AN ANALYSIS OF INDIAS NATIONAL COMPETITIVE ADVANTAGE BASED ON THE CASE OF SOFTWARE INDUSTRY

By Howard He

Submitted to the Faculty of Department of International Affairs in partial fulfillment of the requirements for the degree of Bachelor of Arts in International Affairs

Wenzao Ursuline College of Languages 2008

WENZAO URSULINE COLLEGE OF LANGAUGES DEPARTMENT OF INTERNATIONAL AFFAIRS

This senior paper was presented

by

Howard He

It was defended on May 21, 2008 and approved by

Chun-Ping Chang, Assistant Professor, Department of International Affairs Signature: _______________________________ Date: ________________________

Senior Paper Advisor: Sunny Yang, Assistant Professor, Department of International Affairs Signature: _______________________________ Date: ________________________

Copyright by Howard He, 2008

AN ANALYSIS OF INDIAS NATIONAL COMPETITIVE ADVANTAGE BASED ON THE CASE OF SOFTWARE INDUSTRY Howard He, B.A. Wenzao Ursuline College of Languages, 2008

In this paper, it contains four main parts which are explanation of key words, analysis of Indias national competitive advantage, case study, and advice for Taiwans software outsourcing industry. The space of analysis of Indias national competitive advantage is at most. I make use of Michael Porters The Diamond to describe the present situation in India. It is a good way to figure out why a nation can achieve international success in a particular industry. In the next part, TATA consultancy services (TCS) is the important role which is analyzed by Gary Hamels frame. From the case study, we can get clearer understanding about this industry in India. At the last main part, I also pronounce some ideas to our government, comparing the similarity and difference between Taiwan and India.

TABLE OF CONTENTS
Introduction6 Motivation..6 Methodology..7 Literature review7 Hypothesis..9 Competitive advantage and globalization14 The essence of globalization14 Competitive advantage.15 Information Technology; IT.15 An Analysis of Indias National Competitive Advantage16 Factor conditions..16 Demand conditions...18 Related and supporting industries21 Firm strategy, structure, and rivalry.22 Chance..25 Government .27 The case study of Indias software outsourcing...30 An analysis of present software outsourcing industry.....30 Case study ...31 How long India could keep..34 Advice for Taiwans software outsourcing industry ...35 Taiwan vs. India ..35 Advice for the software outsourcing company36 Advice for our government..37 Conclusion ...39 Bibliography.40

Introduction
Motivation
BRICs are the new rising countries which is a hot issue because of their national competitive advantage. This new issue was originated from the paper of Goldman Sachs investment bank in 2003 and pointed this four countries will totally replace the current top six countries in economy by 2050. Why I choose India from BRICs? Indias main competitive advantage is like Taiwan- IT industry. Not to be outdone by India, we should be acquainted with India entirely. It is possible to replace Taiwan too. And maybe they have some valuable things that we can learn from. What make India a rising country? Why I choose the case of software industry? One of the most important reasons is because they have a good environment in software industry. It has a connection with Taiwan. I think India can be a good model for us, from many aspects like education, investment environment, and government policy and so on. How come their most nationals have good ability in English? How come they attract lots of foreign directive investment (FDI)? Why they integrate labors and white-collar to create the large output?

Methodology
1. Literature review
There are five material inferences that I want to mention in this part: The first one, Dreaming with BRICs: The Path to 20501 , plays an important role in my essay. In general consensus, the term of BRICs was first used in this paper in 2003. The main point was to argue that the economies of the BRICs are rapidly developing and will eclipse most current richest countries of the world by the year 2050. This paper elaborated on this new issue by a lot of pictures and graphs. It gave us the specific information about why they forecasted that these countries can have much potential competitiveness. The Goldman Sachs global economics team also released a follow-up report 2 to its initial BRIC study in 2004.

Then another important inference isChindia: How China and India Are Revolutionizing Global Business 3 . From this book, we can know the present and the future situation of India and how they affect this world. The technology, service and outsourcing industry of India make herself become a crucial partner and respectable competitor for other countries.

