Mr. Sanjay Anandaram
Managing Director, JumpStartUp Fund Advisors
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.
Speakers/Speeches Next Speech