebookers received 100 applications for five positions when it advertised for jobs in India in Scandinavian papers.
Ask Stian Johansen, 27, team leader, who landed from Oslo a fortnight back. He still can't get used to the number of people he sees on the roads (he studied at Lillehammer in Norway which has just 20,000 people!). Johansen is, perhaps, the first Norwegian to get a work permit to India. For, when he applied for one, the Indian mission didn't have any forms as no one from Norway had made a request for a work visa.
As Johansen settles down for his stint here, others are already planning to request for extension of their work permits. Johansen and Graff's more experienced colleague (India experience, that is) Koivunkangas, 26, joined Tecnovate in January and is already thinking of extending the work visa by a year.
If more like her do so, Tecnovate's experiment will succeed. Tecnovate's parent ebookers operates in 11 European countries. At least 75% of its $800 million revenues come from the English market. It even has a BPO facility in Ireland where it can easily offer multi-lingual skills. So why did it fly people to India to offer services to European clients?
For one, Ireland is three times more expensive than India. The Irish centre employs 60 people. In comparison, the Okhla office has 650 people, including the 30 Europeans. Tecnovate evaluated this business model late last year before inviting Europeans to work here.
That the model has worked well can be gauged from the fact that Tecnovate plans to take its European strength up to 100 by December 2003. The foreign staff in India costs Tecnovate under 25% of the European wages. It says that compensation is at par with other Indian workers and there is no such thing as a hardship allowance. To top it all, Tecnovate's attrition rate is just 15% compared to the industry average of 35%. The model is important on three counts.
To begin with, Prashant Sahni, CEO, Tecnovate, says you can train French- or German-speaking professionals in India to do the work, but they just don't match up on skills that can get additional bookings. He says: "When a person is aware of the subtle difference between a Hyatt and an Orient Mandarin, he is able to deliver better. The Europeans know this as they have grown up that way.'' To top it all, Europeans have a significant rub-off on Indians working with them as it helps the Indians hone their skills in the foreign language.
Destination knowledge is another area where foreign professionals score naturally. What is the difference between Madrid and Barcelona? While going to either place, what should the tourist look for? Nothing like having a homegrown person handling the work. Also, car hire is big business in Europe and fumbling with differences between a coupe and a sports car could well mean loss of a client.
Finally, let's come to the advantage of entry cost. BPO companies spend a few months and Rs 25,000-35,000 on training each employee on countries, time zones, people, habits and culture. Here again, a European would be more at home with Octoberfest or a carnival. Is it held in Bonn or in Cologne? Actually, the latter. But an agent messing up on such basics could lose customers. "That can be critical in an industry where conversion rates (percentage of deals closed) are very, very low. Ours is 25% up from 17% a year back,'' says Sahni.
So what the company saves in training, it spends in giving the only extra - a company-provided accommodation. Tecnovate rents out apartments in the upmarket New Friends Colony for their stay. Another expense is the cost of the flight bill to Delhi. The company would not reveal how much it spends on this but says that since it is in the travel trade, getting discounts is no problem.
Tecnovate gains in another way. Foreign professionals are able to leverage their knowledge of their countries to do more bookings than their Indian counterparts, directly affecting revenues. The company expects to save over $2 million in the next quarter for the parent from this. For travel work, knowledge of native culture helps. But would it make sense to have locals fly in to do banking, insurance and healthcare BPO work?
The company emphasises that while people can be trained on processes, there are always things that natives know better or are more familiar with. For instance, while an investment professional has to know the numbers well, the volume of trades that happen in a European or US business might be appreciated better by a native rather than someone who has exposure to only Indian markets. That's one reason why a lot of high-end work in banking, financial services and insurance and other domains is yet to come to India. Pawan Sharma, vice-president (international sales), HCL Technologies BPO Services, believes: "Such a trend will increase as India matures into a services backoffice country.'' Sahni adds: "It is an endorsement of what India as a country is. Food is not a problem, caretakers speak English, bottled water is available and infrastructure is improving. Who could think of Europeans working at entry- to mid-level positions in India?''
So Sahni is losing no time in expanding the non-English work in India. Graff, a project manager, has four people from India in her team who speak French. Another will be joining from France next month. Graff will also oversee the company's Dutch business, for which the company will recruit Dutch professionals in November. Her team checks the booking status, does quality control, checks validity of fares, travel insurance, invoicing and validates tickets issued in France. Similarly, Koivunkangas has six people in her team, all from Finland. They do online bookings, email inquiries, take phone calls and MIS work. By December, she will have five more Finnish agents.
Where the model could pay for companies is in niche businesses (small centres) and also where foreign language professionals are a must. For the latter, the company could hire Indians who speak the language and fly down a couple of natives - say, from Spain, Germany or France - to help polish skills and provide cultural insights.
But ICICI OneSource's managing director and CEO Ananda Mukerji cautions: "You can take it to 100 people. But beyond that, creating scale will be tough. Companies will have to look at, say, Mauritius for French work. Also, from a client perspective, it makes more sense to spread out in different places rather than concentrate everything at one place.'' That could be the Achilles heel - is it possible to have a 400-seat centre catering to European languages with natives working out of India?
Sahni has no ready answers, since the model has worked well so far. Word of mouth has helped Tecnovate tap European talent for the Delhi office. Its target of hiring 100 Europeans is really no problem. But to derisk, Tecnovate might well have to look elsewhere, particularly since it is eyeing third-party work. Nonetheless, it remains to be seen whether the trend of foreigners working at entry- to mid-level jobs catches on.
No language barriers
Last winter, online bookstore Amazon asked Daksh eServices if it could offer German language work for its European customers. Daksh took a while before it hired its first German-speaking professional. Last month, the company increased the strength of German language experts to 80. French is next. By end-2003, it expects to have 150-200 non-English professionals.
