If wishes were horses…

I recently read an interesting observation about growth prospects for India. During the first millennium AD, and even before, India was an evolved society. It had world class educational institutions (Nalanda, Taxila etc) which attracted students and scholars from around the world; it had world renowned commercial centers which had trade relationships with many continents, and it demonstrated leadership in area of philosophy, mathematics, literature and astronomy. It was the era of knowledge and reasoning.

The second millennium was the era of engineering and industrial revolution which practically bypassed India. The colonial suppression would have definitely contributed to this. But, as per the above article it was also a manifestation of how Indian brain is wired, which makes it more comfortable with knowledge and logic than technology and applied science.

The third millennium again is that of knowledge and learning, which are comfort areas for the Indian brain. In fact the planning commission in early 2000 had set up a task force under the chairmanship of Dy Chairman of Planning Commission to evolve strategies for becoming a knowledge superpower.

I don’t know how correct is this analysis with respect to the competitive edge of Indian society in this knowledge economy. But there can be no argument about the fact the key drivers for today’s growths are information and collaboration. The most important infrastructural requirements for these key drivers are connectivity to link people and capability to use the modern tools that facilitate information flow and collaboration.

Today India is acknowledged as a powerhouse in the area of Information Technology. We are the back end development center for the whole world. Graduates in every field of science, whether it is engineering, physics, chemistry and mathematics appear to be drifting to computer programming and many more into IT Enabled Services.

Therefore, it appears that we have the aptitude, the infrastructure and the human resources necessary in this most important field and we are well poised to build on this. But when we go a little deeper, we see some underlying weaknesses.

A global ICT index called “Connectivity Score Card” based on a Study created by Professor Leonard Waverman, London Business School, and economic consulting firm LECG, commissioned by Nokia Siemens Networks has been tracking the level of sophistication of ICT infrastructure across the world for last few years. It is a broad based matrix taking into account availability of infrastructure and usage & skills in the area of ICT among consumer, business and government sectors. This study has ranked countries which are segregated into two groups called innovation driven and resources driven as per the categorization of world economic forum. The former contains mostly developed economies and latter more of developing economies. India forms a part of the resource driven countries and with a score of 1,82 out of 10 it ranks 21 among 25. The only four countries which have ranks lower than India are Kenya, Nigeria, Bangladesh and Pakistan. Malaysia with a score of 7.14 has the top place among the resources driven economies.

What do we learn from this contradiction? We have outstanding strengths in the field of ICT which is one of the key requirements for a knowledge economy. But, this skills and strengths are concentrated in few Islands of excellence. Therefore, we need to have a focused strategy and attention (a little more than that gets wasted in telecom scams) for wider availability of ICT infrastructure for us to exploit this opportunity. Somebody once asked Dr R A Mashelkar what would be his ultimate wish for India. He had no difficulty in responding quickly. “High quality connectivity to every citizen at affordable cost and skill to use it effortlessly and meaningfully.” Then, as Mat Ridley would say, ideas will have more sex and multiply.

The number one benefit of information technology is that it empowers people to do what they want to do. It lets people be creative. It lets people be productive. It lets people learn things they didn't think they could learn before, and so in a sense it is all about potential. Steve Ballmer


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Never Rode & Never Fell

“If Thomas is corrupt, (I don’t want to defend him, let justice system decide) is there something wrong with what defines corruption in India. I can be wrong ....what do you think?” My friend Antony wrote to me.

I had read the news items regarding the controversy relating to appointment of Mr PJ Thomas as the Central Vigilance Commissioner (CVC). With the cursory reading of the news items I was under the impression that he could be one of the corrupt officers who had managed to slime his way to the prestigious post. I was taken aback by Antony’s mail.

I asked around. I talked to his college mates, his colleagues in the IAS and his family friends who knew him as a person. Everybody told me that he is a man of high integrity and a brilliant officer. I read the Supreme Court Judgment relating to the writ petition as to the legality of his appointment. This judgment was only about the legality of the appointment and does not in any way take a view on the merit of the Palmolein case which is pending in the court of Special Judge. As to what I have understood from my talks with the various people who are of the know of this case, though he got embroiled in this case when he was the secretary, Department of Food and Civil Supplies of Kerala State when the Palmolein controversy erupted, he may not have been beneficiary or may not have consciously abetted the controversial decision.

This questionable import of Palmolein took place in 1991. Subsequently in the last 20 years, this matter has been tossed around in legal and procedural wrangles without any decision. Instead of undertaking thorough investigation as to who erred in his judgment, or who was negligent or who was corrupt to fix responsibility and take necessary action, this case had become a political tool in the fight between two political parties and their leaders dragging the career of a few officers for few decades.