Goldman Sachs global economics team, Dreaming with BRICs: The Path to 2050 (N.Y.: Goldman Sachs investment bank 2003). 2 Goldman Sachs global economics team, How solid are the BRICs (N.Y.: Goldman Sachs investment bank 2005). 3 Engardio Pete, Chindia: How China and India Are Revolutionizing Global Business (McGraw-Hill, 2006). 7

This book included some first-hand news from the reporters of the worlds most widely read business magazine and old-time scholars comment.

And, the third book is about 4 . This book is written by Taiwanese. We can regard this book as a guidance of investing India. From the dimension of culture, population, IT industry, agriculture, policy and so on, it explicitly analyzed how they are rising. Especially the talent in IT industry, this is one of the most important reasons to prompt India. From this book, we got a sweeping understanding about India.

And the next is The competitive advantage of nations 5 . This is a book which searches the competitive advantage in a nation. The main point is to search why a certain industry can be developed well in a certain country. Michael Porter advanced The Diamond frame to explain above question. He used six dimensions such as factor conditions, demand conditions, related and supporting industries, firm strategy, chance and government forming The Diamond to analyze why a certain industry can be developed well in a certain country. I also want to use these six dimensions to analyze that why the IT industry of India can be developed well.

(2007) (Michael E. Porter) (The competitive advantage of nations)( 1996) 8

5

The last one is : 6 . As we know, Indias talent in IT industry is an important reason to prompt India to be a rising country. Kenichi Ohmae advanced that three main skills which are important ability to be a talent. One of these skills is language ability. He asserted that language ability is equal to English ability. Those countries such as India, the Philippines take advantage of English ability to connect advanced world. They also use this advantage to win lots of jobs from white-collar in other countries.

2. Hypothesis
In this part, there are six elements that will have positive and negative impacts on India IT industry. (1) Positive: <1> Factor Conditions Its about the nations position in factors of production, such as nature resources, skilled labor or infrastructure which is necessary to compete in a given industry.

(Kenichi Ohmae) : (2007 ) 9

According to Business Week 7 , India is a Brain Empire possessing the talents of both mathematical science and English ability. Apart from that, the population of India is sufficient, especially lots of young working-hard people and the returned talent after studying abroad. And owing to the labors payment is high in Europe or America compared with India, and the enterprises have strategy about geography of globalization, the path of IT outsourcing in India is developed smoothly.

<2> Demand conditions It means the home country demand for the industrys product or service. Large home market size can lead to competitive advantage in industries where there are economies of scale or learning 8 . India already attracted over 250 multinationals to set research center in Bangalore such as Microsoft, Intel. Bangalore also gets the name- Indias Silicon Valley 9 .

<3> Related and Supporting related

7 8

2032 901 2005 5 112-113 Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 71-93. 9 (:2005) 115 10

Due to the Silicon Valley in India is booming, the related and supporting industries like chip, hardware or internet industries are also taking off. Besides, lots of research institutions have being set there.

<4> Firm Strategy, Structure, and Rivalry The goals, strategies, and ways of organizing firms in industries vary widely among nations. National advantage results from a good match between these choices and the sources of competitive advantage in a particular industry. The pattern of rivalry at home also has a profound role to play in the process of innovation and the ultimate prospects for international success 10 .

<5> Support from government is one of the main growing factors The fifth positive element is the role of Indian government. I hypothesize India government has continually enacted many policies about software development, regarding IT industry as the top priority policies and establishing software research center. India government not only supplies preferential tax convention but also

10

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 107. 11

supports, attends lots of international seminar on software, expanding international IT market.

<6> A good chance in 21st century As the internet become universal, especially the market in Europe, America and rising developing-countries are increasing much need for being computerized. In the other side, the labors payment is comparative high in developed countries and the enterprises have strategy about geography of globalization, so the path of IT outsourcing in India have a big chance in this generation.