BPO outfits have so far preferred to hire Indians who have learned European languages. "They come at a 25% wage premium to their English-speaking counterparts,'' says Aniruddha Limaye, vice-president (corporate HR and training), Daksh eServices. On the other hand, the Bangalore-based MsourcE has set up a $1-million facility in Mexico with 50 Spanish-speaking professionals. Now it wants to offer Mandarin, Cantonese and European languages. At home firms are cautious because finding and retaining talent is difficult. The Chennai-based OfficeTiger took two months to recruit a 10-person German-speaking team. They execute finance- and document-related functions for European clients. Progeon has 15 Indians doing French and German work.
Pawan Sharma, vice-president (international sales), HCL Technologies BPO Services, says that about 60,000 Indians learn German and French every year. This pool can be tapped to deliver language skills. But Milind Godbole, vice-president, MsourcE, insists that spoken fluency required in voice work is difficult to attain and requires nurturing each employee. It's early to zero in on the right model. As Indian BPO firms mature, clients will soon be calling for non-English skills. So will it be smooth sailing?
Monday, March 20, 2006
India Outsourcing to Grow 10X
McKinsey-Nasscom report says India will maintain its lead.
December 13, 2005
The Indian information technology and business process outsourcing industry is poised to grow ten-fold by 2010, according to a report released Tuesday.
While Indian companies will continue to maintain their 46 percent share of the global business processing outsourcing (BPO) market and 65 percent share of the IT outsourcing market through 2010, the combined market is estimated to grow from the current level of $30 billion to $300 billion by 2010.
These two sectors of the Indian economy will earn $60 billion in exports by March 2010, an increase from 3 percent of gross domestic product to about 7 percent, according to a report by the Indian software trade association Nasscom and global consulting firm McKinsey.
The 2005 report, the third by the two organizations in the last six years, projects that the BPO industry will grow from $11.6 billion today to $150 billion by 2010, while IT outsourcing will increase from $18.4 billion to $150 billion over the next five years.
The Indian industry is in a strong position to leverage the global software opportunity, but extensive innovation by industry stakeholders could further accelerate growth in export revenues.
“Sustaining industry leadership will require Indian players to continue driving the frontiers of operational excellence,” said Subramanian Ramadorai, chairman of Nasscom and chief executive of Tata Consultancy Services.
Nasscom and McKinsey have jointly developed a BPO benchmarking framework called Process360 to help providers identify key operational gaps by analyzing 14 different operational areas.
Growing Employment
The projected growth of the Indian IT and BPO industry will directly employ approximately 2.3 million people, provide indirect employment to another 6.5 million workers, and pay for a massive infrastructure build-out by 2010, according to McKinsey partner Noshir Kaka.
The IT and BPO industry could account for over 44 percent of
Highlighting businesses that had not seen significant penetration by Indian companies but could nonetheless become potential growth areas, Mr. Kaka said Indian companies had captured a tiny segment of the outsourcing pie in several verticals.
Indian companies only garnered 10 percent of the market in the banking-services business and only 9 percent of the auto manufacturing business.
Stumbling Blocks
However, this phenomenal growth is not going to be a cakewalk, warned industry experts.
According to Jayant Sinha, another McKinsey partner, three key issues could prove to be stumbling blocks if they are not addressed systematically.
“First, the skills and quality of the workforce need to be improved, since only 25 percent of technical graduates and 10 to 15 percent of general college graduates are suitable for employment in the offshore IT and BPO industries respectively,” he noted.
“Second, as margins come under pressure, companies must be able to continuously improve operational excellence, in addition to innovating and developing new service lines,” added Mr. Sinha.
Urban infrastructure also needs immediate attention, as offshoring companies deal with bottlenecks ranging from power to cafeterias. Further growth will have to come from entirely new business districts outside of Tier I and Tier II cities, said Mr. Sinha.
The report also explains threats that the Indian IT industry could possibly face in the near future, including political opposition in Western countries like the
The report states that Indian companies need to stay ahead of competition from other low-cost destinations such as
Sunday, March 12, 2006
SAP INFO - Offshoring is Here to Stay
February 27, 2006 || New study:
Offshoring is Here to Stay
A new study revealed globalization of software is here to stay and policymakers, educators and employers all need to tackle the realities of offshoring.
The Association for Computing Machinery (ACM), a group of information technology professionals and academics, who conducted a year of study, found globalization of and offshoring within the software industry will continue and increase over the decade. The US followed by the UK have been the largest offshorers, but other countries in Western Europe, Japan, Korea, Australia and even India send work offshore. The study found the annual dollar value of worldwide offshoring trade for recent years has been estimated to be between $1.3 billion and $32 billion, depending on whether certain exported products are counted and whether the numbers for multinational companies are included.
ACM president David Patterson said while offshoring has increased over the last five years, the study sites Bureau of Labor Statistics data that also indicates that more IT jobs are available today in the US than at the height of the dot.com boom. It is estimated that only 5 percent of European businesses (of all sizes) are offshoring and at most 2 percent to 3 percent of European IT workers will lose their jobs to offshoring by 2015. In Germany, only 15 percent of companies are now offshoring and perhaps a total of 50,000 German jobs have been lost to offshoring so far, according to the study.
Source: EDITTECH INTERNATIONAL
Friday, March 10, 2006
IBM Outsources Development Operations To India
IBM will spend $200 million to launch the center, which will handle the bulk of solutions development work for IBM worldwide. (Courtesy: InformationWeek)Mar 8, 2006 - By Paul McDougall
In a stunning example of how India has progressed from a country to which businesses farmed out routine programming and back-office work into a center for leading-edge innovation, IBM disclosed Wednesday that it is moving all of the design and development of its vaunted business consulting offerings to the fast-growing country.
"Until this, we depended on any number of solution development centers across the globe. We're moving all of that development to India," says Jeby Cherian, head of IBM's new Global Solutions Delivery Center in Bangalore. IBM says it will spend $200 million this year to launch the center. The center will handle the bulk of solutions development work for IBM worldwide, with two existing development centers in India playing a supporting role.