I am sure that it is this conviction that Mr Thomas is an honorable and capable person to take the role of CVC that prompted the Prime Minister and Home Minister to recommend his name for this post and not because they thought they have a pliable officer who would play by their tune.

I am not qualified to comment on the merit of the case. But in my mind, this case is a classic example of the perverse incentive that influences the decision making process of our bureaucracy. As Mr Thomas has observed in his petition “it is routine for officers in the discharge of their duties to have cases slapped against them, many of which are trumped up or politically motivated. In an environment where a bureaucrat bears the brunt of protests against governmental action, it is necessary that an objective view be taken of how officers function.”

Instead of taking such objective assessment of the process followed in decision making, if we find fault with the outcome of the decision with the benefit of hindsight, and we allow such matters to be enmeshed in legal wrangles without any conclusion for decades, we have a serious problem. Honest and good officers get penalized and tainted for their life for having taken a judgment call. This worry and concern often act as a deterrent to take a bold stand or to interpret the laws and procedures for the right cause without any private agenda. On the other hand the unscrupulous officers realize that the legal processes may get dragged for years without any result and in the meantime they can maximize their private interests and that of their political mentors.

If we don’t find ways to protect and support good officers we have no moral right to complain about the inaction of the bureaucrat. Take it or leave it ...!

It is the spirit and not the form of law that keeps justice alive. Earl Warren


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Paving the last mile

My post “Last mile to the bottom of the pyramid” discussed how targeted delivery of subsidies and benefits can reduce leakage, improve efficiency of delivery and stimulate demand in the economy. In this post I discuss three critical components for targeted delivery.

Unique Identification: The first and foremost requirement for targeted delivery is unique identification of recipients. “Aadhar”, the biometric based unique identity for residents, addresses this issue. Especially, an infrastructure for verification of identity by matching the biometric signature (say finger print) of the recipient against the master database of UID effortlessly and cheaply from any part of the country would be an extremely powerful tool. This may sound like science fiction or a costly option for our country. Experts do point out that the current state of technology makes this quite feasible and affordable as we can have a standardized process for identity verification for variety of applications. With the increase in volume of usage, the cost would only drop further.

Enrollment of eligible person: The second component is the ability to filter out the individuals who are not eligible for specific subsidy or benefit. Today each agency that is responsible for providing an entitlement goes through extensive processes for enrolling eligible persons. If we take a deeper look, we can see that there are many common eligibility parameters for most of the entitlements. For example one or more indicators like age, sex, income, educational qualification etc are common for most of the subsidies and benefits. I agree that there are some efforts like BPL and APL list, differentiated ration cards etc in certain states which are attempts in this direction. But, there are hardly any agencies that have implemented an infrastructure using the power of modern technology to build and maintain such databases which can be easily accessed and referred to by other systems using a published standard interface.

If we are able to establish one or more entities that would build and maintain databases of individuals against their Unique Id (Aadhaar), various parameters which go into determination of entitlements, there will be tremendous efficiency gains and cost reduction in the process of enrollment. These databases should also have mechanism for reverse flow of information from the administering agencies which will help in continuous update of these parameters. These would be essentially utilities that focus on the IT enabled data management which help the implementation agencies to focus on policy administration.

Some people may point out that such integration of data is an intrusion into privacy. However, conceptually it is just like the credit bureaus like CIBIL that maintains credit history of individuals using data sourced from banks and financial institutions.

Distribution Channel for subsidies: The third critical component in targeted delivery is the distribution channel. As the various subsidies are provided by means of reduced price of products or service, there is a need to manage the distribution of these discounted products along with market priced products. If this movement is not strictly controlled and monitored there could be significant leakage. This would require each of the agencies to make significant investment and effort for this process control which often forces state management of distribution that sometime compromise quality of service.

One of the most efficient ways to address this is standardization of manner for delivering subsidized products. The highest level of standardization is when the subsidy is in the form of a money transfer. In this case the goods will move in market price and the eligible person will get the subsidy credited to a bank account which is easily accessible. In this way the process of benefit distribution is not product based but beneficiary based which can be same for variety of products or services from kerosene to education. The agency responsible can then plug into a standardized payment mechanism at very low cost. Further tweaking the eligibility condition will also require very little or no tweaking of payment system.

In this model the agency distributing the subsidy can focus on product/ service distribution. Moreover, there may not be any need to restrict such distribution through government controlled agencies and can be handled by a number of private and public service providers helping competition and resulting improvement in service quality. Government can focus on administration of eligibility and administration of the subsidy. This monetization of benefit can also leave the choice of how to use this entitlement to the beneficiary.

Criticism for this model is that the beneficiary may misuse the entitlement irresponsibly and the state will not be able to influence the behavior of the target audience. Even this can be addressed by mechanisms like transferring the subsidy to the account of lady of the house (It is a well researched fact that women of the house are normally more responsible with money. Similarly the better status of the Nair woman of Kerala who historically had the economic power on account of a matrilineal society could also support this) or dependent on compliance to certain conditions.