(2)Negative: <1> Gap between poor and rich In New Delhi, the capital city of India, lots of beggars crouched on the street. I hypothesize their government pay more attention to higher education than primary education. The low literacy is a main reason that leads lots of Indian to be poor.
12

<2> Corruption From some news, India governments corruption is notorious and sometimes it may be thought an unstable government. It could be a big problem to prevent FDI.

13

Competitive advantage and globalization

1. The essence of globalization
Properly speaking, globalization is a trend and process instead of theory. Since 1990, globalization has been generally used to explain many kinds of issues, included politics, economy, culture, and environment and so on 11 . In terms of

economy, capital, service, labors and goods are the main points to be researched. Because of the universal development in information and communication technology, global issue and social relationship could be integrated well. In a word, globalization means the limitation of geography has already been conquered by information technology. Some globalists such as Ohmae pronounced this kind new type society will supersede the status of conventional nation-state eventually12 . In the other side, this kind of argument was doubted by skeptics (Hirst and Thompson) 13 . Some schools professed that cash flow of nowadays are not more than the period of British Empire. Apart from that, they also pointed that main cash flow only center on three economy system- Europe, North America and East Asia.

(2002) 515-516 Kenichi Ohmae, The Borderless World: Power and Strategy in the Interlinked Economy (London: Fontana, 1990). (2002) 515 13 Paul Hirst and Grahame Thompson, Globalization in Question (London: polity, 1996). (2002) 515 14
12

11

Anyway, the important thing is that the new trend of international and society is changing our life style and worldview. Socialist, Giddens said globalization is Modernism deepened 14 .

2. Competitive advantage
Competitive advantage is decided whether one country has core resource or not, because core resource develops core competence and eventually become competitive advantage. According to Jay Barney, core resource should have four elements which are valuability, rarity, inimitability and substitutability 15 . It means the resource should be valuable, rare, unique and low substitutability. This kind of process is so called Resource Based School.

3. Information Technology; IT
According to Robert, IT means the entire software and hardware tool is used to get, apply, display, store and communicate information 16 . In general speaking, IT includes all computer network and electrified equipment. In my topic, software is a kind application of IT.

14

Anthony Giddens, The consequence of Modernity (Cambridge: Polity Press, 1990).

(2002) 516
Jay Barney, Firm Resources and Sustained Competitive Advantage, Journal of Management 17, no. 1 (1991): 99-120. 100 -(2007) 520 16 Christopher B. Roberts, The Impact of Information Technology on the Management of System Design, Technology in Society 18, no. 3 (1996): 333-355. Hypercube - 15
15

An Analysis of Indias National Competitive Advantage

Why does a nation achieve international success in a particular industry? Michael Porter said the answer lies in six elements of nation that shape the environment where local firms could promote or impede the creation of competitive advantage.

1. Factor conditions
Every nation has its own factor conditions which economist so called. Factor conditions conclude labor, arable land, natural resources, capital, and infrastructure. Every nation has different factor conditions. A nation will export goods which are endowed with different resources. For example the United States has been a substantial exporter of agricultural goods, because its abundance of large arable land. In general, factors can be grouped into a number of categories: (1) Human resources: the quantity, skills, and cost of personnel, taking into account standard working hours and work ethic. (2) Physical resources: the abundance, quality, and cost of the nations land, water, mineral or hydroelectric power sources, fishing grounds, and other physical traits. (3) Knowledge resources: the nations stock of scientific, technical, and market knowledge bearing on goods and services. Knowledge resources reside in universities, government research institutes and so on.
16

(4) Capital resource: the amount and cost of capital available to finance industry. (5) Infrastructure: the transportation system, the communications system, mail and parcel delivery, payments or funds transfer, health care, and so on. To understand the enduring role of factors in competitive advantage, it is increasingly necessary to discriminate among types of factors. There are two particularly important distinctions among types of factors, but here Id just like to talk about the first distinction which is between basic and advanced factors. Basic factors include natural resources, climate, location, unskilled and semiskilled labor, and debt capital. Advanced factors include modern digital data communications infrastructure, highly educated personnel such as graduate engineers and computer sciences, and university research institutes in sophisticated disciplines 17 . From above mentions, India has the advantages of factor conditions no matter in basic and advanced factors. India has a large number of human resources. According to UN and Goldman Sachs banks research, Indians population is rising up. Now India is the second large population of the world. It will increase more five hundred billion in the next forty years. It shows that labor ability is increasing, and the cost of elder is decreasing 18 . Compare with other nation, the age of thirty-five young working-hard people is called Yippies (Young Indian People with Influence) by media. Seventy

