India and its Ironies

Several entrepreneurs I have talked to have felt its hard to have a team in India. Some of the reasons were: the time difference and the cost of managing the associated overhead, cultural mismatch in terms of incentives (in the valley people understand stock options, but in India cash is king), not enough tribal knowledge in the country's knowledge centers (Bangalore, Pune etc) on how to run a capital efficient small business.

I hadn't however heard of companies bailing out of India. Not until now. Read the post from Munjal Shah. The main issue appears to be steep increase in wage expectations.

Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first 5 years of his career to get from 1% to 10% of his equivalent US counterpart. He then jumped from 10% to 20% of his US counterpart in the next 1 year. During his time with us (less than 2 years) he jumped to 55% of the US wage. In the next few months we would have had to move him to 75% just to “keep him at market.”

If its not wage inflation, its the infrastructure. Andrew Leonard of Salon highlights the irony in Nokia manufacturing cellphones that have a flashlight feature:

The spread of cellphones in India is a data point indicating how new technology allows developing nations to leapfrog some of the stages laboriously struggled through by the developed world. But the flashlight feature simultaneously symbolizes how far India has to go. It's one thing to be able to skip the costly logistics of wiring a huge nation, telephone pole by telephone pole, but the hundreds of millions of Indians living in poverty will still need power and roads and clean water if their living standards are to be improved, no matter how many gadgets their Swiss Army cellphones are equipped with.