Outsourcing 3.0: GE’ll manufacture here now

Exactly twenty years ago, in September 1989, Jack Welch, the legendary ex-chairman of General Electric, began India’s unplanned outsourcing revolution when his visit set the wheels in motion by getting Wipro coders to write software for GE’s ultrasound machines.

Fast forward to 1997: GE Capital decides to create a back office to process credit-card applications for its venture with the State Bank of India. That’s when the “lights went on” for the conglomerate, Nigel Andrews, a former top GE Capital executive who was steering India operations, told the Wall Street Journal four years ago.

Version 2.0 was seeded and soon flowered into the call-centre revolution, the poster boy of which was GE Capital International Services (Gecis), the company now known as Genpact.

A dozen years and many seismic shifts in reforms later, it’s time for Version 3.0. The globe-straddling industrial giant has now decided to make India a manufacturing base, primarily to cater to the growing demand within the country and also cater to the neighbourhood.

“Our focus areas for manufacturing would be energy, healthcare and water. These are the three critical areas in the country that actually need new, affordable and quality technologies,” Tejpreet S Chopra, president and CEO, GE India, Bangladesh & Sri Lanka, said on the sidelines of a two-day GE Day event.

In between, in 2000, GE took another major step —- to set up a research facility —- John F Welch Technology Centre —- at Bangalore. This is one of the key R&D centres GE has globally. “Following the Gecis and the technology centre experience, India will now be a manufacturing base, too,” Chopra said.

As part of this, GE is planning a wind turbine generator plant. To be set up by GE Energy, the unit would come up in south India. The plant is expected to commence production in the second half of 2010 with GE’s 1.5XLE model wind turbine, which is believe to be most suited for India’s low wind regimes. The ultimate capacity of the plant would be ship about 300 turbines to produce 450 mw.

“Initially we will bring components from our other existing units in other countries and do the assembly locally. But, over a period of time, the plant will start manufacturing components. We are yet to determine the cost of the project, which is linked to the location,” Chopra said.

With renewable energy under klieg lights everywhere, GE also plans to increase its focus on solar energy sector in India. Healthcare and water are the other two areas the company is gearing up to tap in India. “We are already a leading player in the Indian healthcare equipment market. But, the focus is now on making healthcare more affordable by manufacturing equipment to suit the Indian conditions,” he said.

One of the first such efforts was to indigenise ECG machines. “We had looked the ECG machines used in India worth $15,000 (Rs 7.5 lakh). Our engineers worked on this and improved the technology, brought down the cost and made it more affordable. With this, the machine is now available for Rs 25,000. While it used to cost Rs 1,000 for an ECG test, with the new machine we can do it for less than Rs 50. This is the kind of impact and offering we are planning for India,” Chopra said.

The company would also evaluate inorganic growth plans for faster market penetration.
GE globally has been working on a $6-billion plan under a programme called Healthymagination. This five-year programme would work on reducing costs, improving accessibility and quality in healthcare sector.

“About $3 billion of this would go for development about 100 new products primarily for countries like India, China, Africa and some western countries. About $2 billion would go for healthcare IT financing and a billion for creating healthcare awareness. The objective of the programme is to improve accessibility and quality by 15% and reducing the cost by 15%,” Chopra said.

The other two markets GE is eyeing in India are security and aviation. Though these sectors are not part of the manufacturing strategy, India is seen as a major market for selling its existing technologies.

Under what’s called a ‘validated end user’ (VEU) programme, the company has already received the approval for technology transfer without waiting for any specific clearances from the Indian government.

“GE has best of the technologies for homeland security. These are best suited for the Indian market. Similarly, aviation technologies of GE too suit the Indian conditions with some indeginisation. We are actively working on these sectors,” Chopra said. The company is hoping to bring its first technology product under the VEU scheme in the next two months.

For now, the Indian market contributes about $3 billion to the $70 billion topline of the company. “I can’t talk about the growth in Indian revenues now. The slowdown has changed the equation. We were working on $8 billion by 2010. But, now this number is no more valid,” he said.