Wednesday, 26 December 2007

Emerging IT hotspots in world and competition to Indian IT

A lot is being made out of Chinese threat to Indian IT industry and also threat from other emerging cheap IT labour markets like Eastern Europe (Hungary, Poland, Czech Republic), Latin America (Brazil, Argentina), China, East Asian Countries (Malaysia, Philippines), Russia, etc. But I don’t think any threat from any of these countries at least in next 10 years.
The reason why I think so is because the Outsourcing industry in the world is flourishing because of following three reasons:

  • Cheap IT/ Engineering labour,
  • English speaking skills and
  • Easy and quick Scalability.

All of these three skills or differentiators are equally important for a country to be a real outsourcer and a real threat to India. Because if you have engineers and they are not cheap no point (case is Russia), or you have cheap engineers and also in abundance but no English (China) no point and you have English speaking engineers but not in abundance (Latin America, East Europe and East Asia) then again no point. And all these three above criteria are satisfied by India only.
A lot is being made of China that China will be able to teach English skills to all its engineers in no time and it'll be a threat. But teaching English is no child's play, it take years to be comfortable wit it. The biggest Chinese IT outsourcing company's turnover is not more than $300m in 2006 and that is no match for TCS and Infosys of India. Also most of Chinese companies’ work is domestic.
Another thing IT project management skills (5+ year experience) are costly in China than in India. So the so-called cost advantage of China over India is just a mirage not reality. Also China mainly caters to Japanese market because Dalian area in China provides Japanese speaking resources. There is hardly any work being done for non-Asian market in China. Similarly other countries like Russia, Brazil, Philippines, etc. can not provide scalability which is required in any service industry. Outsourcing jobs requires huge numbers of engineers which are not available in these countries.But all these countries can be very good partners for Indian companies. Indians can utilise these countries by setting their operations in these countries and can tap their local market. So I feel there are more opportunities for Indian IT companies in these countries then threats. Like Indian can open centre in Russia for high end IT work and product development work because of the excellent talent there. Latin America and Eastern Europe could be used to cater for non-English clients. China and Eastern Asia can be used for servicing local and Japanese market. So emergence of these new hotspots should excite India rather intimidate.

China a Threat to India in IT? Not at least for now!

In last 4-5 years if anyone has said that China could be a major competitor to India in IT outsourcing & BPO business, it would have definitely sent shocking waves among big IT players and even among IT professionals (they stand to loose jobs).
Media, especially the research firms like IDC, Gartner & Forrester had been proclaiming from perch top that China was going to be a big powerhouse very soon in IT outsourcing and India should worry about dragon. They were predicting for this to come true as early as by 2007. Everyone was saying so looking at the way China had been making strides in manufacturing and the way it was improving its hard infrastructure. And for us as well there was no way but to believe because if Chinese think of doing something they would make that happen at any cost. That’s the kind of reputation they have got.
But nothing significant in IT outsourcing industry has happened so far in China and I don’t see this happening for at least another 7-8 years. That’s when it may be starting to emerge a contender for competitor, still it would not be a competitor. That would still take few more years from there if Chinese are prepared.
Today there is not a single IT vendor in China worth its salt. There are many outsourcers like Objectiva, Bleum, etc. but they are just fringe players who would either never become serious players or would have to try too hard to become one.
Here are some of the reasons why China can not just become a serious IT player in IT outsourcing business:

  1. There are no big IT companies comparable in scale to Indian giants like TCS, Infosys. Today to bag a big outsourcing contract you have to show scale. Otherwise you can just become a body-shopper.
  2. Project management experience is one thing which you can not learn in an institute or college that comes only from work experience and India has that in abundance. Indians have been working in IT industry for decades now and so they have built formidable skills in this area which is their selling point and also huge differentiator.
  3. Even though the IT industry is so small there in China still attrition in China is more than 20% as against 15% in India. Not so goon signs at the inception.
  4. The experienced IT resources in China are 50-70% costlier than in India. Even the entry level resources are not very cheap in India and those are also not English speaking so the cost factor is hardly an advantage.
  5. Patent and IP protection is biggest problem in China and IT being such an important and sensitive area for customers they would think twice (or more?) before sending work to China.
  6. Should we mention English as one of the reasons? Can Chinese learn English in few years to become strong contender? Most of the business world over happens in English, even in non-English speaking countries.
  7. Nothing works in China without guang-xi i.e. connections, so for an outsider if they have to set up shop they either have to tie-up with local partner just for guang-xi or wait for years to grow whereas in IT you have to be very fast and nimble. International players like IBM, EDS, and TCS may not find it easy to grow there as they have grown in India.
  8. IBM, Accenture and EDS have been in China for 15-20 years still their service staff is minuscule that tells what the current IT environment there is.
  9. Indian IT is not because of government support or any institutional support but because of entrepreneurship of some individuals. In China it’s government that is pushing, but govt. can set up manufacturing companies not IT. It’s a people business. Better the people, more is success.
  10. China’s one child policy hampers employee movement between different Chinese cities as people normally are hesitant to leave their parents and grant parents.

    This is not to say that China can never become a serious IT player and Indian IT should also not become complacent. I’d hope China to come up fast in IT so India also improve its quality and there is overall improvement.

Saturday, 18 August 2007

How a leader change the course of an organisation.