Staffers at the center will look for ways in which IBM's vast array of hardware, software, and services products can be combined into prepackaged offerings that consultants can sell to specific industries. One example: Teams are designing a system that uses telemetry devices, embedded processors, and mathematical algorithms to help automakers better predict and manage costs from warranty claims. To the extent possible, the teams will create systems that can work in so-called service-oriented architectures. SOAs feature reusable software components and applications that can be combined and recombined in numerous ways. This sort of work is currently done at IBM locations in the U.S. and around the world.
IBM says existing delivery centers outside India would not be closed. Instead, they will be "remapped" into demo centers. "They will become more customer facing," says Cherian. Still, IBM's decision to offshore virtually all of the design and development of its consulting offerings is sure to draw heat from critics who say American corporations should keep jobs—especially ones at this level—in America.
IBM is on a hiring spree in India. The company currently employs about 39,000 workers in the country, up from 23,000 a year ago. That rate of growth should continue "for quite some time," says Amitabh Ray, who runs IBMs' global delivery operations in India. If it does, IBM would have more than 60,000 workers, or about 20% of its worldwide workforce, in India by next year. The company employs about 150,000 workers in the U.S. but has been quietly eliminating a number of domestic positions in recent months.
Ray says IBM—and by extension its customers—will realize a number of advantages from the movement of its business solutions development to India. Costs will be lower, and greater centralization will speed design and innovation. "In the previous model these solutions were splintered across a number of development centers," he says. "We can get cross-visibility; something that's applicable in retail might be applicable in automotive."
IBM also hopes the initiative will give it a badly needed sales boost. The company's software revenues were flat in the most recent quarter, while services sales fell 5% year-over-year.
Thursday, March 09, 2006
29K legal jobs to migrate to India by 2008
Though India had earned over $6.7 bln in US-based outsourcing services such as software and call centres till march 2005, the field of legal outsourcing was largely untapped, says Forrester Research. Legal field is poised to increase dramatically from about $80 mln annually to approximately $4 bln, with jobs growing to 29,000 in 2008, 35,000 by 2010, and 79,000 by 2015. At present the number of jobs in legal outsourcing in India stood less than 12,000.
Sunday, March 05, 2006
For your buck
Leasing of over nine million sq.ft of Grade A office space by corporates in 2005 has not only given Bangalore the top spot in the Indian realty space but placed it next only to Tokyo and London in the global market, according to a survey by international consultancy firm, DTZ.
Bangalore's supremacy can be guaged from the other findings of this report which graded Chennai sixth with a net absorption of 3.76 million sq.ft and Delhi 11th with 2.36 million sq.ft in the list of top 20 global cities.
The 2005 performance is a 22% jump over the 7.6 million sq.ft space absorbed in 2004 by India's knowledge capital. Clearly, there appears to be no stopping Bangalore in growth and demand driven by its ever growing population of IT/BPO firms.
While this in no way takes away the opportunities for real estate growth from Chennai, Hyderabad and Cochin, the other tech hubs in the south, Bangalore is by far the leader. The demand in 2006 is expected to match if not outstrip last year's numbers, subject to availability of the space, according to Juggy Marwah, vice president, RMZ Corp.
While the unabashed appetite for residential, commercial and retail space is a function of the economic prosperity shining on this region, critics are surprised that Bangalore continues to enjoy the roller coaster ride despite the infrastructural bot-tlenecks plaguing the city.
Obviously, this doesnot mean that it will be a case of endless growth, the high demand appears sustainable at least for some more years.
However, with the new coalition government led by H.D Kumaraswamy promising some quick relief on the infrastructure side, growth can assume a high speed north-ward trajectory. It must be mentioned that like any other business, Bangalore has experienced its share of waves and troughs, but the downsides have been few and short.
For instance, the market in recent months witnessed marginal softening of demand and pricing in commercial space in select belts like Whitefield but the overall demand for real estate has not abated.
Since Whitefield is possibly the largest tech belt in the city, builders almost went into a frenzy to develop more commercial space but the actual demand for 'non-Grade A' variety turned out to be less.
For a short while close to a million sq ft was lying unsold but the market has started to pick up again now, according to Mayank Saxena, senior manager for Trammelcrow Meghraj.
As a result of this mid-term correction, developers will seek to firm up commit-ments first before pressing ahead with creating commercial space, says Jack Nazareth, director, Sobha Builders. For some time, developers built the space first be-fore getting customers on board but this trend will change a little now which will prevent capacity from lying unused, Nazareth adds.
According to a CB Richard Ellis (CBRE) report, the rental values in 2005 witnessed an overall increase of 10% across micro markets, although it is expected to remain stable in 2006 due to the fresh supply that is expected to hit the market.
The central business district (CBD) remains the most attractive for new companies entering Bangalore. A CBRE report says that about 1.1 million sq.ft of commercial office space is expected in CBD in 2006. The non-CBD areas are being targetted by high end engineering firms for setting up their R&D outfits/ labs for high end support functions.
An estimated 1.2 million sq.ft of commercial space will be ready for occupation in 2006, and a significant share of this space is already pre-committed for lease by customers. Even the suburban micromarket witnessed sharp rise in corporate demand last year.
In fact, developers are reported to have committed delivery of 1.5 million sq.ft of commercial space this year. Limited availability of space in non-CBD areas is expected to trigger growth in the micro markets.
Thanks to this situation, the Outer Ring Road in Bangalore is clearly the hottest corporate destination. Almost the entire space that was built in 2005 was precommitted by customers, encouraging de-velopers to plan for at least 2 million sq.ft of commercial space in the first half of 2006.
Overall 6.5 million sq.ft of commercial space is expected to hit the micro market this year. Demand for quality retail space is also growing rapidly. In fact, customers are waiting for more retail projects to get completed.
In any economy, higher GDP leads to higher disposable incomes which translates into higher consumption. It in turns triggers greater investment in creating retail space — malls and shopping cen-tres, says Suresh Shringarvelu, vice president, Prestige Developers.
