Monday, January 7, 2008

Story of Nasscom

Business India, February 19-March 4, 2001

Power Lobbying

Shivanand Kanavi

Lobby: 1. Solicit the support of (an influential person) 2. Members of the public seek to influence members of the legislature 3. Frequent a parliamentary lobby 4. Get a Bill through the legislature by interviews, etc in the lobby.
(Concise Oxford Dictionary)

Though it sounds like a harmless part of any democracy in this sanitised version, lobbying is yet to attain a respectable position in India. In the United States, ex-presidential candidates, ex-senators and ex-ambassadors sport the description "lobbyist" with no hesitation. In India it brings on the image of a khadi-clad fixer, with paan in the mouth and toting a mobile phone, hanging around Delhi or various state capitals. Alternately, it could be a shadowy bagman representing corporate interests and servicing various MPS and ministers, seeking confidential Cabinet information or planting starred questions in Parliament on ill-starred corporate rivals.

Of course, come February and the Central Budget, 200-odd industry associations in the country seek an appointment with the finance minister - or at least a joint secretary in finance and other ministries - and present their wish list. Having done their job they vanish till the next February or the next consignment of Chinese goods.

In the first couple of years of liberalisation, the old trade associations, CII (Confederation of Indian Industry) and Ficci (Federation of Indian Chambers of Commerce and Industry) played a major role in pooling public opinion about deregulation and liberalisation and in showcasing India as a destination for foreign investors. Soon, the first flush was over and the economy started opening up for global competition. The protected laggards began feeling the pinch as never before, and the Bombay Club and its clones emerged. Large federations of industry associations beset by contradictory pulls from user industries and producer industries started singing a protectionist tune. The sheen gained as liberalisers and wannabe global players was lost in no time by many entrepreneurs and industry associations.

In this scenario, if there is one organisation that has lobbied for policy changes openly, transparently, and in a well-planned manner in India and abroad on a wide variety of subjects and achieved considerable success, it has been Nasscom.

Today, Nasscom members and its president Dewang Mehta have become a face of corporate India that is welcomed in any part of the globe and listened to with respect. How a bunch of computer nerds and a suave spokesman achieved this is the story Business India looked into.

Nasscom started its activities in December 1988 (see box Success has many fathers ... ) in a low key. The first major challenge it faced was effectively articulating the problems of software companies to the government. Though exporting most of their services, they were not getting the income tax benefits that other industries were getting. Adding to their woes, they were not getting bank credit. In 1991, Nasscom took the matter up for lobbying. "Banks saw no land, plants, and machinery in software companies; the entrepreneurs, moreover, were technocrats and had no great personal wealth of their own to use as collateral. Thus, income tax exemption was crucial. We were not asking for special treatment but to be treated on par with other industries," says Harish Mehta, then chairman of Nasscom. Industry leaders and Dewang Mehta, who had just joined as executive director, pleaded their case with Dr Manmohan Singh, who was very sceptical of the demand. "Vittal, then in the Department of Electronics, was very supportive and promised the finance ministry that the software industry would achieve exports of about 400 million by the year-end. The target was impossible to achieve, but we said we would do our best. Since the export did not involve tangibles, finance ministry officials were hesitant to give the benefit," adds Harish.

"I had to give up my software company Fractal Graphics in London and come back to India due to family obligations. I was told that running the secretariat of Nasscom was a light job and I could work two days a week there and do my own business during the rest of the time," recalls Dewang.

Success has many fathers ...

The cliche is proving to be particularly true, as Nasscom has gained great visibility recently. There are several people who claim to be founders, co-founders of Nasscom as if it were a new startup from the Valley.

In the beginning there was only the Computer Society of India, which was an organisation of academics and professionals, but did not address IT industry concerns. So, a new association - Manufacturers Association of Information Technology (MAIT) was formed in 1982. True to its name, it was an association of primarily hardware manufacturers. "In a council of 15-20, there were two representing dot matrix printers,” recalls F.C. Kohli. It reflected the infancy of software industry and the then existing mindset that said “bury a PC or a mini and the software is almost free”.

