Reverse exodus: High-tech Indian immigrants returning home

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Reverse exodus: High-tech Indian immigrants returning home
By Mira Kamdar
San Jose Mercury News
Article Launched:05/13/2007 01:54:47 AM PDT


Sri Renganathan had made it in America - she owned a lovely home and had a good job with Intel. But three years ago, she and her husband decided to move back to India. They headed to Bangalore, her hometown, where she was able to keep her job with Intel, before moving on to a better position with another high-tech company. Her husband, who'd been laid off in the wake of the tech-bubble bust of 2001, started his own biotech consulting business.

"Ours was a one-way move," says Renganathan of her family's return to India. "We sold the house and packed up and came."

Renganathan and her husband are among the tens of thousands of Indians who, despite having more than achieved the American dream, are voting with their feet to return home.

This is not the mythic immigrant saga most Americans imagine. India's economic boom is now offering returning Indians things that simply didn't exist there when they left: U.S.-level salaries and an American lifestyle, including gated communities with manicured lawns and swimming pools, shopping malls filled with familiar brands, and international schools for their children.

Moreover, a low-cost, English-speaking workforce, a liberalizing economy that just hit a 9.2 percent annual growth rate, and the recent infusion of millions of dollars in venture capital and foreign direct investment have come together to create an environment many Indian entrepreneurs find hard to resist, especially when it is located in their home country.

No region of the United States has been more affected by this trend than Silicon Valley. The Indus Entrepreneur Group, known as TIE, estimated in 2003 that between 15,000 and 20,000 Indians had left Silicon Valley to return home. That strong trend has continued, with about 40,000 more returning in the last four years, according to Vish Mishra, a charter member of TIE and a senior venture partner with Clearstone Venture Partners.

The flow of investment capital to India also has expanded, much of it from Silicon Valley VC firms. Clearstone Venture Partners now has an office in Mumbai, as do many other firms that either are based in or originated in Silicon Valley. During the 12-month period that ended in August 2006, Mishra notes, VC firms invested $2 billion in early- and late-stage companies, and new India-focused VC funds raised a total of $3 billion.

Clearly, the flow of people and money to India from the Silicon Valley was not a one-time response to the tech-bubble bust. Should the valley be worried?

According to a report released earlier this year by Anna-Lee Saxenian of the University of California-Berkeley and by Duke University, Indians founded 15 percent of all Silicon Valley start-ups. The study also found that 53 percent of the science and engineering workforce in the valley is foreign-born, and that one-quarter of immigrant-founded engineering and scientific companies founded in the United States during the past decade were created by Indians. These companies rang up $52 billion in sales and created 450,000 jobs.

No wonder some business and policy leaders are sounding alarm bells about American competitiveness in general and Silicon Valley's future as a technology leader in particular.

There isn't a single major information-technology company in the United States that hasn't set up operations in India. IT companies are attracted by the low-cost, highly skilled workforce; 3.5 million white-collar U.S. jobs, along with $151 billion in wages, are expected to be outsourced by 2015, with India the top outsourcing destination, according to a report by Forrester Research.

But these tech companies also see a market of potentially epic proportions. Half of India's 1.2 billion people are younger than 25. That's 600 million people coming into their peak consuming years in an economy fueled primarily by exploding retail growth.

As Amar Babu of Intel India, where 15 percent of the workforce is made up of Indians who returned from the United States, explained, "Intel views India as a critical research and development site. At the same time, India is a consumption market for IT. A lot of future growth will come from these emerging markets."

In fact, India is moving beyond simply being attractive because of the obvious cost advantage of lower wages. As wages rise on the tide of higher demand for skilled workers, India is shifting its competitive advantage toward more and more sophisticated industry needs. This has led to a trend from call centers to back-office processing to cutting-edge engineering. India is no longer just one of the world's biggest buyers of commercial aircraft and pharmaceuticals; it also is emerging as a center for research and development in scientific and technological areas as diverse as aeronautics and biotechnology.