After success-fully developing Forum Mall in Bangalore, Prestige is now coming with a second Forum style mall on a larger scale, followed by a premium product mall in UB City in the CBD area.
Also on cards is a factory outlet mall or a mall village near Whitefield. Sigma, another developer, is creating a large mall with an independent hotel and commercial wing, all straddled together. Housing in all price bands is also in constant short supply.
Even luxury accomoda-tion, despite its sky-high pricing, is being lapped up. According to Nitesh Shetty, who specialises in luxury apartments and commercial space in central business dis-tricts and downtown Bangalore, premium top end dwellings are being virtually sold by invitation.
There is a class of people, whose numbers are steadily inching up, who want an exclusive world class offering at just about any price. The audience includes NRIs in the US, UK and the Gulf and HNIs living in Bangalore and other cities who also view it as an ideal investment opportunity.
Incidentally, the price definition of a high end dwelling unit is also evolving. The changing market perception is reflected in the fact that a Rs 1-1.5 crore apart-ment/villa was considered a luxury offering 18/24 months back. Today, the super premium bar has risen to Rs 2/6 crore an apartment, and often the names are plucked out of the who's who list of India.
Brigade Group is creating a 40 acre lifestyle enclave, Brigade Gateway, in Rajaji-nagar, north Bangalore, and a 36 acre enclave, Brigade Metropolis, on Whitefield Road. Between them, the two enclaves will be home to about 3000 families and will cover all aspects of realty including a hospital (Columbia Asia), retail, commercial, residential, hotel, etc.
RIMs: IT is the new wave in India
NEW DELHI: Talk about remote control from India. In fact, remote infrastructure management services or RIMs is being touted as the next big wave after BPO and KPO.
And the job is a critical one too. It involves managing the infrastructure of Fortune 500 companies 24X7 from offices located in India and is fast emerging as a lucrative option for top Indian IT companies.
Currently, RIM business out of India is approx $200 to $300 million. By the end of 2006, it may surpass $1 billion. However, the global market for RIMs is between $86 billion to $150 billion.
"Remote management is done through an offshore operations management centre that monitors and manages the infrastructure, ensuring guaranteed uptimes, availability and enhanced performance," says Anant Gupta, COO, HCL Comnet.
This is done on a 24X7 basis and entails management of operating systems, databases, applications and even workflow processes of the client company. Compared to other forms of outsourcing, this is a relatively untapped and niche segment for Indian vendors.
Nasscom predicts that outsourcing industry will be divided into two distinct groups - those who create business and those who run it. "In the last two years, the market for RIMs has taken off in a big way for Indian companies," says Preeti Rao, Infosys.
The US is the largest consumer and producer. Its closest competitor, Europe lags far behind. Countries like India, Philippines, Malaysia, Brazil, and South Africa are attractive locations for offshore delivery. But China is expected to emerge as a big player.
So why are companies opting for RIMs? Sean Narayanan, VP, Cognizant Technologies, says, "International connectivity and bandwidth into India is relatively easy now.
Therefore, managing servers and providing production support can be delivered effectively over a global network." Moreover, Indian offshore providers have proved themselves in the areas of application development and maintenance.
Our process maturity and access to world-class technical skills at affordable rates also gives us an edge. Realising India's advantage, many global vendors are expanding their offshore capabilities here.
Companies like HCL Technologies, Infosys, Wipro and Cognizant are some of the top RIMs providers from India.
Even though entry barriers are high due to rigorous processes and operations and the critical nature of business, Gartner and Nasscom are optimistic.
Gartner predicts RIMs will be a $80 billion industry by 2007, while Deutsche Bank says services from India will grow at 50% in the next three to five years.
"A few years ago, simple network monitoring services were being shifted to India. Today, we do critical production support for global companies out of India," says Narayanan.
Clients are now looking for integration of application support and infrastructure management. "Companies see more synergy from service providers who can provide well-integrated services," he adds.
The good news is as RIMs catch up in India, thousands of jobs are being created in the sector. "Even if India gets about 5% of the global requirement, that would mean about 50,000 new jobs every year," says Narayanan.
An optimistic scenario, all right.
Friday, March 03, 2006
Offshore Outsourcing a Part of Every Major FAO Deal in 2005; Chennai, Delhi, Kochi and Manila Most Popular Offshore Locations for FAO
Offshore Outsourcing a Part of Every Major FAO Deal in 2005; Chennai, Delhi, Kochi and Manila Most Popular Offshore Locations for FAO
Source: Everest Research Institute
NEW YORK and DALLAS, March 2, 2006 (PRIMEZONE) -- Offshoring has become fundamental to finance & accounting outsourcing (FAO), with every multi-process FAO contract(see note) signed in 2004 and 2005 featuring an offshore component. This and other key findings were reported by Everest Research Institute in its FAO Market Update, released today.
"Finance & accounting outsourcing is mostly about direct cost savings, and offshore -- offering a significant labor arbitrage opportunity -- has become a fundamental component of the FAO model," said Joe Fernandes, Managing Research Director at Everest Research Institute. "This is the case across virtually all major geographic markets and industry segments. We're finding that after call centers, F&A is the most offshored business process."
A graph indicating increase in India-based offshore employees is available at: http://media.primezone.com/cache/6149/file/2753.html
To meet growing demand, FAO suppliers have been steadily expanding their offshore capabilities. The graph and table above show the increasing investments that the largest FAO suppliers -- Accenture, Computer Sciences Corporation (CSC), Electronic Data Systems (EDS) and IBM Global Services have made in the past three years.
According to the report, direct cost savings captured through offshoring include lower labor costs, lower costs of real estate and overheads, and greater utilization of labor and infrastructure as a result of increased work hours and multi-shift operations. "These cost savings vary significantly by offshore location," Fernandes added. "Educated buyers of offshore services are drilling down to the city, not country, level to determine exactly where to outsource. Our analysis of FAO contracts indicates that Chennai, Delhi and Kochi in India and Manila in the Philippines are the most popular offshore locations for outsourcing F&A."
