India, because of its vast pool of skilled and inexpensive engineers, has arguably been the hottest location in the world for such outsourcing. AOL said that it will employ 100 engineers to build software for Netscape and AOL products. The annual salary for such employees averages between $7,000 and $8,000.

AOL Time Warner is the world's largest Internet access provider and world's largest media comany. Netscape India will initially work on projects for iPlanet E-commerce Solutions, a joint venture between Netscape and Sun Microsystems Inc. iPlanet provides electronic commerce services and software.

In the past few months alone, similar announcements have come fast and furious: IBM will open a Linux research lab employing 500; Nortel Networks, which already has 1,300 developers in India, will spend $350 million in the next three years and employ 500 additional R&D scientists; Cisco Systems will spend $200 million on a development center; and Deutsche Bank is dropping $4.3 million to build a 50,000-square-foot development center that will eventually house 550 software professionals.

Henry Blodget, an equities analyst at Merrill Lynch, says that today's software outsourcing mirrors what has happened in manufacturing over the last 40 years. "The Internet allows us to shrink geographical differences. India has excellent technologies, a high level of tech and software expertise, and with the Internet, it doesn't matter whether your programmers are 50 miles away in Redwood City or halfway around the world in India," he says.

Blodget points out that today's economics requires companies like Intel and AOL to farm their work out to low-cost centers such as India. "Their technologies are excellent over there, and companies like AOL would be foolish not to take advantage of the arbitrage between compensation and costs," according to Blodget.

A recent report from Deutsche Bank says that global spending on information technology will increase by 5% to 10% this year. That report singled out India as the one country that stands to benefit the most, and noted that it is the country least likely to be affected by a slowdown in U.S. IT spending.

The software industry alone employed some 250,000 people by 1999, according to an estimate by India's National Association of Software and Service Companies, a trade group. But it has plenty of room to grow. Overall, global software exports from India are estimated to be $4 billion for 2000, according to the National Association of Software and Service Companies, and will rise to $6.3 billion for 2001, with predictions for a further grow of roughly 50% every year until 2008, when the figure is expected to reach $50 billion.

India clearly has the momentum and infrastructure to become a major IT player, and recent news suggests it is rapidly establishing critical mass. A study released yesterday from the Asia Private Equity Review, a Hong Kong-based journal, said venture capital money flowing into India will triple this year to $2.5 billion. The study suggested that India will soon overtake Taiwan in the amount of VC money it receives for technology startups.

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Media Lab Expands To India
15 February 2001, Forbes magazine, By Arik Hesseldahl

NEW YORK - Now that it has one of the fastest-growing technology work forces in the world, India will soon have its own outpost of a new economy vanguard: a Media Laboratory of its own.

Officials with the Media Lab at the Massachusetts Institute of Technology in Cambridge, Mass., confirmed it is in talks with the Indian government to set up a new Media Lab facility in India. Setting up one of its vaunted Media Labs in India is a deal, which could be worth as much as $1 billion, would be funded partially by India's government and by the sponsors recruited both by MIT and by the Indian government. That was a major coup for India and a golden opportunity that a country like Taiwan surely wishes it was able to snare.

"We're trying to transfer some of the Media Lab's know-how and culture and work with partners like the government, the private sectors and NGOs [non-governmental organizations] to solve problems," says Media Lab's executive director, Walter Bender.

With so many American high-tech companies setting up development centers there, among them Microsoft and Sun Microsystems, the new lab will both give a boost to India's already accelerating IT economy. In addition, the lab will conduct research to use technology to help improve education in the country.

Home grown software companies like Infosys, which employs more than 9,000, and Wipro, with 7,000, attract software development contracts by charging lower rates--almost a third as much per hour--than do contractors in the U.S. And over the last several years, revenue per worker has doubled to reach a rate of about $81,000 per head.

"Name almost any U.S. technology company and they have operations in India," says Venkat Sambamutri, a New York-based writer for SiliconIndia Magazine.

Another export from India besides software is IT executives. Some 130,000 Indians earn engineering and computer science degrees each year, and many of them leave the country for opportunities in the U.S. and elsewhere. That's a source of sponsorship funds that Bender hopes to tap to help fund Media Lab Asia.

"There is a lot of interest among the Indian expatriate community in helping India," he says. That help could take the form of developing the entrepreneurial environment in India at the local level to help solve the country's problems.

The new Media Lab is likely to help produce a new generation of high-tech executives. The original helped sprout companies like Firefly.com, which was acquired by Microsoft in 1998. More recently, research at the Lab was behind children's site MaMaMedia.com.

The new lab will not be Media Lab's first venture overseas. It launched Media Lab Europe in Dublin last year. It would have an annual budget of at least $50 million and would be located at several sites throughout the country.

Says Bender: "We can't reach out and touch a billion people from MIT. But we've met a lot of brilliant and talented people who have good ideas, and if we have the capacity to help them, we'd like to."