Software exporters had specific problems, which were not being addressed. A software delegation, which had gone to the US for a road show, sat together after a tiring day in a Boston bar and brainstormed about a separate software association naturally, all those who were in that ‘Boston Soctch Party’ claim to be founders of Nasscom.

Then there are stories of dinner at Vijay Mukhi’s house, scotch again at the Sea Lounge (Taj, Mumbai), brainstrorming in Bombay hsted by Harish Mehta, in Bngalore by Nandan Nilekani and in Delhi by Saurabh Srivastaba. Essentially, it all came from dissatisfaction with MAIT. Two founders of MAIT- Prem Shivdasani and Ashok Narasimhan- were also roped in. And a body called Nasscom was registered, with the following signatories to the MoU: Prem Shidasani, Harish Mehta, Saurabh Srivastava, Yash Pal Sahni, Lalit Kanodia, K. Pandyan and Ashank Desai.

The late Prem Shivdasani, the first chairman of Nasscom, is credited with coining the name Nasscom (National Association of Software and Service Companies). It was prophetic, since it included the then non-existent IT-based services.

"Frankly, I was not happy about the formation of a new body,” says soft ware pioneer F.C. Kohli. “The IT industry itself was nascent and I did not like a fragmentation. I also firmly believe that hardware and software are two sides of the same coin. When the people who wanted to start Nasscom saw me, I blessed it, though I felt bad about it,” he says. “Initially, it was a small organization, but the real renaissance of Nasscom took place with Dewang Mehta. He was a charted accountant and also a software man. In those very early days he played with graphics software, which is a very complex software. He has worked very hard. In fact, he had not other life than Nasscom. But more than anything else, he connects with people,” sums up Kohli. And the rest is history.

He took to lobbying like fish in water. He had seen his father lobby for pharmaceutical companies among the MPS in Delhi during his childhood. He managed to get endorsement from 40 MPS for the income tax waiver on software exports and waited for the budget proposals with bated breath.

"We were not allowed inside the Parliament during the Budget session. I still remember waiting outside Parliament house the whole day with Harish and buttonholing everybody who came out, trying to find out what was happening inside, where a historic budget was being presented by Dr Manmohan Singh," recalls Dewang.

Singh gave a one-year waiver in the 1991 budget and the software industry was ecstatic. Suddenly, Nasscom gained popularity within the industry. "That was our first tangible victory and we had proven our point that a focused association like Nasscom was needed to lobby for the software industry, as against general ones that existed then," says Harish Mehta. "We worked so hard to achieve it that the promised two days a week evaporated in no time and I never looked back from my Nasscom commitment after that," says Dewang. This taste of victory was a turning point for Nasscom and for the Indian software industry.

Every industry association lobbies for protection or concessions with the government. But dealing with intangibles like software was new to bureaucrats and ministers. Come every February and each budget, and Nasscom had to lobby to get an extension on tax exemption. Finally, in 1997, P. Chidambaram, then finance minister, who was software savvy, gave the income tax benefit to software on par with the rest of the industries till 2002, as allowed under WTO. But an anecdote from 1997 illustrates the problems involved in educating government officials. The government had proposed a 5 per cent duty on software imports, whereas Nasscom had asked for zero duty. This in itself amazed some people, who asked: "Are you not afraid of competition when all other sectors are asking for protection?" The reason was simply that imported software was being used to provide software services and, in any case, IT was a global industry and one had to use best of the breed products. "Chidambaram, then finance minister, asked irritably: 'You have billion dollars in exports, can't you pay 5 per cent duty?' We explained that the import duty, even if imposed, could become impossible to implement since software can be downloaded through Internet gateways. An officer immediately piped in: 'But sir, we can make a customs officer sit at their gateway and charge the duty!' He had not understood the difference between a gate and a gateway. But Chidambaram immediately understood our point and relented," says Dewang.

The billion-dollar barrier was a significant one. Once the industry crossed it in exports in 1997, everybody took notice, both in India and abroad. While it is true that the growth in exports is primarily the achievement of software companies, Nasscom from the very beginning has been a great facilitator. For example, it has regularly organised conferences and seminars abroad to tell the India story. "The delegations to these seminars comprise any member company which applies by the deadline without any discrimination. The seminars end with actual deals being signed. We have conducted over a hundred of them in a short period of time. Even now, when the US ambassador says that over 266 of Fortune 1000 US companies are outsourcing mission critical software to India, we have to keep targeting the other 70 per cent who are not," says Dewang.

