behind a podium is restrictive. I am going to cover a bunch
of ground real quickly. I will start in the self congratulatory
style of the IT business. It is remarkable, one way to use a
statistic is in 1993 it is a publicly available statistic TCS
is not, Infosys went public. Revenues here were 5 million dollars.
Their market cap was 10 million dollars. Fast forward 13 years,
revenues are 500 times bigger, and the market cap is 2000 times
bigger. That is just startling any way you look at it. Yes.
It certainly creates a brand impact any way you look at it.
There is a but…the segment that IT services competes in
is ball park of 400 billion dollars in the US…about 4%
of the 10 trillion dollar economy….4% of the GDP, So what
we have impacted is 4% of US GDP of which we have taken 5% share
which is the 20 billion dollar number. Now, we have managed
to take the Oxygen out of the remaining 95%, we have changed
the dynamics of the 95%. It is very hard to do business in the
remaining 95% without being aware of the cost of the 5%. We
are competing in the small segment in the scheme of things in
the large segment.
The other way to think about it is that this phenomena has been
enabled, I think we have to keep in mind, by some thing very
fundamental that has happened in the technology in the last
10 years, which is that the Internet did happen, distances shrunk
and telecommunications did make the world flat. We exploited
that and we produced ball park, if you take NASDAQ evaluations,
50 to 70 billion dollars market cap. We did very well, but it
is dwarfed by Google, Amazon, eBay, Yahoo, which are all phenomena
which have a shorter life, they started in 7-8 years, exploiting
the same phenomena. So we have done pretty well but there is
a 300 billion dollar market cap created of the same phenomena.
So as we self congratulate I think it is worth to keep in context
what the accomplishment is. The accomplishment is good but constrained
and it has got a bigger constraint coming-it is eventually a
time and materials industry. And whenever you grow some thing
at 35% to 40% a year, you depend on a notion that you got to
put the labor in, skilled and qualified labor, 40% of a big
number becomes a very big number, and that number is going to
get bigger year after year. So that constraint is coming and
there is no avoiding it. The way that curve is going to plateau
out you just can’t keep the growth of the infrastructure
of the educational system growing that rapidly.
In a sense I will say
very quickly what I see about the service industry. Let me
switch to how I assess and what I think about the product
business. I came back in 1994 from Microsoft and I had an
arrogance of a product boy. I want to be a technocoolie putting,
hammering railroad ties in the Information highway. I want
to build a competitive product for the planet, that was our
mission statement, that was the reason we existed. So we built
this thing called Talisman and we took it to the market. We
took it to the market at the speak of the dot com madness;
we were building a CRM software product to be sold to the
enterprises, and it was going to be fantastic. We scored early
wins, we were at Microsoft, we were at Dell, we were at New
York Times, we had real run, we were doubling revenue every
quarter, and we were going to go for it. We were not doing
a half based commitment. We went to the market in late 1999
and by the end of 2000 we had 11 sales Offices in US, we had
4 in Europe, we had 1 in Australia, 1 in New Zealand, 1 in
Hong Kong, 1 in Singapore. We had a 200 person sales organization.
Isn’t that the way to play? If you want to build a product
then go for it.
God, I ask it. Late 2001 the enterprise CRM market dried up.
The worst recession in the history of computing. We didn’t
have any competitive advantage. We were running sales and
marketing business which had no structural damage. We had
a clever R&D team, big deal. When 90% of your cost structure
is fundamentally an overseas cost structure, what do you bring
to the table? You haven’t brought anything unusual or
exceptional on to the table. So that was a big lesson. Just
because we want to be the product boys, we want to move up
the value chain, you got to think about this game some what
differently, and that means, oh I have to got to do everything
differently which a global brand creator does. The reason
why Samsung is a brand, creating a brand in US is because
Samsung is willing to sink 5 billion dollars into creating
that brand. This cost of creating a brand, and if you create
a brand in the traditional mechanism…I will create sales
offices, I will create distribution outlets, you will have
to get above the noise levels I will get heard, you better
be ready to write very broad cheques. We wrote 90 million
dollars in cheques, that was not a small number, and that
wasn’t enough. It was enough that there were 200 CRM
companies and at the end of it there were 7 and then 1, not
bad, but we have never recovered the 90 million dollars.
So in some senses, I think there are some lessons for us here.
Yes. The romantic appeal of building product is great, but
you have got to think through what competitive advantage you
bring to the table. And in some sense, I think it that is
the lesson Titan learnt it as well. Now one of things I am
a firm believer in, why I admire iFlex, because iFlex is an
interestingly different play. So it is alright. Wait a minute.
We have got only small markets, the domestic desi market.
We have a reference account with our owner Citibank. Then
we will go to the low cost entry market called the mid-east.
If you put 3 people there then we have as big a presence as
the biggest software company in the planet. If you put 2 guys
in Nigeria same things happen. So you go to small markets,
you get positive cash flow, you get referensible customers,
and you go to the next bigger market. You get success in the
next bigger market, you go to the next bigger one, and you
are still building brand in a traditional fashion, but you
are building your brand in a successful mechanism after that,
and that is one model.
However there is, in some senses, a more interesting market.
There are 15 million merchants, on eBay today. 15 billion
merchants who have no store fronts, who have no physical presence,
whose sole job in life is to figure out how do I get virtual
traffic? I live in a virtual landscape. There are 100,000
people, it is amazing, and who have left their jobs, and make
their money by being bloggers. All they do…there is
this mother who writes every morning. Her’s is the 5th
largest visited site; she makes a lot of money out of Google
advertisements. So there is something else fundamentally going
on, and it is a way to thinking about building a brand, and
say, let me break the models, and I am really talking about
the cost of building brand, cost of building distribution,
which is to say that I don’t need to do the traditional
way I used to do it. If you think of it that way then there
is another way of thinking what IT means to you. It isn’t
whether IT is a brand by itself, but if you think about IT
as a component of what you do? So you buy steel, you buy iron,
and you build a car. Well you also buy IT, you also buy labor
costs, and if you start to think about the capability that
this industry provides you, it gives you a million guys who
know how to write a code. It gives you a million guys who
can understand what this new platform implies. Now you think
of It as an enabler for the rest of you, and that becomes
an interesting proposition. Thanks.