Emerging countries like India and China are posing a great challenge to America's leadership position in technology, said Pramod Haque, managing partner, Norwest Venture Partners, while addressing the Nasscom Leadership Summit in Mumbai on Wednesday.

"Thirty years ago, 12-15 companies controlled the technology world, most of them don't exist anymore. Today there are over 2000 companies in the US as entrepreneurship has flourished."

But US is not the only country to face competition. India too, said Haque, could face the same situation, as lesser-developed countries are moving up the value chain, grabbing a slice of India's business process outsourcing sector.

In the new globalised world, brain drain to the US has stopped, reverse brain drain to emerging countries is a major concern, he added.

And this is where the US-India strategic alliance will play a vital role. In July 2005, Norwest Venture Partners was invited by Congressman Jerry Lewis to discuss ways to form a long-term strategic alliance to address this situation.

The plan entails focusing on product development or product germination phase where India and US will work in collaboration to develop next generation technology.

"The US-India development labs, a model similar to the one in the Indian Institutes of Technology will work towards jointly developing products. The program will be supported by the governments of both the countries, private players and universities," said Haque.

The research labs set up in the US and India will work to leverage talent and capabilities, as the hybrid model is now widely accepted.

Elaborating on India's IT edge, Haque said, today the West is threatened by an aging population and a shortage of intellectual capital. So it's advantage India, as the country will see a boom in young population, who can make up for this shortage.