A major concern for the Indian software industry, of course, is its very heavy dependence on the US market. Over the last few years Nasscorn has taken initiatives in that respect and organised marketing seminars in Europe, Japan and Oceania. "Nasscom has done a wonderful job marketing and brand building for Indian software abroad. We have assisted them in Japan with the Indo-Japan business council for the last three years," says Amit Mitra, director-general of Ficci.

The result is that today only 58 per cent of Indian software exports are to the US and the rest is primarily divided between Europe and Japan. "Nasscom, in fact, is running a programme called Ninjas (Nasscom India Japan Alliance in Software) which will help train hundreds of Indian software engineers in Japanese language and culture. The Japanese market has been the toughest to crack. The real breakthrough came with Y2K, when about 30 Japanese companies came with an SOS to Nasscom. We put them in touch with the entire Indian software industry and their problem was solved. That is how today there is tremendous interest in Indian software in Japan," says Dewang.

This also underlines how Nasscom operates and why it is so popular with its members. The association sends tonnes of research and information regarding market conditions, government policies, visa and regulatory issues in other countries, Indian government notifications, and so on to all its members. "I don't think any other association sends as much mail to its members. I get about 200 mails from them, giving me really useful information. The secretariat is doing a great job," says a member. "All these services cost money and we, of course, remove anyone who does not pay his membership immediately," says Arun Kumar, MD of Hughes Software and treasurer of Nasscom. Nasscom today has a budget of Rs10 crore collected largely from membership and conferences. The secretariat, however, is extremely slim, consisting of only 19 people. The frugal atmosphere, high pressure of deadlines, along with long working hours in the Nasscom office in Vishwa Yuvak Kendra in Delhi reminds one of a software start-up rather than an industry association.

Mr. Nasscom

The following narration by Dewang about his activities in the last week of January and first week of February on the eve of the Nasscom 2001 conference in Mumbai speaks for itself:

"Last Monday was the advisory committee meeting for the IT ministry. Later there was an industry leadership lecture organised by Nasscom, where John Chambers, CEO of Cisco Systems, spoke. It was followed by a dinner hosted by Pramod Mahajan in honour of John Chambers.

Late in the night I flew to Paris. After a long time France is looking very positively to India. It has taken eight years. We not only had a successful road show, but also signed a MoU with Syntec, which is Nasscom's counterpart in France. Wednesday evening I went to Aachen, Germany, and had a road show there. The next day I was in Berlin where we had not only a promotional seminar but in the afternoon actual contracts were signed. After coming back on Monday we had a meeting with finance minister, Yashwant Sinha. Tuesday I had three major TV interviews.

On Sunday I worked on the review, but in the afternoon flying classes. Flew till Mathura and came back. Yesterday I had meetings with Canadian, French, and US ambassadors, since for the first time we are having a session in the Nasscom conference with the ambassadors. Then I came to Mumbai in the evening, since I had to supervise the arrangements at Turf Club for a gala dinner during the conference, which will also have a fashion show. Then I went to the exhibition venue at the World Trade Centre. Then I had to meet a journalist. Checked into the hotel at 4 am and after an hour’s rest I just checked out at 5.30 am to leave for Bangalore by the early morning flight. I will be inauguration Mindtree Consulting’s office there” .

To doublecheck whether he was pulling a fast one on us, with all this namedropping, we spent a day with him. It turned out that his to-do-list actually increased a time went by. He had worked 48 hours straight but could not even catch forty winks on the first flight out of Mumbai to Bangalore, since he fixed up an in-flight interview with us. On top of this, Sanjay Khan, bollywood actor and producer who was on the same flight, to join the board of a new media company he'd floated.

The man is a total workaholic. “Dewang works for Nasscom at great personal sacrifice. He is on the road for more than 15 days a month. That he is not married might have helped, but he is dedicated person. When Nasscom was not very big and did not have many resources for his travel, he was using his own frequent traveller coupons and I think the credit for what day has to go requires certain human qualities and I think Nasscom has been very fortunate in having him. It perhaps happens to one in 100 organisations,” says none other than F.C. Kohli. Tall praise coming from a man of very few words.

