Victor J. Menezes, the 49-year-old newly appointed co-CEO at Citigroup's corporate and investment banking branch, vividly remembers his grueling college years in India--and Professor M.S. Kamath's electrical engineering class in particular. Menezes recalls Kamath as "the most dreaded professor" on campus 30 years ago at the Indian Institute of Technology-Bombay. His class was the hardest to get into.
And once in, students wondered what hit them. Kamath's grading system was a punch in the nose for students who fancied themselves as the best and brightest in India. Often, only one student per test got an A--the top scorer. The second-best score got a B. Everyone else got Cs, Ds, or Fs. But Kamath had his reasons. Now retired and living outside Bombay, he brushes off his legendary reputation as a campus terror: "I used to tell my students, `IIT is a center of excellence. I don't want you to be third-rate products."'
Far from it. Some of the most prominent chief executives, presidents, entrepreneurs, and inventors in the world are graduates of IIT, India's elite institution of higher learning. Its impossibly high standards, compelling the mostly male student body to average fewer than five hours of sleep a night, produce numerate graduates who are masters at problem-solving. Familiar with Western ways due to India's colonial past, they have spent their academic years studying in English, which gives them an edge over other Asians competing for jobs in global corporations.
While IIT has been producing talented engineers, scientists, and managers for four decades, the school has taken on a new prominence lately. With Menezes' ascension at Citigroup on Nov. 1 and the appointment of 45-year-old Rakesh Gangwal as US Airways Group's new CEO on Nov. 18, IIT counts two more alums among the highest ranks of global business. They join Rajat Gupta, who has led McKinsey & Co. for four years, Vinod Khosla, the co-founder of Sun Microsystems Inc., and hundreds of others now working in the top ranks of U.S. corporations and Silicon Valley powerhouses. (BUSINESS WEEK has an IIT connection. Graduate Vasant Prabhu is president of the Information and Media Services unit of The McGraw-Hill Companies, BUSINESS WEEK's parent.)
FORMER PRISON. Wall Street firms rely on Institute grads to devise the complex algorithms behind their derivatives strategies while big multinationals call on them to solve problems in new ways. When recruiting from colleges for its annual crop of consultants, McKinsey hires a significant number of the school's graduates every year. Many more write the software and design the chips and peripherals that Silicon Valley sells to the world. One example: The founders of Internet browser Junglee.com--all IIT grads--made fortunes in August by selling their company to Amazon.com, the online bookseller, for $180 million.
The rise of IITians, as they are known, is a telling example of how global capitalism works today. The best companies draw on the best brains from around the world, and the result is a global class of worker: the highly educated, intensely ambitious college grad who seeks out a challenging career, even if it is thousands of miles from home. By rising to the top of Corporate America, these alumni lead all other Asians in their ability to reach the upper echelons of world-class companies.
It's not just that entrepreneurs have forged a path through high-tech arenas; corporate executives have proven proficient at managing companies, too. Cost-cutting by US Airways' Gangwal, for example, helped pull the airline back from the brink of bankruptcy and increased revenues fourfold.
In that regard, the story of these Indians provides a model for other Asians to emulate--and an example for U.S. companies and universities to ponder. For India has created, out of limited resources, a class of executives and entrepreneurs who manage to combine technical brilliance with great management skills. And the Indian government, to its credit, has not tried to keep these first-class students at home. In many ways, the IIT grad is the hottest export India has ever produced.
To mold them, the schools put these 18-year-olds through an experience akin to boot camp. Theories learned by rote--a key element of Japanese education--are only part of the experience. "Students should see the problem and conjure up a solution, not only memorize a theory," says Deepak Phatak, professor of computer science at IIT-Bombay. The focus is on hands-on learning. IIT maintains workshops where students even learn how to make machine tools and operate rotation motors, the kinds of crafts relegated to trade schools in the U.S.