Editor's Note: Multi-process FAO contracts are defined as involving two or more processes, a minimum of three years in contract length and at least $1 million in annual contract value. FAO contracts that do not meet these minimum requirements tend to have marginal impact on the changing market landscape, and are therefore not included in Everest Research Institute's market analysis.
Thursday, March 02, 2006
Outsourcing Budgets Up
Among companies already committed to India; a look at Patni's numbers
by Tamina Vahidy, Line56
Thursday, March 02, 2006
The value of this survey is limited by its sample space, but it is still worth noting the enthusiasm of existing customers of India, Inc. to pass more business to that geography
Not remarkably, 61 percent of respondents said that their leading expectation from an outsourcing relationship was "better quality resources and enhanced services at a lower cost."While respondents want cost savings, they choose vendors based more on cultural fit (the leading factor to 24 percent of respondents) and quality of service (also 24 percent) than on cost (14 percent). One way to think about this result is that, since there is no shortage of lower-cost Indian vendors, cost as a closing factor is commoditized and companies are freed up to seek vendors based on other desiderata.
This is a newer phenomenon, as last year's Patni survey found only 10 percent of respondents putting cultural fit in first place.
Given what is at stake, it was disturbing to find that 34 percent of respondents admitted to having no formal change management process for outsourcing. Meanwhile, 41 percent have an in-house team, 12 percent go through their service vendor, and 12 percent use outside consultancies.
These numbers indicate that companies believe that outsourcing is easily accomplished and managed. That's a dangerous attitude to take given the managerial and process complexity of outsourcing, and it should be interesting to see if future Patni surveys show customers moving towards more outside help.
Wednesday, March 01, 2006
India Rising - Newsweek
Messy, raucous, democratic India is growing fast, and now may partner up with the world's richest democracy—America.
By Fareed Zakaria
Newsweek
March 6, 2006 issue - Every year at the World Economic Forum in Davos, there's a star. Not a person but a country. One country impresses the gathering of global leaders because of a particularly smart Finance minister or a compelling tale of reform or even a glamorous gala. This year there was no contest. In the decade that I've been going to Davos, no country has captured the imagination of the conference and dominated the conversation as India in 2006.It was not a matter of chance. As you got off the plane in Zurich, there were large billboards extolling INCREDIBLE INDIA. Davos itself was plastered with signs. WORLD'S FASTEST GROWING FREE MARKET DEMOCRACY! proclaimed the town's buses. When you got to your room, you found an iPod Shuffle loaded with Bollywood songs, and a pashmina shawl, gifts from the Indian delegation. When you entered the meeting rooms, you were likely to hear an Indian voice, one of the dozens of CEOs of world-class Indian companies. And then there were the government officials, India's "Dream Team," all intelligent and articulate, and all selling their country.
The Forum's main social event was an Indian extravaganza, with a bevy of Indian beauties dancing to pulsating Hindi tunes against an electric blue Taj Mahal. The guests joined in the festivities. The impeccably dressed chairman of the Forum, Klaus Schwab, donned a colorful Indian turban and shawl, nibbled on chicken tikka and talked up the country's prospects with Michael Dell. india everywhere, said the ubiquitous logo. It was.
And everyone now is in India—most significantly, of course, George W. Bush, who will arrive there on March 1. Jacques Chirac was there two weeks ago. (So was Bill Clinton, who can't stop returning to the country.) Two weeks before that it was Saudi Arabia's newly crowned monarch, King Abdullah. The week after Bush leaves, Australian Prime Minister John Howard arrives. And that's all in six weeks. The world—and particularly the United States—is courting India as it never has before. Fascinated by the new growth story, perhaps wary of Asia's Chinese superpower, searching to hedge some bets, the world has woken up to India's potential. But does it really know this complex, diverse country? Just as important, does India know what it wants of the world?
The marketing slogans wouldn't work if there were no substance behind them. Over the past 15 years, India has been the second fastest-growing country in the world—after China—averaging above 6 percent growth per year. Growth accelerated to 7.5 percent last year and will probably hold at the same pace this year. Many observers believe that India could well expand at this higher rate for the next decade.
While China's rise is already here and palpable—it has grown at almost 10 percent since 1980—India's is still more a tale of the future, but a future that is coming into sharp focus. A much-cited 2003 study by Goldman Sachs projects that over the next 50 years, India will be the fastest-growing of the world's major economies (largely because its work force will not age as fast as the others). The report calculates that in 10 years India's economy will be larger than Italy's and in 15 years will have overtaken Britain's. By 2040 it will boast the world's third largest economy. By 2050 it will be five times the size of Japan's and its per capita income will have risen to 35 times its current level. Predictions like these are a treacherous business, though it's worth noting that India's current growth rate is actually higher than the study assumed.Even the here and now is impressive. Indian companies are growing at an extraordinary pace, posting yearly gains of 15, 20 and 25 percent. The Tata group, the country's largest business house, is a far-flung conglomerate that makes everything from cars and steel to software and consulting systems. In this sense, it is a useful window on India's industrial and postindustrial economy. Its revenues grew last year from $17 billion to $24 billion and it is heading for extremely strong growth this year. At another end of the scale, the automobile-parts business is made up of hundreds of small companies. Five years ago the industry's total revenues were $4 billion. This year they will exceed $10 billion. In 2008, General Motors alone will import $1 billion of auto components from India.
That's outsourcing—as it is any time an American company buys goods or services from abroad. It's also called trade or globalization or capitalism. Those who want to stop it—and it's not clear how you could do that—should remember that the United States' prosperity has come from its very willingness to open itself up to the world. Over the last 60 years, manufacturing employment in the United States has plummeted as those industries went abroad—and yet average American incomes have risen to be the highest in the world. Over the last 20 years, as globalization has quickened, American companies have outsourced first goods, then services—and American incomes have risen faster than those of any other major industrial country. Banning auto-parts factories or call centers will not save General Motors. Globalization highlights some problems for America, but the solutions are all at home. As they have in the past, Americans must—and can—make goods and services that people will pay for freely, not because the government forces them to by shutting out the competition. That is the only stable path to economic security.
