No longer simply an epicenter of outsourcing, India is riding a new wave of globalization as the economics of the technology business turn it into a regional design and development hub. The subcontinent is seeing an explosion of business and forging IT partnerships with neighbors as diverse and disparate as China, Egypt, Pakistan, Australia and Dubai, as these and other would-be technology players strive to usher in a new phase of tech-driven development to the region, which includes North Africa, the Middle East and the Gulf states.

This new geotechnology axis is destined to have a profound impact on the global IT and technology sectors, and its arrival marks a turning point in the shift of the industry's balance of power from West to East. "We are seeing a whole new age of globalization today," according to analysts at Bengaluru-based Prayag Consulting. "Three countries that are taking full advantage of this paradigm shift are Israel, China and India."

As India extends its connections throughout Asia, Australia, the Middle East and Africa, it will emerge not just as the region's business and technology leader, but as a more powerful player in the global IT sector. That will have a ripple effect on the entire market as next-generation semiconductor and system development--including embedded-systems design--follows trends that arise from the burgeoning domestic and regional economies.

This factor was topmost in the minds of the India Semiconductor Association as ISA convened its 2008 Vision Summit in Bengaluru recently. The organization expects that India will evolve from a design-oriented industry into a major electronics manufacturing hub before the end of the decade.

It was also the underlying theme at another recent event in Mumbai, as would-be regional tech players like Egypt, Australia and China vied for notice from India-based IT service and technology development companies at the India Leadership Forum.

Among the most revealing sessions at the Mumbai event were the "focused country sessions." These informational and networking meetings underscored the spillover effect of India's IT success, pointing to bright prospects for smaller regional players eager to ride India's coattails and become part of the new regional development axis.

Tiny Pakistan is already enjoying the knock-on effect of India's steady rise as a regional and global IT superstar. With a population of 160 million, Pakistan will be the first in the world to complete a nationwide deployment of WiMax wireless communications technology. This boost in infrastructure will help make its technical talent pool more competitive and will serve as another catalyst for regional economic development.

"It's a case of petrodollars at work," noted Shahid Azim, the Harvard-educated CEO of Braintree Group (Islamabad, Pakistan).

Like India, Pakistan has a large pool of well-educated engineering and IT professionals eager to participate in the global IT sector. With the Pakistan economy enjoying robust growth, Western companies are looking to India's neighbor as another source of technical IT talent.

"The idea is to set up R&D centers. It's just beginning," Azim said, projecting optimism that Pakistan will follow India's well-worn path to global significance.

With the aim of unlocking the technology potential of the Middle East, the Gulf and Africa, Egypt's General Authority for Investment (GAFI) also came to Mumbai in search of potential partnerships. Marshaling a 55-person delegation of Egyptian corporate executives and government officials, GAFI mounted an aggressive diplomatic and commercial initiative at the Leadership Forum designed to foster long-term relationships with its historic trading partner, India, and to position Egypt as a player in the evolving regional development hub.

With a GDP growing at 7.2 percent per year and a mobile-phone growth rate of 50 percent per year, Egypt also boasts one of the region's lowest IT outsourcing cost structures--lower than Eastern Europe's--including the world's lowest telecom costs. The nation is undergoing tax, customs and financial-sector reform, and has a talent pool consisting of 300,000 graduates with strong commercial, engineering and science backgrounds. Its unique multilingual heritage with English, French, German, Italian and Spanish language skills also works in Egypt's favor. Multinational investors active there include Mentor Graphics, Oracle, Vodaphone, IBM, Microsoft and Sun Microsystems.

Egypt is also poised to be a leader of regional infrastructure development, having pioneered its own "smart village" technology deployment concept, a model being copied throughout Africa for bringing connectivity, communications and economic prosperity to remote villages. One Indian executive, who recently completed a joint project with a team of Indian and Egyptian engineers, described the country as full of "energy and excitement and a receptivity to new ideas and change."

At the other end of the spectrum, China--already an electronics powerhouse in its own right--also came courting in Mumbai. In pitches to Indian and global IT players at the India Leadership Forum, Guan Rong Rong, secretary general of the Beijing Software Imports and Exports Committee, acknowledged that while "China leads in hardware and infrastructure, India is the global leader in software." That's why China's own software industry is seeking "equity partnerships" with India, she said, and hopes to form what she called "a hub of virtual collaborative networks" to serve the regional and global market.

Partnership feelers also came from the city of Wuxi, where the local government has made a massive investment in a new software park. "We are seeing the beginnings of cooperation and hope for great success with India," said Weize Yang, secretary of the Wuxi Committee of the Communist Party of China.

"We don't see it as China vs. India or either/or, but rather as a partnership," Yang noted, adding that as IT outsourcing becomes increasingly institutionalized in the United States, "it's only natural that companies will begin looking for a second source and a backup to spread the risk to two or three countries."

China needs India because by itself, it lacks the high-end domain expertise in information technology to serve external markets like Japan. "China has an army of programmers, but they do not have project-management experience," one industry observer said.

Then, too, India has a language advantage. Being a nation of English speakers gives it a huge edge over rival China in international markets.

"India sees that it has about 10 years more in the language advantage over China," John Studzinski, senior managing director for The Blackstone Group, said during a private meeting with business executives in Mumbai last week. After that, observers predict, China will begin to close the language gap as well as acquire its own IT skills, and the two countries will be more equally matched competitors.

India and China are two of the three countries poised to take the lead in the global electronics marketplace, according to analysts at Prayag Consulting, who cited Israel as the other.