When he helped found IIT in 1951, Jawaharlal Nehru, India's first Prime Minister, wanted an elite that could build the great state-sponsored power plants, dams, and bridges so badly needed in the newly independent country. The planners drew on Massachusetts Institute of Technology as a Model and on UNESCO for funds to build the first campus, in Kharagpur, near Calcutta, in a former British prison for Indian political detainees. Five other campuses followed, in Kanpur, Delhi, Bombay, Madras, and most recently, Guwahati. At various times, the U.S., Britain, the former Soviet Union, and Germany have all provided backing.
FREE REIN. The schools have kept their edge by staying out of India's partisan politics. "It is the most uncorrupt institution in India todAy," says Kartik Kilachand, a New York-based consultant and IIT alumnus. IIT has an autonomous board that doesn't have to kowtow to state bureaucracies. The Indian government pays most of the $3,000 it costs annually to educate each student. Famous alumni in India include B.K. Syngal, chairman of Reliance Telecom, Nirmal Jain, managing director of Tata Infotech, N.R. Narayanamurthy, founder of software developer Infosys, and Yogi Deveshwar, CEO of Indian Tobacco.
IIT's huge campuses are vastly superior to other Indian universities but spartan compared with Western counterparts. Many of the faculty have U.S. degrees and are stars in their fields, such as V. Rajaraman, who has helped New Delhi formulate its software policy. Professors double as administrators, limiting India's notorious bureaucratic malaise.
More than 100,000 Indians aspire to enter IIT each year, sitting for the grueling entrance exams every May. Students typically spend two years in preparation. Of those, just 2,500 are admitted to the network of campuses. Fewer than 2,000 make it to graduation each year. "The process of selection is absolutely draconian," says McKinsey head Gupta.
Once in, it gets tougher. Aman Parhar, 22, a biochemistry major at IIT-Delhi, was a high school star. "But here, everyone is as smart or smarter than you are," he says. Textbooks are so expensive that an entire class of 25 often has to share a single book. Students routinely stay up until 3 a.m. to study--or, in IIT lingo, "mug." But they get plenty of attention. Faculty-student ratios, at 1:6 or 1:8, are among the world's lowest. MIT's is 1:11.
TECHNOBRATS? Tales abound of the secrecy and ritual of IIT's dorm life. Students have their own exclusive slang, where "crack" means a job well done, and "fundoo," short for "fundamental," means great. The jobs and salaries grads command make them highly prized in India's contractual marriage market.
While some of the swagger gets beaten out of them by the rigors of the system, these students retain high expectations for their careers. Below the surface of being "well mannered and polite," according to Rukmini Bhaya Nair's book on IIT, Technobrat, students are "ruthlessly competitive and have an annoying complacency at having `arrived' at age 19."
This attitude often leads to disappointment with the opportunities India has to offer. Thousands of graduates have emigrated to the U.S., causing the Indian government anxiety over the brain drain of its brightest. A full 30% of the graduating class--over 500 students--headed to the U.S. for graduate degrees and better job opportunities in 1998. In the more popular computer-science programs, nearly 80% leave for Silicon Valley. So routine is the exodus that at IIT-Madras, the local campus postman and bank clerk provide unsolicited advice on the best U.S. schools to attend. When acceptance letters arrive, the postman waits outside the student's door for a tip--a large one if it's from a highly regarded university such as Stanford. While IIT does offer graduate programs, students know that an advanced degree from a U.S. institution is the entry ticket to an American or global corporation--and big bucks.
The U.S. also benefits enormously from the influx. AnnaLee Saxenian, an associate professor at the University of California at Berkeley, recently conducted a study of Silicon Valley's new immigrant entrepreneurs. According to Saxenian, of an estimated 2,000 startups in Silicon Valley, 40% are Indian-spawned, and of those, half are by IIT grads.
The influx began in earnest in the 1970s as Indian students graduated from such schools as Stanford, MIT, and Carnegie Mellon and became a vital source of brainpower in the research labs of Hewlett-Packard, Intel, IBM, and Texas Instruments. They then played founding roles in Sun Microsystems, Cirrus Logic, and numerous other high-tech powers.