The visibility Dewang gets in the media is mainly due to his hardwork, but there are detractors in the industry who think that he gets more exposure than the elected chairmen even though “he is just an employee”.

Dewang seems quite sensitive to this criticism of hogging the limelight. In fact, he was hardly in the centrestage in the 20-odd sessions of the recently-conducted Nasscom 2001 and kept himself in the background. Of couse, cynics might say, “so what, he will have his 361 days.”

However, this manic is not all work and no play, he loves flying and is on his way to get a pilot licence. His passion is filmmaking and fashion design. In fact, when he was hardly 20 and a young chartered accountant, he went to UK to receive a prize in the Commonwealth Film Festival for a documentary he had made called Garvi Gujarat. That is where he met Robert Kitching, a pioneer in computer graphics, who inspired him enough to get a BS in computer graphics from the Imperial College in London. Since his father got worried about his son’s inexplicable career path, he also finished his ICPA on the side, a UK accounting degree, Making a full length Bollywood masala film remains his ambition.

"Besides lobbying in India, Nasscom has been very successful in lobbying abroad as well," says Mitra. "We collaborated with them and did our bit about the H1B visa issue, as it unravelled in Washington, through the Joint Indo-US Business Council. But they worked really hard and in a focused way and achieved excellent results," adds he.

But the story of lobbying abroad does not start with visas. It goes way back. In 1993 Nasscom was the first industry association to appoint a fulltime lobbying firm in Washington.

The association has been most proactive in IPR. For example, in 1994, Nasscom started its anti-piracy initiative in India when IPR was becoming a major issue in Indo-US relations. Nasscom took up the campaign against software piracy and started conducting well-publicised raids. Today piracy has come down from 89 per cent to 59 per cent -largely due to awareness within the software industry and the corporate sector - though it continues with home users, small businesses, and some government departments. "We are way ahead of China in this respect and this is one of the reasons why US IT companies were attracted to investing in India," says Dewang. It was a master stroke, and gave immediate visibility to Nasscom in Washington. The Department of Commerce and the US trade representative, who was threatening actions under Super 301 against all and sundry for violating IPR, were pleasantly surprised to find an ally in India.

Again in 1995, the US trade representative (USTR) told a delegation of Nasscom that the copyright laws were not strict enough in India and they were contemplating using Super 301 over India. The Nasscom delegation immediately advised her to hold on and said they would lobby with the Indian government to change the copyright laws. "The USTR could not believe us. But we explained that if they imposed Super 301, it becomes politically impossible for the Indian government to change the laws, since it would appear to have buckled under pressure. Whereas, if the Indian IT industry lobbies for change, then the government will easily see reason," says Dewang. The strategy succeeded and gave a lot of leverage to Nasscom with USTR. It also helped bring more and more dedicated India development centres for US companies into India, as they felt more secure. Today, even data is being processed in India in back-office operations. If the relevant changes had not been made in copyright, most corporations, credit card companies, and banks would never have let go of data, which they, carefully guard.

Nasscom's most recent and remarkable achievement has been its role in the liberalisation of the telecom sector - the graveyard of many a telecom investor. Nasscom first targeted the Internet infrastructure and lobbied for allowing the emergence of private ISPS. When the government allowed private ISPS in 1998 - these were essentially bandwidth resellers for VSNL - Nasscom lobbied for allowing them to set up their own international gateways. This faced a lot of resistance since, as everybody knows in this age of convergence of data and voice, these gateways can willy-nilly be used as bridgeheads for breaking VSNL'S monopoly over voice services as well. Today the government has agreed in principle to bring forward the 2004 deadline for VSNL'S monopoly status to 2002. It is also taking serious steps towards privatising VSNL. Such moves would have been unthinkable hardly a year ago. The campaign for bandwidth started way back in January during Nasscom 2000. The release of the Nasscom-McKinsey report on India's software future in December 1999 which postulated an achievable horizon of $50 billion of exports by 2008 set the ball rolling.