17 18

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 73-77. (:2005) 99 17

percentage of Indian population is under age thirty-five. Young population is definitely an advantage for economy growth 19 . Besides, Indian knowledge resource is also another factor condition. Indian software industry is flourishing because of Indian education. Their Mathematical science and English ability are very good. Young people educate Western culture. Moreover, India is also the second large nation speaking English in the world. Over thirty percentage engineers in NASA are Indian; forty percentage American enterprises founders in Silicon Valley are Indian 20 . All in all, Indian has many factor conditions which can be one nations competitive advantage.

2. Demand conditions
For analyzing national competitiveness, demand condition is the second important element. Demand conditions in the domestic market make improvement in economic growth and innovation. From point view of competitive advantage, there are three points to analyze: (1) The composition of home demand (2) The size and pattern of growth of home demand

19 20

2032 901 2005 2 112-113 (:2005) 95 18

(3) A nations domestic preference transition to foreign markets. The significance of the latter two is contingent on the first. The quality of home demand is more important than the quantity of home demand in determining competitive advantage 21 .

We can take the case of television set industry for example. It provides a good example of the interplay of demand conditions that are working in tandem are mutually reinforcing. American was primarily for the industry and designed fine furniture styling and large picture tubes. In the contracts, Japanese home demands were primarily for small, compact, portable televisions because of lower per capita income and Japanese homes are small. Japanese firms put a lot effort to improve quality, features, and price. As American firms continued earning profits that made Japanese market reach saturation. Japanese started to reduced costs, introduce sets with new features, and move to export markets. At the end of 1980s, the Japanese firms were the world leader of television set industry 22 . Besides, another meaning of home demand is transmitted via political alliances or historical ties. Today, foreign aid and special political relationships among nations

21 22

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 86. Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 100. 19

have similar effects. Nations use foreign aide to increase demand for their firms products and services such as Italy and Japan 23 . In fact one nations demand conditions influence national competitive advantage. In India, software industry is very flourishing. There are more than two hundred fifty multinationals research centers and one thousand two hundred science and technology firms 24 . According to Indian National Association of Software and Service Companies (NASSCOM), the output value of exportation in Indian software and IT industry is up to nineteen point six billion US dollars in 2003 25 . For example, the branch of IBM in India only had nine thousand employees in 2003, and the employees raise to seventy-three thousands in 2007. The market of IBM branch in India enlarge rapidly, India has become the second large beachhead in the world. In addition, Microsoft has already established a university in India because of the needs of demand conditions. The top priority of establishing the university is to develop human resource in software. Indian not only has rapid economic growth but also becomes the human resource supply center for Microsoft.

23 24

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 99. (:2005) 92-93 25 2032 901 2005 2 112-113 20

3. Related and supporting industries

The third determinant factor of national advantage in an industry is to supply well-adequate and complete related and supporting industries so can be more internationally competitive. Competitive advantage in some supplier industries confers potential advantages on a nations firms in many other industries, because they produce inputs that are widely used and important to innovation or to in internationalization. When upstream industries are internationally competitive, it has variety effects to downstream industries. It is good for downstream industries to have efficient, early, rapid and preferential access to the most cost-effective inputs. Nevertheless, downstream also has relatively advantage in related industries. Besides using components and machinery in developing related industries, domestic industries have to be cooperative and sustained. Japanese machine tool producers are world-class because they draw on world-class suppliers of numerical control units, motors, and other components. Swedish strength in fabricated steel products (for example, ball bearings, cutting tools) is strength in specialty steels. Swiss firms are leaders in embroidered goods and also embroidery machines 26 . All these products are very famous because its related and supporting industries are internationally competitive.

