Software is a multi-billion dollar industry
Issues of Intellectual Property and Confidentiality
In 1999, bilateral trade registered an impressive jump reaching $994 million, a five-fold increase since 1992.
The balance of trade has been in Israel's favor with the exception of 1998 when a surplus of $9.4 million
was recorded in India's favor. Besides diamonds, which accounted for 60% of India's exports to Israel in
1999, major export items from India include textiles, cotton yarn, organic chemicals and machinery. The
volume of non-diamond exports has increased steadily from almost nil in 1992 to $ 177 million - in 1999. A
number of new items have been introduced into the export basket in recent years.
Both countries have experienced threats to their internal stability. The Pakistan Indian border dispute
related to Kashmir have impacted India's software industry.
President Kiran Karnik said in the past year, about 60 collaborative ventures have been made with Israeli
companies and about 30 of them had contracted for outsourcing from Indian companies.
An Understandable but Unspoken Nightmare
IHTIR's figures indicate that the productivity of each individual member of Israel's software Industry is
$162,000. The comparable figure for India's counterpart is $16,250. Should the know-how existing in Israel
be transferred to India and thus raise that country's software productivity only to half of the Israel's figure,
the Indian industry would produce not $8.5 billion, but $40.5 billion per year.
Where Is there a Clear Case for Cooperation?
The size of the Indian industry which according to most future projections, will grow in the number of
people, involved as well as in quality of expertise, and could lead to cooperation if at the initial stage the
Israelis conduct their own software development. Israelis will need to persuade the Indian software
industry to relinquish its drive for Israelis to outsource to them its research and development.
What type of cooperation could benefit both countries? Most likely a combination of their individual
strengths. India's growing massive global marketing and technical presence when united with Israel's
proven development and technological skills could hatch global outreach companies, with the size and
corporate muscle to innovate products and capture major markets.
Dynamic Software Industries Strive for Common Ground
The most vigorous trade promotion effort ever launched in Israel by India was marked by the recent visit to
Tel-Aviv by a high level delegation from NASSCOM, the National Association of Software Services and
Companies. It is the industry association of IT Software and Service companies in India.
Describing the Indian miracle
NAASCOM President, Mr. Kiran Karnik, declared, "Not only is the Indian Software and Services industry
growing quantitatively, and qualitatively. We are seeing multi-year contracts coming to India, reflecting the
confidence in our abilities. Furthermore, Indian companies now service nearly 220 global customers.
Indian vendors are also increasingly participating in large global bids against worldwide IT majors."
NASSCOM forecasts Indian software exports to maintain a 30% growth in financial year 2002-3 to
approximately $9.5 billion. The contribution of software exports reaches 16.5% of total exports.
"The 30% export growth is enviable in view of the 2% export growth for the whole Indian economy",
Mr. Karnik added.
Elaborating on the future outlook, Mr. Arun Kumar projected that "the industry should start seeing a
recovery in the third and fourth quarter of the financial year, and thus we are optimistic in sustaining our
growth rate on a much larger base for the next year. We expect an export turnover for IT Software and
Services sector of $9.5 billion FY03."
The Israel Association of Software Houses figures speak for themselves. In 1990, software exports from
Israel amounted to $90 million. By 2000, overseas sales had soared incredibly to $2.6 billion and even if
the staggering average annual growth of 25% should not be maintained in 2001, the forecast is that
exports will surpass $3 billion by the end of the year. Domestic sales have been growing by 10% per
annum and overall sales for the industry are expected to top $4.2 billion in 2001.
There are currently about 35,000 computer specialists in Israel, 14,500 of whom are employed in more than
400 software houses. Not only are these experts highly qualified and educated at the finest universities in
Israel and abroad, they also possess extensive experience and technical know-how and are endowed
with an unrivalled spirit of initiative and enterprise.
NASSCOM president Kiran Karnik said copyright laws in India are among the strictest in the world, and
there was therefore no reason to worry about confidential data being leaked by Indian companies.
The case for intellectual property privacy and protection ,according to the Economist points that. "piracy
is a cheap way to climb the lower rungs, but it takes you only so far. Failure to respect intellectual
property rights deters high-tech . Firms will not bring technology to countries where it can be stolen with
impunity. Furthermore, if poor countries do not reward innovation, their people will have no incentive to
innovate. Several Indian biotech firms that export their products are wary of selling them at home for fear
of piracy".
Amiram Shore President of IASH is adamant on this subject and as a matter of current policy the Israeli
Association of about 100 software houses opposes helping the Indians in this area of business. Mr.
Shore's concern, is that unique technological know-how developed by the Israeli software industry, which
he describes as among the most innovative and advanced in the world, would be transferred to Indian
companies, and position the Indian companies to compete with Israel.
Mr. Shore said the Israeli programmers are more skilled than those in India and it was therefore inadvisable
to transfer know-how to programmers there. "Americans had used Indian programmers to convert
programs from old languages like Pascal or Fortran to C++. That is an example of proper use of the skills
of Indian programmers," he added.
The Indian representatives, for their part, say their programmers have become more professional in recent
years and are now capable of handling complex projects. "It has been four years since we last did those
sorts of conversions," said NASSCOM Vice-chairman Run Kumar.
Overview: Similarities and Disparities
The population of India dwarfs that of Israel by a ratio of 200 to one. Both nations are democracies, both
were born in the middle of the 20th century, and both have major technology achievements to their credit.
In Full diplomatic ties between India and Israel were finally established in 1992. Since the establishment of
diplomatic relations between India and Israel in 1992, bilateral merchandise trade has increased by an
average of 30% every year reaching close to a billion US dollars in 1999. With the exception of 1995 trade
volumes have grown steadily, by 12% in 1996, 17% in 1997, 3% in 1998 and 47% in 1999 as compared to the
previous years.