Yet India also faces a series of serious challenges it must overcome if it is to realize the promise of its renaissance as a global economic power. That China has huge advantages over India when it comes to infrastructure development is common knowledge. Overloaded roads, insufficient airport and port capacity, and woefully inadequate power are all potential roadblocks to India's advancing economic engine.

Education gap

On the human side, the situation is even worse. The information-technology industry in India has created 1 million jobs, which in turn are estimated to generate an additional 3.5 million jobs. But that's a drop in the bucket compared with the hundreds of millions of jobs India needs if it is to give its unemployed and underemployed the financial resources they need to participate in India's booming economy.

A cruel irony in India is that while a small proportion of the population is exquisitely educated and speaks English, the vast majority do not have these skills. Only one in 10,000 Indian students makes it to college. Few of those who get to college obtain a level of education equal to their aspirations - or equal to the needs of companies desperately looking for qualified workers. Of the more than 1 million Indian applicants for jobs at Indian tech giant Infosys last year, for example, less than 2 percent met the company's requirements.

More people live in absolute poverty in India than in any other country in the world. Malnutrition and illiteracy rates are among the world's highest. And India has the largest number of people infected with HIV: 5.7 million. India also is facing an environmental catastrophe, with some of the world's worst air and water pollution. And India, like most of the developing world, will be disproportionately affected by global warming.

In this contradiction between India as exploding tech leader and developing nation lies huge opportunities for Silicon Valley - opportunities it can leverage through its Indian workforce that is returning home to its native land.

There's only one way forward for India: innovation. India needs precisely the skill set Silicon Valley famously nurtures: the ability to think outside the box, and the daring to risk capital on new ideas. These solutions in turn will create products for the great untapped markets of the world. Face it: More people on the planet live in conditions that resemble those in India than those in the Menlo Park. The problems India is facing are global problems. How much the dynamic recirculation of money and talent between Silicon Valley and India focuses on solutions to these problems may determine how much Silicon Valley remains relevant and in the vanguard of a changing world.

In the age of cheap jet travel and digital communication, many of the Indians returning to India from Silicon Valley aren't leaving so much as expanding the sphere of their well-honed talents and networks beyond California. As Clearstone's Vish Mishra put it, "These people are building bridges, not burning them."

For Mishra, Silicon Valley's unique tradition of innovation and educational and research excellence, coupled with a free-wheeling entrepreneurial environment, cannot easily be duplicated. "The whole state of mind here is very difficult to replicate. India will try to come close to it but they don't have all the pieces," he says. "Indian-Americans are playing a big role in what is happening in India, but they are doing it because of what they have learned here and their connections here."

Valley connections

The immigrant talent from Asia that has been so much a part of Silicon Valley's success in the past will be critical to that success in the future, helping turn the valley into the hub of a vast network that relays talent and capital back and forth to new centers of innovation and market growth. The more Indians who leave Silicon Valley and renew linkages with their homeland, the more Silicon Valley will reap the benefits of having fostered an Indian immigrant population.

For Renganathan and her family, the transition back to India has had some bumps along the way. Real estate values shot up 300 percent before she and her husband were able to buy property in Bangalore. The daily commute in the city's famously hideous traffic is wearing. And their young daughter took some time to adjust to life in a country where she had never lived.

Still, Renganathan has no regrets. Her family is enjoying renewed closeness with their Indian relatives. They're building a new house. Their daughter now attends a local school where her best friends are children who, as she did, began their childhoods in America. (For more on Renganathan's experience moving back to India, visit her blog at: http://sribloremusings.blogspot

.com/)

At the same time, Renganathan confesses that "all my close friends are still in the U.S." She keeps up her professional contacts in the high-tech world in the United States and has traveled back to visit friends and family. While her daughter is happily adjusted now to her new life in India, Renganathan considers it temporary. "She thinks she'll go back to the U.S. for college," she says.