26

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 100. 21

In India, the related and supporting industries like chip, hardware or internet industries are taking off. Besides, lots of research institutes have being set there such as Indian Institute of Management-Bangalore (IIM-B), Ministry of Information Technology and International Institute of Information Technology-Bangalore (IIIT-b) etc. Especially the IIIT-b, which was started on September 15, 1999, is also one of the new generation premier graduate schools in India offering M.Tech, MS (Research) and PhD programs in the field of Information Technology. The higher education in India is vigorous and flourishing. We can regard these related, supporting industries and research institutes as upstream and downstream industries of India software. They have a relationship of recursion which means they have relatively advantage and disadvantage in each other 27 .

4. Firm strategy, structure, and rivalry

In the relation of national competitive advantage, the fourth factor is firm which consists of how to found, organize, mange, and the conditions of rivalry. Simply, it is the conditions in the nation governing how companies are created, organized, and managed, and the nature of domestic rivalry. The goals, strategies, and ways of organizing are different in every nation. National advantage results from a good match between these

27

2032 901 2005 2 112-113 22

choices and the sources of competitive advantage in a particular industry. The way of one firms management and competitive form is affected by national circumstances. In Italy, many successful international competitors are relatively small or medium sized firms that are privately owned and run like extended families. In Germany, the top management of many companies consists of individuals with technical backgrounds, and companies are hierarchical in organization and management practices. Hence, the managerial system of firms is one of the important factors in national competitive advantage. No one managerial system is universally appropriate. Nations will tend to succeed in industries on the premise that the management practices and modes of organization favored by the national environment are will suited to the industries sources of competitive advantage. In addition, important national differences in management practices and approaches occur in such area as the training, background, and orientation of leaders, group versus hierarchical style, the strength of individual initiative, the tools for decision making, the nature of the relationships with customers, the ability to coordinate across functions, the attitude toward international activities, and the relationship between labor and management. These differences in managerial

23

approaches and organizational skills create advantages and disadvantages in competing in different types of industries 28 . In resent years, there is a name usually appears in Fortune global 500. Without this company, the product line of General Electric (GE) Company will must lay off. Without this company, the bookkeeping system of City bank may not work out. This company which is the top ten in Fortune global 500 is TATA consultancy services (TCS). Like other outsourcing companies in India, TCS has to dispose their company members in lots of countries in order to provide prompt services to their customers. This kind of characteristic of outsourcing companies makes Indian software companies have a special organizational strategy and structure. At the example of TCS, sixty percent from forty-three thousands employees are arranged working in customers companies in many countries. TCS developed an information platform named ULTIMATIX to organize their human resources management. Due to this information platform, TCS can give orders to their employees smoothly and successfully. And, the control centers in every area also dispatch certain workers to customers whenever they need. In order to promote the use of efficiency of human resource, maybe a member work with a project

28

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 107-109. 24

team in Taipei today but move to Europe or Japan tomorrow. We can call this kind of company Amoeba. They have adhocracy structure and flexible strategy 29 . In the other side, the competition among software companies to catch customers is intense in India. Lots of software companies are so competitive and at international level such as TCS, Wipro, and Infosys and so on. At the example of TCS, this is the largest software company in India. Its output value of exportation is sixteen billion which account twenty percent for total exportation in India. TCS has a locomotive effect to lead software industry in India 30 .

5. Chance
The determinants of national advantage shape the environment for competing in particular industries. Chance events also played a role. Chance events are occurrences that have little to do with circumstances in a nation and are often largely outside the power of firms (and often the national government) to influence. Some examples which are particularly important in influencing competitive advantage are the following 31 : (1) Acts of pure invention

905 2005 3 152-154 30 902 2005 3 76-78 31 Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 124. 25

29

(2)

