The Canadian Advanced Technology Alliance is calling on Canadian businesses to forge relationships with their Commonwealth counterparts and partner with Indian firms as an alternative to entering the U.S.
To promote this, CATA has teamed up with not-for-profit organization the Commonwealth Advantage and the Greater Toronto Marketing Alliance to jointly host a business-to-business trip called, “Mission to India,” next month. Launched in September, the Commonwealth Advantage is a private sector, member-based association that encourages Canadian companies to establish ties with other businesses in the Commonwealth, including India.
“It parallels very closely the work CATA has been doing for years on outsourcing to various countries,” said CATA and Commonwealth Advantage executive vice-president Barry Gander. “When you look at the global economy today, the first thing that strikes first and foremost is the tremendous power of the Commonwealth, second only to NAFTA.”
Back in October, the Information Technology Association of Canada announced it had forged a partnership with its Indian counterpart, NASSCOM in order to boost trade and commerce between the two countries.
Aside from obvious similarities between Canada and India such as similar languages, laws, education, accounting and parliamentary systems, India has the world’s fourth-largest and fastest growing economy at more than eight percent growth this year, with half of its Gross Domestic Product coming from the high-tech sector. In the past decade, trade between Canada and India has quadrupled to $2.5-billion, according to CATA.
While large companies such as IBM, EDS and Accenture have established or purchased major development centres in low-cost countries like India, Canada exported $700 million in IT services compared with $466 million in IT services from offshore regions in 2004, according to IDC. Imports of IT services from offshore locations accounted for over $16 billion or three per cent of the Canadian IT services industry in 2004. Indian high-tech exports, on the other hand, have quadrupled to $17 billion in five years.
“The big things I see are getting a piece of the Indian marketplace where the GDP is going up and discretionary spending going up,” said Jason Bremner, director of outsourcing services at IDC Canada. “That type of stuff would say it makes sense to get a piece of that pie.”
While India has enjoyed its reputation as the bastion of global sourcing for many North American companies, a recent article in the Wall Street Journal reported research from consulting firm McKinsey & Co. that said India’s IT industry could face a deficit of half a million workers by 2010. The article, “India’s Talent Pool Drying Up,” linked the shortfall to India’s outdated post-secondary institutions.
Gander, who had not seen the article, disagreed with its findings.
“India has some of the best educational institutions in the world,” said Gander. “People from MIT are going to India to complete their studies. Of the top IT companies in the world, India is second only to America. Educational institutions have had a lot to do with positioning them that way.”
In addition to labour shortages, the article said rising labour costs for entry-level positions like software developers are also to blame for eroding India’s competitive edge over other outsourcing destinations like China, for example. But both Bremner and Gander don’t view that as a negative side-effect of India’s booming high-tech sector.
“Costs, on the whole, are increasing,” said Bremner. “Costs are dependant on individual firms. The price is set by the market.”
Likewise, with an increased knowledge level in its workforce, Gander said it’s only logical that wages have risen as a result. Increasing labour costs are one of the reasons why CATA and the Commonwealth Advantage are getting involved in a direct business way.
“This is a constantly changing equation,” said Gander. “You can’t take a generality and apply it to your own business. Each sector is different within the high-tech industry.”