Once the figure of $50 billion sunk into the Indian psyche, Nasscom began popularising the necessity for removing bottlenecks in the quantity and quality of "bandwidth", a word known thus far to only hard core techies. Nasscom clearly pointed out that if the bottlenecks were not removed, the nation would lose $22.5 billion in IT-enabled services, e-commerce and software to other more lucrative international destinations. And along with it, about 6.5 lakh new jobs. Even politicians in UP can understand such numbers.

Clearly Nasscom's strategy of projecting the carrot and the stick has worked. In less than a year India is seeing the results of Operation Bandwidth. The domestic backbone of DoT, which had 34 Mbps capacity, is being upgraded to 2.5 Gbps by March 2001 and the international bandwidth, which was a meagre 300 Mbps and had a long waiting period, has jumped to 800 Mbps. VSNL and DoT have dropped charges on lease line and international circuits at times by 90 per cent. IT-enabled services are employing about 60,000 people and generating about $500 million in revenue. However, this is not the first time that Nasscom has used a report from an outsider effectively. It happened in 1992 as well, with the World Bank report on Indian software. In 1991 when IT had very low visibility, Nasscom found out through the Department of Electronics that the World Bank is working on a report on Indian software capabilities. "We managed to work with the WB team in producing the report and then used the same report to gain much required visibility," says Harish Mehta, CEO of Onward Novell and the then chairman of Nasscom.
Dewang's slogan 'Roti, kapda, makaan, bijlee, and bandwidth' is finally looking credible. It might not even be too surprising to soon find the IT industry and Nasscom lobbying for the much-needed power sector reforms. Already, IT minister Pramod Mahajan is saying in public that without assured power supply IT parks will be useless. Recently, power minister Suresh Prabhu was heard telling a friend: "I wish I get a Dewang for the power sector."

CII Ficci Nasscom

Members 3900 540 Chambers and 800
2,000 corporates

Budget 100 crore 18 crore 10 crore

Employees 450 350 19

Offices 23 in India, 8 abroad 25 in India and 2 offices 1
and 4 reps abroad

"The access Nasscom enjoys in the government in all ministries from the PMO to telecom, industry, commerce and finance is amazing," says Mitra. One achievement of Nasscom, and of Mehta in particular, is in converting the IT ministry into a valuable ally within the government, rather than an adversary. In fact, when the ministry was created, most people within the IT industry had said: "We have grown because we did not have any government interference. Now why create a ministry to spoil the sport?" Today Dewang and Pramod Mahajan have developed close ties, leading to easy access within the government for Nasscom. The friendship has drawn jealousy among some in the industry, more so when Mahajan has half jokingly begun introducing Dewang as the minister of state for IT. Perhaps it has fuelled Dewang's political ambitions as well. It certainly led Dewang to talk more of 'nation-building' and less of software. His Website says that he intends to contest the next Parliamentary elections. However, it is interesting to note that Pramod Mahajan had not even met Dewang Mehta till a year back. It is another proof of Dewang's people skills that software pioneer F.C. Kohli talks about. "Dewang is very hardworking, dedicated, has integrity, but most importantly he connects with people," says Kohli. "He has political ambitions but within Nasscom, he does not play politics."

Nasscom has taken up two serious projects as part of its mission. One is revitalising the Indian technical and engineering education to provide a high quantity of high-quality engineers to achieve export goals of $50 billion. This is a major initiative and creating a separate industry fund for this purpose is also being considered. The initiative will obviously be welcomed, as it will have far deeper significance than just munificence of some successful NRIS in regard to their alma maters. "There is serious discussion going on among us on how to raise the standards of the 43 regional engineering colleges to those of IITS," says Dewang. Narayana Murthy's speech in the Nasscom Industry Leadership series during the recently concluded Nasscom 2001 conference was in fact devoted to education.

The other initiative is directed towards making IT a part of common man's life, and introducing IT in governance and in education in a big way. This will mean for example; increasing use of IT in the RTOS for vehicle registration, land records, income tax, customs, municipal taxes, courts, and several other departments that interface with the public. This will obviously remove to a great extent the scourge of touts and agents and make the process more transparent and remotely operable from Internet kiosks without the necessity of visiting faraway government offices and queuing outside them. The use of Internet and video conferencing can bring a lecture by an IIT professor or a scientist to every school and college thereby bridging the divide and using scarce educational resources more intelligently.