Major

technological

discontinuities

(for

example,

biotechnology,

microelectronics) (3) Discontinuities in input costs such as the oil shocks (4) Significant shifts in world financial markets or exchange rates (5) Surges of world or regional demand (6) Political decisions by foreign governments (7) Wars Chance events are important because they create new area for competition. For example, a surge in demand for ships of shipbuilding industry gave Korea opportunity to compete with Japanese. The apparel industry developed in Singapore because western nations practiced quota to Hong Kong and Japan. Korea wig industry prospered owing to American imposed economic sanctions against China during the cold war 32 . Chance events have different impacts on nations which are good and bad. Wars have different effects on winners and losers. Although, chance events affect national competitive advantage, nation plays an important role in what nation exploits them. Nation has well system that may shit chance events into competitive advantage. As the internet become universal, especially the market in Europe, America and rising developing-countries which are increasing much more need for being

32

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 124-125. 26

computerized also need a suitable software system to operate. India has played an important outsourcing role for these countries in particular who want to save money. Selecting India could be a good choice. Because of the labors payment is comparative low in India and the enterprises have strategy about geography of globalization, the path of IT outsourcing in India have a big chance in this generation. By the way, dot-com bubble in 2000 also established foundation of software business in India. Due to low cost, highly educated workers and proficiency in English, lots of American companies who want to sharply reduce cost began to place their research and development of software and backward operations to India. At the example of Infosys, it got ten times income approximately one billion during 1999 to 2004. It proved again that chance events are occurrences that are often largely outside the power of firms and often the national government to influence.

6. Government
Government is the last factor of national competitive advantage. In fact, it is positive and negative effects on the relation of government and other conditions. Factors conditions and domestic markets will be affected by the strategies of capital markets, policies toward education, and subsidies. It is often more subtle. Government establish
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local product standards or regulations that mandate or influence buyer needs. Government is also often a major buyer of many products in a nation. This may help or hurt the nations industry. Government has many ways to influence upstream and related industries such as control of advertising media or regulation of supporting services. Government policy influences firm strategy, structure, and rivalry, through such devices as capital market regulations, tax policy, and antitrust laws 33 . On the other side, government policy can be influenced by the determinants (Factor conditions, Demand conditions, Related and supporting industries, Firm strategy, structure, and rivalry).For example, choices about where educational investments are made are affected by the number of local competitors. Strong home demand for a product may lead to early introduction of government standards. Indian government not only supplies preferential tax convention but also supports, attends lots of international seminar on software, expanding international IT market. Manmohan Singh who is the current Prime Minister of India was born in September 26, 1932. Singh is considered one of the most qualified and influential figures in India's recent history, especially at the part of economics, because of the economic reforms he had initiated in 1991 when he was a Finance Minister. He helmed

33

Michael E. Porter, The competitive advantage of nations (N.Y.: PALGRAVE, 1990), 126-127. 28

reforms that liberalized India's economy, changing it in a fundamental way. At present, he leads United Progressive Alliance (UPA) government controlling political power. Manmohan Singh said the role of government is not a government that will disappear. They share our public expenditure. We are not saying that government will disappear. We're going to redirect this expenditure. The government will take a lot more interest in education, in primary health care, in environmental protections, in promoting research and development. But the government will not be in the business of running industries and running trading enterprises. After the economy were liberalized, top three Indian software companies went public one after another in India and America. According to Merrill Lynch Investment Managers (MLIM), India produced eleven thousands millionaires in US dollars in 2003. Its speed surpassed every country and broke the history record. Forbes reported that the total amount of assets of top five richest people in India is 24.8 billion in US dollars which overtook the total amount of assets of top five richest people in United Kingdom 34 .

34

(:2005) 96-101 29

The case study of Indias software outsourcing

1. An analysis of present software outsourcing industry
In the recent years, Indian software outsourcing industry has been increasing rapidly. Instead of investing a big amount of money in hardware infrastructure, the service of software outsourcing industry just rely on brain to make money. According to Indian Ministry of Information and Technology, the exportation of software service grew thirty two percent from April 2006 to March 2007. (The gross export value is about 31.3 billion in US dollars) Besides, there are five cities ranked top ten outsourcing center in India. From the report of NASSCOM, the gross export value of Indian software and service may grow to 50 billion in US dollars. Additionally, Tholons, an American investment consultant company, announced a report in 2007 that Indian Chennai, Hyderabad, Pune and Kolkata came in one, two three and five out of top fifty software outsourcing cities. 35 According to Gartner Dataquest, the total net earnings of Indian top ten information-technology service companies such as TCS, Infosys and Wipro and so on are about 15 billion in US dollars from March 2006 to the end of March 2007. 36