"With the explosion of technologies, knowledge pools and people are connected as never before, and the rules of the game have changed irreversibly," Prayag analysts said in a research bulletin titled "21st Century Innovation Hubs" that was distributed at the India Leadership Forum. "The death of distance, a result of the wired world we now live in, has opened up possibilities for individuals, enterprises and nations."

“We are seeing a whole new age of globalization today," according to analysts at Bengaluru-based Prayag Consulting. "Three countries that are taking full advantage of this paradigm shift are Israel, China and India."

Indians, many observers have noted, look to Israel's success in technology innovation with great respect, bordering on awe. Some theorize they may see in that beleaguered nation's success many of the same elements of adversity, and diversity, required for the unique alchemy that creates the necessary catalyst for successful innovation.

Smart city

From its new headquarters operation in Bengaluru, Cisco Systems Inc. is developing the network architecture for an $8 billion high-tech "smart city" project in Saudi Arabia as part of a contract it signed in January. According to Cisco, there are at least nine to 12 such smart-city deals in the pipeline. The flight from Bengaluru to Dubai takes just three hours, making India the ideal hub to serve this region.

Following in the footsteps of India pioneers such as Texas Instruments and Motorola, multinational companies like Cisco and IBM Corp. are finding India an ideal location not just as a source of low-cost labor, but as a place to drive their regional and global business and technology development plans. IBM alone employs 76,000 people in India, its second-largest employee base in the world.

Indeed, IBM has put India at the apex of its global IT strategy, Virginia Rometty, senior vice president of IBM Global Business Services, said during her keynote speech at the India Leadership Forum. As the business world moves to greater global integration, IBM's value proposition to its clients increasingly relies on the ability to deliver the best ideas and capabilities from anywhere to anywhere, she said.

"We achieve this by building globally integrated centers of excellence and networking them together," she said. "We do a great deal of asset development for our industry solutions in Bengaluru, jointly with IBM colleagues from software and research."

Industry watchers believe this trend will help propel India from a services-only model to an innovation, or intellectual property-driven, business model.

It doesn't hurt that India is feeling its own pressure from the appreciation of the rupee and a growing crunch of available talent to serve new outsource customers--factors conducive to a new wave of regional business and technology partnerships.

The Asian-Oceanian Computing In- dustry Organization (ASOCIO) IT trade association was formed in 1984 to represent this new, emerging Asian geographical region. Headed by Ashank Desai, ASOCIO has 20 members representing Japan, Australia, Bangladesh, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Mongolia, Myanmar, Nepal, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam. Seven guest members hail from the United States, the U.K., Canada, Spain, France, Russia and Kenya.

But India and its emerging network of regional partners are no longer just focused on serving overseas customers. For the first time, the domestic market is becoming a promising new source of business growth and development.

The spin-off from this new global technology axis is far-reaching. Hard-pressed to meet the surge in local and offshore demand, Wipro has begun setting up its own offshore centers, including a new Atlanta operation, while Infosys, TCS and Satyam already have development centers outside of India in places such as Hungary, Romania, China and Canada.

'Third wave'

With its eye on growing its IT industry from its current $30 billion into the $100 billion range over the next 10 years, India today reminds some observers of the historic three-wave model of the "Asian miracle," in which Japan, South Korea, Southeast Asia and now China have successfully moved up the value chain from basic component makers to system builders, to suppliers of locally branded, global brands.

It's this last step--or third wave--that is currently on the minds of India's business leaders. To get there, India's IT sector will have to concentrate on delivering "complete solutions," not just business process services, to its business partners, said Sudhakar Ram, chairman and managing director of Mastek Ltd., one of India's largest IT service providers. They will have to move beyond so-called "cost arbitrage" to "delivering strategic impact to their customers." And they will have to become providers and developers of intellectual property, he said.

To make this value-added leap, India's IT sector will have to concentrate not just on providing process services, but on developing and differentiating its customer solutions with its own intellectual property in the form of methodologies, frameworks, tools, platforms and packages--in other words, products, not just services. To do this, it will have to "build a cadre of domain experts in their target industries or develop strong partnerships with firms that can bring in that expertise," Ram said.

Finally, domestic IT companies will have to "make a move away from an India-centric approach to a truly global approach," meaning they will have to operate as a network across countries and by harnessing the full power of the global capabilities in serving every local customer better," he said.

It's an ambitious goal, and with China still focused on semiconductor and basic electronics manufacturing and mired in the first and second waves of technology development, it just might be the one that puts India ahead of its neighbor to the north in today's intensely competitive global market.

Nasscom, the premier trade body of the IT industry in India and organizer of the India Leadership Forum, recently announced the key findings of its "Strategic Review 2008."

The organization said that software and services exports are expected to exceed $40 billion and that the domestic market is expected to touch $23 billion in fiscal 2008. Positive market indicators and a strong track record support a target forecast of $60 billion in software and services exports and $73 billion to $75 billion in overall software and services revenue by fiscal 2010.

"The Indian IT industry has been rapidly evolving; growth is on track to achieve, if not exceed, the targets for 2010," said Nasscom president Som Mittal. "The trends are interesting, and findings indicate that the domestic market is poised for growth, with IT spending trending upward, particularly by the government. We also see an increasing level of specialization within the industry both in IT services and BPO [business process outsourcing] exhibiting signs of a rapidly maturing industry."

However, he said, "there are global macroeconomic challenges; talent, manpower and infrastructure issues will need to be addressed and resolved, collectively. The industry has shown resilience and has taken several steps to mitigate the impact."