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Pentamedia says to buy US-based Improvision
21 February 2001, Reuters

BOMBAY - Indian multimedia software firm Pentamedia Graphics Ltd on Wednesday said it is buying California-based movie production company Improvision Corp for $19.8 million in stock. Pentamedia will offer 3.3 million Global Depositary Receipts to acquire Improvision, the company said in a statement. It said the acquisition would help strengthen its pre-production and post-production skills and also its distribution reach in the United States.

Improvision produced the animated film "Sinbad-Beyond the Veil of Mists" helped by Pentamedia which was released last year and is working on a sequel. It is also making two live action films. Pentamedia said it expects potential revenues from gaming, merchandising and home videos as a result of this acquisition.

Pentamedia which is India's leading entertainment software firm has been on an acquisition spree recently and has shareholder permission for more. It acquired U.S.-based Film Roman Inc last year and has also purchased three local content firms - Media Dreams Ltd, Mayajaal and Krish Srikkanth Sports and Entertainment Ltd.

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Reliance, Infosys among best managed Asian companies
19 February 2001, Euromoney magazine/ Press Trust of India

LONDON: Two Indian companies - Reliance Industries and Infosys - have been voted as the best managed companies in their field in Asia. According to the fifth annual survey of the best managed companies in Asia, Reliance Industries tops the petrochemicals sector for the second year in a row, while Infosys leads the Information Technology (IT) sector.

Reliance Industries, India's largest private sector company, recorded sales turnover of Rs 21,564 crores ($4,619 million) and net profit of Rs 2,106 crores ($451 million) for the nine months ended December 31, 2000.

In the IT sector, the survey says, in 1999, Infosys was listed on the New York's Nasdaq exchange and it has soared from $34 to over $270. Infosys was an unknown company back in 1992. But thanks to the IT revolution the company chairman M R Narayanamurthy and six co-founders are all multimillionaires today. Two other Indian companies NIIT and Wipro have taken the second and third position while in the construction sector Gujarat Ambuja occupies the second place next to Malaysia's Gamuda.

In the iron and steel sector, Tata Iron and Steel (TISCO) emerge as the third best managed company next only to Ponang Iron and Steel of Korea and Jakarta Kyoei Steel of Indonesia. In the leisure sector, India's East India Hotels come third next to Shangri-La Asia of Hong Kong and Star Cruises of Malaysia.

The magazine ranked Asian companies based on a survey of market analysts at major banks and research institutes across the world. The top three companies in each of the countries and sectors were ranked on the basis of market strength, profitability, growth potential and quality of management earnings. The company's current share price was not taken into account.

According to the magazine, in an earlier study of 146 Indian companies, Reliance Industries was ranked as the biggest creator of intangible value - knowledge, intellectual capital and brands - for the period March 1999 to February 2000. Infosys was ranked eighth for the same period.

Of the 26 sectors covered in the survey, seven are dominated by companies from Hong Kong. They include sectors like banking and finance (HSBC), breweries and distilleries (San Miguel), conglomerates (Hutchi Son Whampoa), leisure (Shangri-La Asia), property (Sun Hung Kai Properties), retail (Giordano) and textiles (Li Fung). India and Singapore lead in two sectors each while Japan and Taiwan lead in one sector each. Singapore leads in airlines and aviation (Singapore Airlines) and transport and shipping (Nepture Orient Line).

Japan tops the small caps (Komatsu) sector and Taiwan, the technology (Taiwan Semi-Conductor Manufacturing) sector. China, Malaysia, Indonesia and Philippines lead in three sectors each. Malaysian companies top sectors like autos and auto parts (UMW Holdings), telecom cellular (China Mobile) and utilities (China Light and Power).

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Virtual Virtue - Wash Away Your Sins on the Web 26 February 2001, Business Week magazine, By Manjeet Kripalani

Hinduism's most sacred festival, held every 12 years and ending Feb. 21, drew 20 million pilgrims to India's Ganges River seeking to wash away their sins. Even pop stars Madonna and Paul McCartney came. But for pious Indians overseas, getting there can cost upwards of $2,500 a person. So an Indian entrepreneur has a clever alternative. Would-be dippers can log on to “webdunia.com” and take a free virtual dip. They scan in their pictures and, at the appointed hour, see cutouts of their heads superimposed into a Ganges purification scene.

Site founder Vinay Chhajlani says more than 2,000 Indians have taken a virtual dip. And although the site has corporate sponsors, Chhajlani won't make money on it. ''It's our social contribution to helping spread Internet use in India,'' he says. He hopes it will draw advertisers to the portal that hosts it. Since ancient Hindu texts did not foresee the Internet Age, it's questionable whether a virtual dip really counts.

Reuters says, Allahabad's Maha Kumbh Mela Hindu festival, billed as the world's largest gathering, wound down Wednesday, with the organizers saying almost 100 million pilgrims had taken dips in the holy Ganges River since it began. It exceeded the 70 million pilgrims expected when the event began Jan. 9. The event's peak was on Jan. 24, when an estimated 30 million pilgrims bathed in the river.

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