35 36

http://news.epochtimes.com/b5/7/9/29/n1850610.htm, accessed on 9 September, 2007. http://news.yam.com/cna/fn/200707/20070701437365.html, accessed on 1 July, 2007. 30

2. Case study - TCS

(1) Brief introduction to TCS TCS is one of the world's largest providers of information technology and business process outsourcing services. As of 2007, it is Asia's largest information technology firm and has the largest number of employees among Indian IT companies with over 110,000 employees in 47 countries. TCS is part of one of Asia's largest conglomerates, the Tata Group, which has interests in areas such as energy, telecommunications, financial services, manufacturing, chemicals, engineering and materials. TCS was established in the year 1968. It began as a division of the Tata Group, Tata Computer Centre, whose main business was to provide computer services to other group companies. TCS's first software export project was undertaken in 1974 when it converted the Hospital Information System from Burroughs Medium Systems Common Business-Oriented Language (COBOL) to Burroughs Small Systems COBOL. At present, TCSs project extend to many industries like banking, general merchandises, electron etc.

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(2) Business Model of TCS According to Gary Hamel, the core business model of a company should include four dimensions which are customer interface, core strategy, strategy resources and value network. In customer interface, it involves understanding your customer, making good relationship with your customer and price structure etc. In core strategy, we can regard it as organizational mission or vision, key success factors. In strategy resources, organization should know where the core competence, strategic assets, core process etc are. In value network, it includes suppliers, partner relationship, alliances etc. Moreover, these four dimensions operation has to depend on the following three bridges which can link four of them 37 .

<1> Customer Benefits Its the bridge of linking customer interface and core strategy. It means company should see or know clearly and thoroughly the customer interface, understand the demand of customers, plan the core strategy which conforms to customer benefits. Adhocracy and flexible structure is the TCSs core strategy to create customer benefits. It helps TCS supply services at any moment and satisfy

37

Gary Hamel, Leading the revolution (Boston: Harvard Business School Press, 2000). 32

100 -(2007) 524

their customers. TCS promotes the use of efficiency of human resource, maybe a member work with a project team in Taipei today but move to Europe or Japan tomorrow.

<2> Configuration Its the bridge of linking core strategy and strategy resources. In order to fulfill core strategy, a company needs to possess enough strategy resources and direct at the demand of core strategy to organize a suitable configuration. At the example of TCS, sixty percent from forty-three thousands employees are arranged working in customers companies in many countries. TCS developed an information platform named ULTIMATIX to organize their human resources management. Due to this information platform, TCS can give orders to their employees smoothly and successfully. And, the control centers in every area also dispatch certain workers to customers whenever they need. ULTIMATIX becomes a strategy resource step by step, so that, TCS can fulfill its core strategy easily.

33

<3> Company Boundaries Its the bridge of linking strategy resources and value network. In order to obtain strategy resources, organizations have to break through present boundaries and keep a good partner relationship, forming a value network On purpose of getting more software talents, TCS already cooperates with some schools to foster more professional talents skills in IT field. They even help schools adjust the quality of teaching and revise schools syllabus 38 .

3. How long India could keep

I believe no one could predict how long India could keep accurately. But, we cant disclaim India is growing in stretch so fast. From the six dimensions of Michael Porter, no matter in factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry, chance and government India has a good behavior just now and in the future. The perspective for India is bright.

905 2005 3 152-154 34

38

Advice for Taiwans software outsourcing industry

1. Taiwan vs. India
<1> Similarity Both of their software outsourcing industry is supported by government. In the recent years, our government has started to pay more attention to our software industry even though Taiwans software is not as strong as hardware industry. Our government held many discussion meeting, develop short-term or long-term planning such as M-Taiwan to promote the value of software outsourcing industry. India government has continually enacted many policies about software development, regarding IT industry as the top priority policies and establishing software research center. India government not only supplies preferential tax convention but also supports, attends lots of international seminar on software, expanding international IT market 39 .