At this point, anyone who has actually been to India will probably be puzzled. "India?" he or she will say. "With its dilapidated airports, crumbling roads, vast slums and impoverished villages? We're talking about that India?" Yes, that, too, is India. The country might have several Silicon Valleys, but it also has three Nigerias within it, more than 300 million people living on less than a dollar a day. India is home to 40 percent of the world's poor and has the world's second largest HIV population. But that is the familiar India, the India of poverty and disease. The India of the future contains all this but also something new. You can feel the change even in the midst of the slums.
To new visitors, it won't look pretty. Many Western businessmen go to India expecting it to be the next China. But it never will be that. China's growth is a product of its efficient, all-powerful government. Beijing decides the country needs new airports, eight-lane highways, gleaming industrial parks—and they are built within months. It courts multinationals and provides them with permits and facilities within days. It looks good and, in many ways, it is that good, having produced the most successful case of economic development in human history.
India's growth is messy, chaotic and largely unplanned. It is not top-down but bottom-up. It is happening not because of the government, but largely despite it. India does not have Beijing and Shanghai's gleaming infrastructure, and it does not have a government that rolls out the red carpet for foreign investment—no government in democratic India would have those kinds of powers anyway. But it has vast and growing numbers of entrepreneurs who want to make money. And somehow they find a way to do it, overcoming the obstacles, bypassing the bureaucracy. "The government sleeps at night and the economy grows," says Gurcharan Das, former CEO of Procter Gamble in India.
There are some who argue that India's path has distinct advantages. MIT's Yasheng Huang points out that India's companies use their capital far more efficiently than China's; they benchmark to global standards and are better managed than Chinese firms. Despite being much poorer than China, India has produced dozens of world-class companies like Infosys, Ranbaxy and Reliance. Huang attributes this difference to the fact that India has a real and deep private sector (unlike China's many state-owned and state-funded companies), a clean, well-regulated financial system and the sturdy rule of law. Another example: every year Japan awards the coveted Deming Prizes for managerial innovation, and over the last four years, they have been awarded more often to Indian companies than to firms from any other country, including Japan.This bottom-up activity is evident not simply among entrepreneurs. The Indian consumer is also rearing for action. Most Asian success stories have been ones in which the government forces its people to save, producing growth through capital accumulation and market-friendly policies. In India, the individual is king. Young Indian professionals don't wait to buy a house at the end of their lives with their savings. They take out mortgages. The credit-card industry is growing at 35 percent a year. Personal consumption makes up a staggering 67 percent of GDP in India, much higher than China (42 percent) or any other Asian country. Only the United States is higher at 70 percent.
Statistics don't quite capture what is happening. Indians, at least in urban areas, are bursting with enthusiasm. Indian businessmen are giddy about their prospects. Indian designers and artists speak of extending their influence across the globe. Bollywood movie stars want to grow their audience abroad from their "base" of half a billion fans. It is as if hundreds of millions of people have suddenly discovered the keys to unlock their potential. A famous Indian once put it eloquently, "A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends and when the soul of a nation, long suppressed, finds utterance."
Those words, which Indians of a certain generation know by heart, were spoken by the country's first prime minister, Jawaharlal Nehru, just after midnight, on Aug. 15, 1947, when independent India was born. What Nehru was referring to, of course, was the birth of India as an independent state. What is happening today is the birth of India as an independent society—boisterous, colorful, open, vibrant and, above all, ready for change. India is diverging from its past, but also from most other countries in Asia. It is not a quiet, controlled, quasi-authoritarian country that is slowly opening up according to plans. It is a noisy democracy that has finally empowered its people economically. In this respect India, one of the poorest countries in the world, looks strikingly similar to the world's wealthiest country, the United States of America. In both places, society has triumphed over the state.
The Indian state has been a roaring success on one front. India's democracy is a wonder to behold. One of the world's poorest countries, it has sustained democratic government for almost 60 years. And this is surely one of the country's greatest strengths when compared with many other developing countries. If you ask the question "What will India look like politically in 25 years?" we know the answer: like it does today—a democracy, probably with a coalition government. Democracy makes for populism, pandering and delays. But it also makes for long-term stability. (In case President Bush is looking for some answers for Iraq, he should recall that the British were able to stay in India for 200 years and built lasting institutions of government throughout the country, and that India got very lucky with its first generation of leaders. Men like Nehru may not have understood economics, but they deeply understood political freedom.)
If the Indian state has succeeded in one crucial dimension, it has failed in several others. In the 1950s and 1960s, India tried to modernize by creating a "mixed" economic model, between capitalism and communism. This meant a shackled and overregulated private sector, and a massively inefficient and corrupt public sector. The results were poor, and in the 1970s, as India became more socialist, they became disastrous. In 1960 India had a higher per capita GDP than China; today it is less than half of China's. That year it had the same per capita GDP as South Korea; today South Korea's is 13 times larger. The United Nations Human Development Index gauges countries by income, health, literacy and other such measures. India ranks 124 out of 177, behind Syria, Sri Lanka, Vietnam and the Dominican Republic. Female literacy in India is a shockingly low 54 per-cent. Despite mountains of rhetoric about helping the poor, by any reasonable comparison, India's government has done too little for them.Is this a problem with democracy? Not entirely. Bad policies fail whether pursued by dictators or democrats. But there are elements of democracy that have hurt, certainly in a country with rampant poverty, feudalism and illiteracy. Democracy in India too often means not the will of the majority but the will of organized minorities—landowners, powerful castes, farmers, government unions and local thugs. (Nearly a fifth of the members of the Indian Parliament have been accused of crimes, including embezzlement, rape and murder.) These groups are usually richer than most of their countrymen, and they plunder the state's coffers to stay that way. It is ironic, for example, that India's Communist Party does not campaign for growth to lift the very poor but rather works to maintain the relatively privileged conditions of unionized workers. As these power plays go on, the great majority's interests—those 800 million who earn less than $2 a day—often fall through the cracks.