This can also be addressed by a minor tweak of payment system. In this case each of the subsidies can be treated as an entitlement credited to the account which can be used only against purchase of the prescribed service. As far as the payment system is considered it is very much like handling multicurrency accounts which is a well established process.

Tail piece: This post attempts to highlight the possibility of establishing two critical infrastructure utilities which in conjunction with the Aadhar can significantly improve the subsidy and social security administration. This cannot be achieved overnight. But it makes sense to give focused attention to the above as we have established Unique Id Authority of India.

In the end, it all comes to choices to turn stumbling blocks into stepping stones.Amber Frey

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Software and Hard choices

In this world there are many countries which are endowed with natural resources. Some of them were content to extract these resources in its most basic form and sell and some countries built up industrial bases that add value to these natural resources. The latter prospered and the former often stagnated especially because this abundance in one area acted as a disincentive to growth in other areas. The stagnation might have happened when the resources ran out or more prices dropped or with falling demand or arrival of more competitive suppliers.

We have the potential for a somewhat similar problem in our software industry which is growing to be a significant sector of strength and opportunity for India. This could be on account of some factors that are holding us from rising above mediocrity. If we don’t address these, eventually we may end up paying price for this as a nation.

Demand Growth: There is an increasing acceptance for use of Information Technology in most sectors of economy in India; e-Governance, hospital administration, educational institutions, manufacturing industry banking and financial services. This offers huge potential for the IT industry. In India, our focus and strength is in application development more so in building bespoke applications and less in hardware and system software. This, in addition to the outsourcing opportunities for undertaking developments for international clients, creates a burgeoning demand for software industry in India.

Customer Awareness: However the in house appreciation among this large consuming sector within India is quite primitive and therefore unable to demand sophistication and quality from their vendors. On the other hand, a significant part of the our outsourcing contracts are for relatively low-end programming as per the solutions defined by in house CIO and his team or based on the solutions architectured by high-end international consulting companies. Thus there is very limited incentive among the programmers to worry about the performance of their output but encourages to focus on functionality and features.

Increase in Diversity: Fast paced  introduction of new tools, more sophisticated databases, and diverse programming languages encourages the programmers to be familiar with this diversity than develop deeper expertise in any of the systems to extract the performance efficiency. The are happy to be "Jack of all trades but Master of none"

Leaping hardware technology: The hardware is progressing in sophistication so fast that it is reducing the cost for processing same volume. When shoddy system design and program quality put strain on performance with increase in volume, the developers recommend more iron. Since these new machines process more volumes, the senior management of customers the gets lulled by the apparent reduction in cost and ask few questions because in most other areas they are used to increase in cost with increase in volume.

Impact of IT cost: Major consuming industries for our software developers are manufacturing, financial services and government. For manufacturing IT costs as a factor of their total cost is relatively low. As they get their revenue from selling products (cars to drugs to chemicals to consumer durables and non-durables) their attention is more on the technology for making and selling their products. IT is seen as an enabling component or a fad and gets lesser attention on performance.

Similarly in Financial services with the revenue being a function of the value of transactions than the number of transactions they pay less attention in cost per transaction. In e-governance application also the situation is same with less attention to performance but more on functionalities.

Measurement of Performance Efficiency: In software industry, there hardly few good measures of performance efficiency that are widely used and fewer bench mark values against which performance can be measured; especially when it comes to cost per transaction. With nobody taking the ownership of the total solution, when problems occur, providers of each component like hardware, system software and networks point finger on each other. Even very few system integrators own the performance of the total solution, and but shift performance responsibly to the components. (Read “Learn to count- both Blessings and Failures” for some more thoughts on this)

So What?

The more discerning users for whom cost per transaction is critical like those of EBay, Google and Facebook have their own in house team whose focus is to squeeze out efficiency and reduce the cost and hardly few of our software service providers do any meaningful work for this high-end computing.or develop unique solution

There are many smart Indians in the development teams out there working on such solutions. But our domestic software industry is often drunk with the $ from being technicians and cybercoolies and not architects and engineers. The user requirement study is "Tell me what exactly you want met to automate, I will program it"  and not "Tell me what your dream is, we will work together on how technology can make it happen"

But if there is a large demand for low and middle end computing should we not supply it to earn our dollars and be happy? Of course yes. What is the risk in this?

The transaction volume in our consuming industry is growing leaps and bounds. The shoddy designs will soon show its weakness in handling this ballooning volume. The users will ask for more performance. They will ask for sophisticated analytics, pattern recognition, trend analysis and statistical modeling with the goldmine of data that has been amassed. Then our conventional solution providers will have nothing to offer as against those companies who have given more attention to high-end computing and more sophisticated model building often having outsourced the run-of-the mill programming to us.