Yogen Dalal, an IIT alumnus and partner with prominent venture-capital firm Mayfield, says the Valley has "a critical mass of IIT alums who can finance and guide the new generation." Suhas Patil, who founded chip design innovator Cirrus Logic in 1984, is now a prominent "angel" investor who provides early capital and business connections for Indian-owned startups. Another angel is Kanwal Rekhi, who founded and sold add-on board maker Excelan and who served as chief technology officer for Novell Inc. Among the dozen or so startups Rekhi helped launch are Ambit Design Systems, a developer of chip-design software, and info-tech consulting firm CyberMedia.
SCHOOLYARD LESSONS. U.S. graduate schools actively seek out the institute's grads. California Institute of Technology "writes to us regularly, asking us to recommend students for scholarships they have available," says Kharagpur campus Professor Badriprasad Gupta, who is vice-chairman of the entrance-exam committee. Amitabha Ghosh, director of IIT-Kharagpur, recalls the dean of the University of Maryland at College Park, entreating him to "send his entire graduating class to Maryland" and promising them all financial assistance. Even the French and German governments, faced with declining numbers of engineers, are trying to attract grads through exchange programs. IIT graduates frequently find U.S. graduate schools a breeze by comparison.
India's math-focused education gives students a leg up on American students, who depend heavily on calculators in the learning process. India has a long tradition of conceptual mathematics, and schoolchildren are forced to master multiplication tables early on. The math advantage helps: Gangwal of US Airways, renowned in the aviation industry for his speedy mental calculations, says "people always pegged me as being this terribly analytical guy who can run numbers in his head." Yet it was Gangwal's number-crunching that helped cut through the morass at the airline.
Another factor of campus life is India's diversity of languages, ethnic groups, and castes. "You learn how to manage across them," says Citigroup's Menezes, who managed to thrive in Citibank's cutthroat environment. "You couldn't survive any Indian schoolyard unless you figured out how different people think and behave."
Recently, IIT grads in the U.S. have been formalizing their powerful network. Two years ago, Indians and Pakistanis in the San Francisco area formed The Indus Entrepreneurs. Easily half its 1,000 members are IIT grads. "We help each other and provide role models," says Desh Deshpande, an IIT-Madras alumnus whose computer-networking company, Cascade, recently was sold to Ascend Communications Inc. for $3.7 billion.
Now that they have the means, alums also want to help their alma mater. Rekhi last year donated $2 million to the school and urged fellow alumni to follow suit. Says Mayfield's Dalal, who has given $10,000 to kick off an alumni-sponsored endowment fund: "We want to make it right for the next generation."
GOVERNMENT CUTBACKS. Their help could not have come at a better time. New Delhi has been reducing funding to institutions of higher learning such as the IITs by 25% since 1993. Alumni help is taking its place: Vinod Gupta, for example, founder of Nebraska-based database American Business Information, recently built a $3 million school of management for IIT-Kharagpur. McKinsey's Gupta is active in setting up a business school to open in 2001 in India, in conjunction with the Wharton School at the University of Pennsylvania and Northwestern University's Kellogg School.
The IITs have also been teaming up with industry on development. IIT-Kharagpur patents a dozen new products each year. Companies such as Intel and Philips Electronics, which are big recruiters at the IITs, have funded endowments and scholarships. They have even bankrolled computer and electronics laboratories in order to keep IIT grads up to snuff on the latest technology.
The bottom line for students and grads is that India has produced a world-class university at surprisingly little cost. By nurturing the schools, the government stands to reap huge rewards as these grads invest in India and draw it further into the circle of global trade and prosperity. Much like Taiwan-born engineers in the U.S., IIT grads are well positioned to set up ventures in their native country. "These Indians will play a key role in the resurgence of India," says Vijay Sahni, country head for Arthur Andersen's India operations. It's not quite how Nehru thought it would be. But this school is vital to India's place in the world.