But democracy has its own way of rebalancing. The wave of Hindu nationalism that raged through the country in the 1990s is on the wane, for now, and a thoroughly secular government is in power. Headed by Manmohan Singh, the former Finance minister who opened up India's economy in the summer of 1991, it is also committed to economic reform. In an act of great wisdom and restraint, Sonia Gandhi, who led the ruling coalition to victory in the polls, chose to appoint Singh as prime minister rather than take the job herself. As a result, quite unexpectedly, India's chaotic and often-corrupt democratic system has yielded as its head of government a man of immense intelligence, unimpeachable integrity and deep experience. Singh, an Oxford Ph.D., has already run the country's central bank, planning ministry and Finance Ministry. His breadth, depth and decency are unmatched by any Indian prime minister since Nehru.
But Singh has disappointed many of his fans. They had hoped for another set of large-scale reforms, but the government has been cautious and is implementing programs that look suspiciously like another round of subsidies (programs that have had such little success in the past). These are the constraints of democracy. Singh heads a fragile coalition government without a strong mandate for economic change. He is not himself a powerful politician, depending on Mrs. Gandhi for his clout. But his quiet determination to keep moving forward—on economics, politics and foreign policy—has been underestimated. His Economic ministers are all reformers. They work within the political limits, but they work. For example, infrastructure in India is slowly getting better and will be funded through public-private partnerships. India's two major airports will be privatized and improve dramatically. Every week you read of a set of regulations that have been eased or permissions that have been eliminated. These "stealth reforms," too small to draw vigorous opposition from the unreconstructed left, add up. And India's pro-reform constituency keeps growing. The middle class is already 300 million strong. Urban India is not all of India, but it is a large and influential chunk of it.
Democracy is India's destiny. A country this diverse and complex—17 major languages, 22,000 dialects and all the world's major religions—cannot really be governed any other way. The task is to use democracy to India's advantage. In some cases this is happening. The Indian government has recently begun investing in rural education and health, and is focusing on ways to make agriculture more productive. Good economics can sometimes make for good politics, at least that is the Indian hope. Another change is that, since 1993, democracy has been broadened to give villages greater voice in their affairs. Most important, village councils must reserve 33 percent of their seats for women. As a result there are 1 million elected women in villages across the country. They will now have a platform from which to demand better education and health care. It's bottom-up development, with society pushing the state.
Will the state respond? Built during the British Raj, massively expanded in India's socialist era, it is filled with bureaucrats who are in love with their petty powers and privileges. They are joined by politicians who enjoy the power of patronage. And then there are some journalists and intellectuals who still hold on to some romantic idea of Third World socialism. There are many in India's ruling class who remain deeply uncomfortable with the modern, open, commercial society that they see growing around them.
But the state fills a vital role. Look at India's great success—its private companies. They flourish because of a well-regulated stock market and financial system that has transparency, adjudication and enforcement—all government functions. Or consider the booming telecommunications industry, which was created by intelligent government deregulation and re-regulation. Or the Indian institutes of technology—among the world's best—all government-run. But that's just a start. The private sector cannot solve India's AIDS crisis or its rural education shortfalls or its environmental problems. If India's governance does not improve, the country will never fully achieve its potential.
This is perhaps the central paradox of India today. Its society is open, eager, confident and ready to take on the world. But its state—its ruling class—is far more hesitant, cautious and suspicious of the changed realities around it. Nowhere is this tension more obvious than in the realm of foreign policy, in the increasingly large and important task of determining how India should fit into the New World.
Most Americans would probably be surprised to learn that India is, by all accounts, the most pro-American country in the world. The Pew Global Attitudes Survey, released in June 2005, asked people in 16 countries whether they had a favorable impression of the United States. A stunning 71 percent of Indians said yes. Only Americans had a more favorable view of America (83 percent). The numbers are somewhat lower in other surveys, but the basic finding remains true: Indians are extremely comfortable with, and well disposed toward, America.
This may be because for decades India's government tried to force-feed anti-Americanism down people's throats. (Politicians in the 1970s spoke so often of the "hidden hand" when explaining India's miseries—by which they meant the CIA or American interference generally—that cartoonists took to drawing an actual hand that descended every now and then to cause havoc.) More likely it is because Indians understand America. It is a noisy, open society with a chaotic democratic system—like theirs. Many urban Indians speak America's language, are familiar with the country and often actually know someone who lives there, possibly even a relative.
The Indian-American community has been a bridge between the two cultures. The term often used to describe Indians leaving their country is "brain drain." But it's been more like brain gain, for both sides. Indians abroad have played a crucial role in opening up the mother country. They returned to India with money, investment ideas, global standards and, most important, a sense that one could achieve anything. An Indian parliamentarian once famously asked the then prime minister, Indira Gandhi, "Why is it that Indians seem to succeed everywhere except in their own country?" The stories of Indians scaling the highest peaks in America have produced pride and emulation in India. Americans, for their part, have embraced India in some measure because they have had a positive experience with Indians in America.
Americans also find India understandable. They are puzzled and disturbed by impenetrable decision-making elites like the Chinese Politburo or the Iranian Council of Guardians. A quarrelsome democracy that keeps moving backward, forward and sideways—that they know. Take the current negotiations on nuclear issues. Americans watch what is going on in New Delhi, with people inside the government who are opposed to a nuclear deal leaking negative stories to the media, political opponents using the issue to score points, true ideological opponents being utterly implacable—and this all seems very familiar. Similar things happen every day in Washington.
