Online Extra: GE's Indian Adventure
Until two years ago, few multinational players believed in India's potential and future. Most stayed away and have only just begun to make an impact in the country. But not General Electric (GE ). It has had a significant presence there for years, with joint ventures in consumer finance, lighting, and medical equipment. But GE really began to take off with the establishment of GE Capital International Services (GECIS), the back-office operation that serviced all of General Electric worldwide.
GECIS -- now an independent company, of which GE owns less than half -- was the brainchild of former GE CEO Jack Welch, who saw the raw talent of India and invested it in GECIS. Welch's "low-cost and high-quality" mantra is the reason other multinationals are flocking to India for services in everything from pharma to tech and design engineering.
Under Jeff Immelt, Welch's successor, GE has even greater ambitions in India. It sees a country in transition, a perfect market for its products. Immelt wants GE's revenues there to go from $800 million currently to $5 billion by 2010. Scott Bayman, GE's country head in India since 1993, has overseen GE's India strategy. At his spacious office in New Delhi, he recently talked to BusinessWeek India Bureau Chief Manjeet Kripalani about how GE plans to achieve its goals for India. Edited excerpts of their conversation follow:
Q: How much has changed for Indian companies since you first came here? A:
Q: How much has changed for Indian companies since you first came here?
A:Ten years ago, Indian companies didn't need much capital. There was no market, no exports. Today, there's more capital available in India, and Indian companies have plenty of have access to it. Their ability to finance projects themselves today is huge. China needs foreign direct investment, and India does not. What India needs is the knowledge that FDI brings.
Q: Does GE have local competitors here? A:
Q: Does GE have local competitors here?
A:The majority of our competitors are still global competitors, not local ones. However the scale isn't so large. Philips is in health care, for instance, but here it does mostly lighting and electronics. The big difference with GE is that we have localized the services we provide, with local software development. No one is doing this much here, among the multinationals.
Q: At what stage of growth is GE in India now? A:
Q: At what stage of growth is GE in India now?
A:We're at the third stage now. We came in early, in 1993, looking for the local market. We got into consumer finance and power-equipment supply. We had bumps along the way, we rationalized and shut down some businesses, but we learned. We developed people, and now are 99.99% local.
When we realized the market wasn't maturing fast enough, we looked at what else to do. We couldn't find software engineers in the U.S. and found them in India. And that's what led us to back-office operations in 1998. So we started GECIS in India. That was phase two. Phase three began in 2004 -- which is actually phase one again, i.e we're looking at the local market. Our new plan is to grow from $700 million in 2004 to $3 billion in 2008.
Q: Where will this come from? A:
Q: Where will this come from?
A:This is part of our "One GE" strategy. It will be spread across our individual businesses. For instance, in power generation, we're involved in gas, hydro, and wind generation. We offer aircraft engines and leasing services -- India has all these new airline startups. We will pursue real estate development and ownership. We'll develop financial services for both consumer and commercial markets.
Our engineered plastics business will be driven by the growth in the auto industry here. In health care, we're looking at growth in government hospitals and in medical tourism. We'll provide medical equipment and lighting.
Q: Are you developing local products? A:
Q: Are you developing local products?
A:Yes, we will. They'll have fewer bells and whistles, and may have more portability to go from village to village, like ultrasound equipment or X-ray machines.
Q: How integrated is the Jack Welch Research Centre in Bangalore with GE? A:
Q: How integrated is the Jack Welch Research Centre in Bangalore with GE?
A:The centre now has 2,500 scientists in Bangalore and 1,000 more in Hyderabad. About 40% of the GE engine for the [Boeing] 747 Dreamliner was developed in Bangalore. It's all integrated with what GE does with software. India is integrated into our company.
Q: Jeff Immelt announced a $250 million investment in a medical facility in New Delhi this May. Can you give us some details about that? A:
Q: Jeff Immelt announced a $250 million investment in a medical facility in New Delhi this May. Can you give us some details about that?
A:That's Medicity, an integrated health-care and research facility in Gurgaon, just outside of Delhi. It's not an investment, rather we'll be supplying equipment [for high-end medical diagnostics, clinical research and development, power generation, lighting, water treatment] and operating it.
Q: What's in it from you, apart from the $250 million in equipment that's your investment? A:
Q: What's in it from you, apart from the $250 million in equipment that's your investment?
A:It's GE's first such collaborative venture worldwide. India gives us a lot of throughput in equipment that will help us do engineering design here. We see this as an opportunity to get into some cutting-edge facilities in India. We want to do further product development here. It will also give us a platform for doing clinical trials.
For us, it's an opportunity to create the best of all the institutions, like Johns Hopkins, but in newer facilities, using leading-edge doctors and thought leaders.
Q: So India is a business-to-business proposition for you, not a business-to-consumer? A:
Q: So India is a business-to-business proposition for you, not a business-to-consumer?
A:Our products have to be global. Here we're all about how to support our customers' business models. We're more B2B, than B2C. This model fits better.
Q: What will your role be? A:
Q: What will your role be?
A:I'll be spending my time adding people, increasing service capabilities in local markets. We'll be growing further and will localize our new employee base as soon as possible. We bring expats to infuse the culture and develop a local management team that can take the company further. Worldwide, our employees have the same annual performance review, salary style, stock options, processes on everything like Six Sigma.
Q: Where does India stand in the world of GE? A:
Q: Where does India stand in the world of GE?
A:In 2008, India will be the fastest-growing region for us. No, it won't be large dollar-wise, just $3 billion by 2008, and GE will be a $190 billion company by then. But India will be much more significant. By 2015, India will be the third- or fourth-largest economy on earth.
Q: It won't be easy making your goals. India is still a fairly restricted economy. A:
Q: It won't be easy making your goals. India is still a fairly restricted economy.
A:We're banking on India getting its act together, especially in infrastructure and health care. That's where One GE comes in -- we can provide all the services India needs.
Almost every global company has woken up to India. I've met most of the companies coming here or making plans to be here. The question is: How big an export market this country can be, how soon can infrastructure be fixed and made world-class?
Q: India seems so behind China. Can India ever compete? A:
Q: India seems so behind China. Can India ever compete?
A:If India gets its infrastructure together, absolutely it can compete.
Edited by Patricia O'Connell