<2> Dissimilarity The degree of setting importance on software outsourcing industry is different. India pays more attention on software outsourcing industry than Taiwan does and regards it as the main important industry in their country. Contrarily, it

39

955 2006 3 96-104 35

seems Taiwan doesnt pay enough attention on software outsourcing as they do on hardware outsourcing. On the other side, India and Taiwan are complementary to each other. Faqir Chand Kohli, the father of India software industry, said if Taiwans hardware could operate with Indian software, the output value of IT industry may be brought up to about 200 billion until 2013. India can utilize Taiwans low cost hardware to develop their domestic software market 40 .

2. Advice for the software outsourcing company

In Taiwan, it is hard to find that companies outsource the whole software system to another company in the general. They just have little demand for software outsourcing service. I suggest software outsourcing companies in Taiwan could make use of the strategies of vertical integration and horizontal integration to build up strategic alliances like a relationship of co-opetition (competition + cooperation) to compete against global software giants such as TCS, Infosys or Wipro etc.

40

902 2005 3 76-78 36

Outsourcing companies also must make sure that the quality of their software. I suggest that these companies should obtain the accreditation of Capability Maturity Model Integration (CMMI) which may help them maintain a high quality process. Besides, low value-added jobs should be outsourced to lower-wage countries, such as China, Vietnam or other south-east Asia countries so we can focus on high value-added jobs. Taiwanese software companies should consolidate a large-scale of software service no matter utilizes strategic alliance, vertical or horizontal integration, merger and acquisition (M&A) to be competitive with global software outsource giants.

3. Advice for our government

For the sake of promoting the quality of domestic software talents, I suggest our government should be more active to better the education of IT not only encourage software outsourcing companies to be the way toward large-scale, but also zealously attract more international corporate setting research center in Taiwan. I think above policies could advance the whole competitive advantage of software outsourcing services.

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On the other side, promoting citizens English ability could help domestic companies be on the way toward earning a world-wide reputation. To follow the precedent of Singapore or Thailand, we can promote Taiwans software branding by English channels as we do like sightseeing. Before on the way toward international, Japan and Korea companies generally shape a good nation image first, and then talk about individual company. This is what we can learn.

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Conclusion
By the six elements from Michael Porter, we dig out that India really grasp the competitive advantage in software industry. Even though India has some drawback to be worried, it is not a big deal to become side effects. I think this is one of reasons why India is looked brightly in the future out of BRICs. On the other side, Taiwan could regard Indias successful experience as our good model. We also should cooperate with India like what Faqir Chand Kohli said, integrate the hardware and software. At the same time, we have to take advantage of our visible hardware resources to assist the development of our software. I sincerely hope that this paper is a good implement to understand Indias national competitive advantage. Apart from that, its also help Taiwan to get more opportunities to participate the value chain in this global world.

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Bibliography
Chinese resources
1. 2. (2007) (Michael E. Porter) (The competitive advantage of nations)(1996) 3. (Kenichi Ohmae) : ( 2007 ) 4. 5. 6. (:2005) (2002) 100 -(2007)

English resources
1. Goldman Sachs global economics team, Dreaming with BRICs: The Path to 2050. N.Y.: Goldman Sachs investment bank 2003 2. Goldman Sachs global economics team, How solid are the BRICs. N.Y.: Goldman Sachs investment bank 2005. 3. 4. Giddens Anthony, The consequence of Modernity. Cambridge: Polity Press, 1990. Ohmae Kenichi, The Borderless World: Power and Strategy in the Interlinked Economy. London: Fontana, 1990. 5. Pete Engardio, Chindia: How China and India Are Revolutionizing Global Business. McGraw-Hill, 2006. 6. Porter, Michael E. The competitive advantage of nations. N.Y.: PALGRAVE, 1990.

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