Most countries have relationships that are almost exclusively between governments. Think of the links between the United States and Saudi Arabia, which exist among a few dozen high officials and have never really gone beyond that. But sometimes bonds develop not merely between states but between societies. Twice before the United States had developed a relationship with a country that was strategic but also much more—with Britain and later with Israel. In both cases, the resulting ties were broad and deep, going well beyond government officials and diplomatic negotiations. The two countries knew each other, understood each other and as a result became natural and almost permanent partners. America has the opportunity to forge such a relationship with India.
This is not a matter of strategic "balancing" against China. The world is not that simple. The United States should not create a self-fulfilling prophecy of a conflict with China. The American relationship with China is complex, with many elements of cooperation. China, after all, is one of America's chief creditors, and Americans in turn buy Chinese goods, fueling its growth. Nor will India want to play along as a counterweight to China, since its own relations with its powerful neighbor are crucial. Beijing will overtake America as India's largest trading partner within a couple of years. Both India and America will want to retain their independence in dealing with the Middle Kingdom. That said, the rise of China is the fundamental strategic shift that is altering Asia's—and the world's—landscape. And the United States and India will be glad to have each other's company in that circumstance.
This doesn't mean that the United States and India will agree on every policy issue. Remember that even during their close wartime alliance, Roosevelt and Churchill disagreed about several issues, most notably India's independence. America broke with Britain over Suez. It condemned Israel for its invasion of Lebanon. Washington and New Delhi have different interests and thus will inevitably have policy disputes. But it is precisely because of the deep bonds between these countries that such disagreements would not alter the fundamental reality of friendship, empathy and association.
Such a relationship between the united States and India is almost inevitable. Whether the nuclear agreement goes through or not, whether the governments sign new treaties, the two societies are getting increasingly intertwined. A common language, a familiar world view and a growing fascination with each other is bringing together businessmen, nongovernmental activists, journalists and writers.
I say almost inevitable because there are pulls against it on both sides. In America, there is always the danger that politicians will turn to populism and protectionism as a cheap way to get votes. So far the pandering has been limited and temporary, but as elections approach and politicians grandstand, it's always convenient to find foreigners upon whom to blame your ills. Additionally, Washington is still learning the art of treating other countries with the respect and deference they expect—and India can be prickly and proud.
But the real stumbling block to a deep Indo-U.S. relationship will come not from Washington but New Delhi. While Singh and some others at the top of the Indian government see the world clearly, and see the immense opportunities it opens up for India, many others are blinded by their prejudices. For many Indian elites, it has been comfortable and comforting to look at the world from the prism of a poor, Third World country, whose foreign policy was neutral, detached (and, one might add, unsuccessful). They understand how to operate in that world, whom to bargain with, whom to beg from and whom to be belligerent with. But a world in which India is a great power, in which it moves confidently across the global stage, and in which it is a friend and partner of the most powerful country in history—that is an altogether new and unsettling proposition. "Why is the United States being nice to us?" several such doubters have asked me repeatedly. Even now, in 2003, they were searching for the hidden hand. China's Mandarin class has been able to rethink its country's new role as a world power with skill and effectiveness. So far, India's Brahmins have not shown themselves the equals of their neighbor.
The danger for India is that this moment might not last forever. The world turns and India will have its ups and downs. But today it is India's moment. It can grasp it and forge a new path for itself. Along that road lies a genuine and deep relationship between the planet's largest democracy and its wealthiest democracy. Until now, this has merely been a slogan. It could actually become a reality, and who knows what such a world might look like?
© 2006 Newsweek, Inc.
Bush: Outsourcing has a silver lining
Overseas growth good for U.S. producers, he says
BY RON HUTCHESON
Washington Bureau
WASHINGTON — President Bush found a bright side to outsourcing Wednesday, saying that the loss of U.S. jobs to foreign countries helps create markets for American business.
"It's true that a number of Americans have lost jobs because companies have shifted operations to India," he said in a speech previewing his trip next week to India and Pakistan. "We must also recognize that India's growth is creating new opportunities for our businesses and farmers and workers."
Bush's visit to South Asia is intended to strengthen ties to two countries on the front lines in the war on terrorism. His diplomatic mission is complicated by longstanding antagonism between India and Pakistan, both of which have nuclear weapons ungoverned by the Non-Proliferation Treaty.
Although Bush made sure to cover the big geopolitical issues in his speech, he acknowledged that many Americans are far more concerned about India's status as a magnet for jobs, especially in the high-tech sector. More than 1.2 million Indians work in high-tech jobs, many of them for U.S. companies or their affiliates.
Echoing a view widely shared by economists, Bush said the benefits from globalization more than offset the damage from lost jobs due to outsourcing. He noted that the United States accounts for only about 5 percent of the world's population.
"India's middle class is now estimated at 300 million people," he said. "That's greater than the entire population of the United States. And this middle class is buying air conditioners, kitchen appliances and washing machines — and a lot of them from American companies.
"Younger Indians are acquiring a taste for pizzas from Domino's, Pizza Hut," Bush added. "And Air-India ordered 68 planes valued at more than $11 billion from Boeing."
But even with India's growing prosperity, Americans buy more goods from India than they sell to Indians. The United States had a $10.8 billion trade deficit with India last year, because even though U.S. exports to India have been steadily increasing, imports from India have risen more.
Bush's prime objective in India is to remove the last hurdles to a landmark agreement that would acknowledge India's status as a nuclear power 32 years after it successfully tested a nuclear device. The agreement would open India's civilian nuclear program to international inspections while leaving it free to produce more nuclear weapons.
With time running out before Bush's visit, U.S. negotiators are pressing India for guarantees that the civilian program wouldn't be used to boost weapons production. Bush urged India to develop "a credible, transparent and defensible plan" to separate the two programs.
In Pakistan, Bush will seek to discuss both the war on terrorism and Pakistan's path to democracy. He praised Pakistani President Pervez Musharraf for his help in the war on terrorism, but said Pakistan "still has a distance to travel on the road to democracy."
He urged India and Pakistan to put aside the ethnic and religious tensions that have brought them to war three times since the two nations were carved out of the British Empire in 1947.