However all these require time spent in championing them and demonstrating prototypes and so on, which Nasscom can effectively do. The result besides modernising large part of common man's life will also create a major market for software services within the country.

This is not to say that Nasscom does not have dissent among its leading lights. Without open and self-critical views, any such organisation is likely to go to seed. For example, past chairmen of Nasscom, Saurabh Srivastava (chairman of IIS infotech) and Harish Mehta (CEO of Onward Novell) are sounding cautionary notes. "Nasscom must save itself from becoming a victim of its own success. The accomplishments of the past have led to some sectors having unrealistic expectations from Nasscom, many of which are not in its purview at all. Nasscom cannot resolve systemic problems that plague the Indian economy as a whole. Nasscom would be doing a disservice to itself by diluting focus from its core agenda. We must learn and practice the art of saying 'No' when faced with such demands," says Harish Mehta.

However, Dewang is unfazed by dissent. "I have learnt much from Tarun Das (director-general, CII) and Amit Mitra, who are handling complex issues and large organisations like CII and Ficci with contradictory pulls. Within Nasscom we have openness and I operate within the mandate given by my executive council. If I trespass it anytime I am, of course, open to criticism," says Dewang.

One major challenge facing the IT industry is the new phenomenon of startups, many of which are involved in products rather than services. Will Nasscom, dominated entirely by the service companies, be able to nurture them as well? "Our membership grew by 200, a hefty 33 per cent in one year. Obviously, most of them are startups. We have started incubation networking within Nasscom and will give them all assistance. In fact, in the projected $50-billion target we expect nearly 20-30 per cent to come from product exports. While large established companies will contribute to it, a lot is expected from the startups," replies Dewang.

When the going is good it is easy to do well but as competition from other countries builds up and as the US economy goes through a trough the task gets more challenging. Clearly Nasscom's work is cut out:
• Continued marketing of the "India story". Focusing on CIOS of the other 70 per cent of Fortune 1000 who are not outsourcing from India.
• Organising more focused marketing on specific skills in Indian companies in Internet enabling brick and mortar companies (e-biz), software skills in communications, optical networking, embedded software, and wireless technologies.
• Participating in new educational initiatives for upgrading quantity and quality of IT manpower in India.
• Dealing with the slowdown in the US economy and turn the adversity into an opportunity.

Dewang and Nasscom's immediate agenda is:
• Open 10 offices in India in 2001, Mumbai, Bangalore, Hyderabad, Chennai, Pune, Ahmedabad, Chandigarh, Lucknow, Kolkata and Jaipur.
• International offices in Geneva, London, Tokyo, Washington DC, San Jose, and Sophie Antapolis (France) during 2001 and 2002.
• NICE: A National Internet Center of Excellence, nucleated by Nasscom, to promote the Internet in local languages, for creating standards for content building and delivery, and researching new technologies.
• NISG: National Institute of Smart Governance to promote e-Governance (in association with the Government of India).
• Disaster Management Task Force:
Nasscom will help create the IT infrastructure for disaster-prone areas of India. This is a reaction to the earthquake disaster in Gujarat.
• Work with Civil Aviation ministry to convert airports in Hyderabad, Bangalore, Ahmedabad, and Pune into international airports so that global movement of IT professionals becomes less of a pain.

Personalities aside, growth and particularly fast growth, brings in its own problems. A course correction is required from time to time, be it an organisation or an individual. Interpersonal problems can exist in any organisation, whether it's of the old economy or the New Economy or even a housing cooperative society. What's central is that a dynamic industry is created, which can bring great wealth and skills to India. This has charged up a sleeping nation, continuously wallowing in sectarianism and wasted opportunities. It has made the ideas to-riches story a reality rather than a Grimm's fairy tale. Its 50 per cent plus growth brings new problems of management within the components as well as within industry bodies like Nasscom. As long as it operates transparently, it can make mistakes and recover from them. It is, after all, a living organism and only dead organisms remain static, with no problems. The $50-billion pot of gold is the reward for Nasscom's continuing efforts.

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