| Mr. Sanjay
Anandaram |
| Managing
Director, JumpStartUp Fund Advisors |
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The
great advantage of being the last speaker is that I can pause
for moment, look very wise, and say that I agree with everything
they said. In fact, I do, because to answer the question that
has been posed, is India’s IT the best foot forward? The
answer is yes. I think there is a huge but, with a single‘t’,
behind it. About 50 years ago if you had asked any one overseas
about what their impression of India was, apart from all the
negative connotations about poverty and such, they would have
said, great for commodities, tea, coffee, leather, jewellery,
and today, fast forward, the real question is, yes…we
also know that India is great for IT, OK? And what kind of IT?
Low cost high quality great technical talent. That is the big
issue. The real issue therefore is, just like India has about
250 million head of cattle which is the world’s largest,
it is also the largest producer of milk in the world, but we
are not a player in the dairy products business, which means
playing at the other end of the value chain. The question is,
and this something that is of relevance to all the big Indian
IT companies while they are going out there and competing, there
is a lot of passive marketing which is a part of their business.
The CIO who takes a decision has already decided that they want
to reduce costs. Therefore I need to come to India which is
the number one country for cost reduction. Once I come to India,
I am going to meet the top 3 or 4 companies, and then I am going
to make a selection. So, if you think about it, there is an
implicit positioning of the whole set of Indian companies. Low
cost, high quality, great project management, etc. We need to
conquer that if we are thinking of building a brand out of India.
A brand in my mind means something that is relatively price
inelastic, gives a warm fuzzy feeling to the customer for buying
it, and as they say in IT business, nobody ever got fired for
buying IBM. The question therefore is if a CIO of a Fortune
500 company wants to get some IT work done, whether its in the
US, whether it is done out of Russia or India or wherever, an
Indian company must be part of that shortlist, not because of
its cost reasons but because of the fact that it has the domain
capability, and that is very important issue in my a mind as
far as the brand name is concerned. It should not become a part
of the choice set because it is offshore low cost India.
The second issue is, it is great jargon to keep using the word
‘global’, but what exactly is global? Does it mean
the number of visa stamps I have on my passport of my every
employee? Is that global? Is the percentage of my overall revenue
that comes from outside of India, is that global? What percent
of my overall head count is international, is that global? How
local I am in each market, is that global? So, we need to be
clear about what we are talking about, because words tend to
have all kinds of meanings when they are bandied about freely
without understanding the context. And therefore if we were
to step back a little and say if we are going to start competing
with the big brands even in the IT services’ space, and
even both of these hold true namely there is certain amount
of price inelasticity and the customer is neutral to where the
work gets executed, and is not selecting you because of India,
and believes that he or she will get full service capability
anywhere in the world with the same predictability, quality,
domain knowledge, etc. Then two things need to happen: we need
to change the whole perception of low cost technical capability
to one that is market insight driven which means investments,
R&D, and innovation. The second big thing is we need to
move out from passive marketing to actual huge investments in
sales and marketing, and everything else that follows it. If
you really think about the investments in innovation, R&D,
and all that, it is not that the top Indian companies don’t
have the money. There are huge amounts of cash being generated
every year from their balance sheets. So instead of paying huge
dividends out to shareholders, why not start making serious
investments in building intellectual capital capacity, which
is soft infrastructure, rather than investing in huge real estate
projects which is hard infrastructure. To my mind that is the
most fundamental change that needs to happen. Because, if you
start to look at the growth and the profits of all the Indian
IT services companies they are volume driven. They are not price
driven, in other words, the value-add per employee or price
per employee is a very strong metric of how strong your brand
is. If the only way I am able to grow profit is by hiring more
and more people, I am pretty much at the same or declining rates,
it is not a sign of a great brand, and that is the key point
I want to make today. For a moment don’t take me wrong,
I have spent 20 years in the IT business, I am huge believer,
but these are the things that we need to do because if we don’t
seize the opportunity then there is a huge danger that this
great movement will bypass us, just like it bypassed us in leather,
gems and jewellery, in garments, and a variety of other businesses,
and that is the huge tragedy that happens, because we have the
innate habit to snatch defeat from the jaws of victory. All
of a sudden we are unable to take that big momentous decision.
We are very comfortable in the small comfort zone we have built
for ourselves. We are very comfortable when we open Economic
Times and read some thing that says Sensex at 12,000, bigger
and better than DOW Jones at 11,000. It just boggles the mind
when you see something like that. So the whole point I want
to make is that let us not start getting consumed by our own
rhetoric. We have done a terrific job, we have established a
certain brand reputation for the country, now we need to build
the brands that emerge out of this country, and that is a long
arduous process.
If you look at China whose economy is 2 and ½ times that
of India, and they are known as the manufacturing hub, manufacturing
location for the world. There is ‘n’ number of companies
of the same size or bigger than any of Indian companies that
is outsourcing business. They don’t have brands, the reason
for that is that they have remained (bell rings) as job shops
or contact manufacturers, or OEM and ODMs. To get into the brand
space requires huge investments in R&D and innovation, and
sales and marketing. One last point, if you talk to any of the
Fortune 500 CIOs they will tell you that by and large most Indian
IT companies look, feel, and smell the same. The value proposition
to us is the same. We really can’t see any huge difference
in the way they pitch to us, in what they tell us. So just go
to the websites of Wipro, Infosys, and TCS, and tell whether
you can really find a huge difference between them? Now you
go to IBM global services, you go to Accenture, they have one
thing there which is more important-they have a button which
says Research and Insight. That is what that drives their next
generation consulting and IT practice. And that is the space
that the Indian companies, with their huge ability in the market,
ably demonstrated ability, need to take advantage of. And that
I believe will really lead to the creation of Indian brands
that are global in years to come. Thank you. |
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