That is why in this time of plenty there is a need to invest in building high performance solutions, develop a culture of fine-tuning systems for performance, learn to offer solution to a client's problem and not just code what he ask for, develop capabilities for building models and so on. Even in our public policy we should start factoring this and shift the incentives from profits of software export to investment and profits from high-end products or solutions development for the global markets.

Talent without discipline is like an octopus on roller skates. There's plenty of movement, but you never know if it's going to be forward, backwards, or sideways.H. Jackson Brown, Jr.


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Last mile to the bottom of the pyramid

Targeted drug delivery systems attempts to deliver drugs directly to the organs which are afflicted by disease or need repair. This improves drug delivery efficiency, reduces leakage and keeps the side effects to the minimum. The idea has been there for a long time; but, we had limitation of technology. Therefore we tried carpet bombing by injection to blood stream to take drug to affected area which caused enormous waste, failure to sufficiency penetrate to where it is needed the most and caused side effects to healthy parts of the body. Today advances in nano technology, advanced polymer chemistry and electronics engineering are coming together to revolutionize drug delivery system to make it more directed.

The same concept is applicable in social security systems too. Especially when we want to reach a helping hand to the needy in terms of subsidized food and fuel, health benefits, support for education and so on. In the absence of more effective means to address the last mile problem, we use carpet bombing here too. For example when we keep the price of kerosene low to help the poor, a large chunk of it is cornered by unscrupulous elements resulting in humongous loss to the exchequer and the needy is often denied what is promised to him. The same is the case of subsidies for many other products and services.

Today two silent developments are opening avenues to address this lacuna in a better fashion. The first one is the Aadhar project, which is attempting to identify each individual uniquely. This unique identity can help in reaching the benefits directly to the needy on a regular basis. The second critical component is the increased connectivity at affordable cost. Widely available connectivity specially using mobile technology has enormous potential for transforming the society in a variety of ways. When we marry the unique identification with reliable and affordable connectivity the impact can be truly astronomical.

Therefore our strategy for providing better data connectivity (whether as 2G, 3G or 4G) should be universal access that is practically free. I agree that we should avoid graft, corruption and nepotism in selection of service provider. Our approach for this selection and license charges to the service should not be to maximize short term revenue to the government but to reduce cost of access across the country. To avoid the service providers exploiting the low input cost, we can have mechanisms to regulate price or to share the revenue or other means which focuses on continuous cost reduction to the end consumer.

The benefit of mobile revolution in social transformation is obvious and there are many studies already undertaken to prove its impact in the poorer segment that today is learning to use this in a variety of applications. The fishermen of Kerala now use this to improve his yield and reduce wastage. Some village panchayats have found ways to use mobile phones to reduce domestic violence. (Whenever the drunken husband tries to beat up his wife she send an SOS to a specific number and then quickly and unobtrusively a group of women land up to the hut which acts as a deterrent to the drunken husband)

Our ability to reach such benefits to a large number of end consumers has another impact in the demand side of the economy. If we put more money to the hands of the rich (who are few in number) most of it goes to saving or spent abroad and so on. On the other hand when we put a little more money to a large number of poor people, most of it will go to consumption of food, cloth, shelter, consumer durables and non-durables, education and entertainment. This can have very significant impact to demand in the economy that will also protect us from over dependence of export which was one of the reasons for the eventual collapse of the East Asian miracle.

This increased purchasing power can be further leveraged if we can get the goods more cheaply with easier availability which is possible if we are able to bring in better efficiency in retail marketing and distribution infrastructure.

Although the policy makers are aware of each of the above areas, very often the vested interests with deep pockets are able to torpedo such initiatives often, with specious arguments and powerful lobbying. We see this in most of our policy making exercises including the annual budget. In this latest budget even though definite actions in these areas are limited, it is heartening to see that the Finance Minister is making an attempt. He has referred to strengthening the retail sector, ways to better farmer yield and reduce retail price by removing inefficiencies in distribution and also has established an inter-ministerial task force headed by Mr Nandan Nilekany to suggest means of directed subsidies to the intended intermediaries in the area of kerosene, LPG and fertilizers.

This a good start; and in comparison with the reduction in tax rate or permission given to the international investors in participate in Indian Mutual Funds or increase in FDI limit and so on which are more high profile policy changes, the impact of the abovementioned initiatives have unfathomable potential for strengthening our economy if we proceed forward from this baby steps keeping in mind that this is only a start.

“It has been said of the world's history hitherto that might makes right. It is for us and for our time to reverse the maxim, and to say that right makes might” Abraham Lincoln