The role of an able leader in the development of any organisation is as important as the oxizen to our body. It's just one leader who can make or mar an organisation. There are plenty of examples scattered around us to support this.
When India was born and Nehru became the first prime minister, his aim was to make India a country worthy for her people. He along with others created a democratic and secular government, created public institutions with broader purpose of serving the people of nation, gave people of the country equal opportunity, created equality among people of various religions and social strata among other things. He set out in creating a modern India by building dams, core-industries, higher education institute, etc. which were clearly meant to take India into league of leading nations of the world. Nehru had long term vision with which he acted for india. That is where the foundation for today's vibrant India was laid. Had he went the otherway of fulfilling his own short term gains, India would not be in position where it's now. Here the leadership of a single person Nehru was very important for india to follow either the path of peace and prosperity or the path of chaos like many other countries.
Similarly Tata group was just languishing and stumbling along in early nineties when Ratan Tata took over it. At that time hardly anyone would have thought that Tata group would be so globalised that it'll take over companies around the world. But it was sheer leadership and the vision of Ratan Tata that Tata group is where it is today. It's one of the most globally diversified and most ambitious diversified group from India. This success is again simply due to the vision of a single leader Ratan Tata.
Obviously, in all this we can not deny the fact that every leader needs to have an able and supporting team which can turn the vision of a leader into reallity. But here again it's the leader who selects his team.

Sunday, 12 August 2007

Advantages of Offshoring

Apart from obvious advantage of saving money, there are huge benefits for entire world, some of them are listed here:

  1. The first and obvious is benefits of lower cost for the business offshoring the work to cheaper locations like India, China, etc.
  2. Improve the quality of their work by taking advantage of excellent and quality oriented workforce of India.
  3. Saving huge time and tension to the Client top management which would have been spent in interviewing a lot of prospect to fill a few posts. To adress urgent requirement for people, they have to spend time which can be cut when they engage offshorer who can supply people fast, saving opportunity cost as well.
  4. Assemble teams and projects much faster than possible as offshorers already have people of all skills on bench ready for deployment.
  5. Huge profits for banks like HSBC, Barclays as they save more by cutting cost.
    They save lot in cost-cut. The US healthcare costs have dropped by 30% since all the data is processed in low-cost locations. And these profits definitely benefits local by way of either dividend distribution or by creating more job, or by investing in new R & D, etc.
  6. More opportunities are generated for UK / US business like more sales for airlines, Microsoft, IBM in hardware and software sales. As countries like countries grow demand for UK/US’s high end product grows so UK/US. American products and services are highly regarded and popular among this new breed of Indians creating growth opportunities for US businesses in many spheres. Similarly more businesses for food chains, sport accessories chains as more spendable money in hands of Indians
  7. More stability in Indian region as job keeps people busy making world a peaceful place.
  8. Ripple effect to Indian economy improving entire economy.
  9. More lean and mean UK/US corporations so more values for shareholders
  10. More profits so more new innovations and more high end job creation in US
  11. Better services to customers, as without offshoring all services would not have been possible due to higher cost.
  12. Lower cost so cheaper services and products to consumers
  13. Lower jobs go to India so people in developed nations have to go for higher education to remain employable and improve overall education level in developed world.
  14. Higher education so more entrepreneurial public creating more jobs in newer areas.
  15. It’s more a tool to increase growth and boost efficiency than just pure cost saving exercise.
  16. Companies have cut down time to market by more than half and also reduced their investment in product development as it shares the same with outsourcers.
  17. It helps corporate clients meet their tech needs without worrying about h/w or s/w trends
  18. These create local jobs also, recruiting local skills which are not available in India, setting up office.
  19. Offshorers also create local jobs and employ local people.
  20. new skills sets like handling offshore team, etc. come up in local markets
  21. Vendors, having worked with several customers in same area, can provide a lot consulting advice from their experiences, share the experiences of other organizations and their use of particular solutions. This knowledge would not have been possible to corporations otherwise. It's like learning by others' mistakes so save time, money and stress.
  22. Can be used by all areas of business, from software development to claims processing, HR administration, and accounting and finance, reasearch, legal, any service you can think of.
  23. Thirty years ago, electronics companies such as Motorola, Texas Instruments, and Intel sent manufacturing overseas to cut operating costs and speed product development by taking advantage of wage gaps and time zone differences. Without global resources, these companies couldn't cost-effectively develop the hundreds of new product designs needed each year.
  24. Studies have shown that with globalization, gross domestic product figures have gone up for all participants in the global economy, both in emerging and developed regions.
  25. automation brought a host of new conveniences and capabilities to American companies,
    the species that survives is the one that is "most adaptable to change."
  26. by having design teams working in multiple time-zones companies can reduce time to market, so save cost and also remain first to market winning more market share.
  27. Indian software industry association, Nasscom, figures that each new worker in the info tech sector creates seven indirect positions, from janitors to security guards. it's a virtuous economic development model.
  28. the labor savings from global sourcing can still be substantial. But it's peanuts compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent.
  29. If we want to recruit a great engineer in Silicon Valley, our lead time is three months and in India it is just 2-3 days.
  30. Clean, well-paying service jobs boost demand for educated workers, an impetus to improving schools and training. And the high-level skills learned "spill out to the economy as a whole,"
  31. Other industry advantage: Over 60% of the commercial real estate in India in the last 3 years was leased to the IT and BPO industry players. The automobile, hotel, airline, catering, computer, telecom and construction material industries and many professional services industries like legal, recruiting and accounting get a major boost from the IT and BPO growth.
  32. the most optimal use of global resources and challenges the benefits of trade based on comparative advantage.
  33. faster service X-rays that are taken at night in a U.S. hospital when the radiologists are not on duty are e-mailed to foreign doctors in another time zone who analyze the x-rays and either e-mail the diagnosis to their American counterparts or call them back to discuss the results.
  34. Products are broken down so that their respective parts are simultaneously manufactured in the U.S. and abroad -- all with close collaboration among the manufacturers. The finished product, when all of its parts are ready, is then assembled at the most convenient and economical location, faster time to market.
  35. Due to globalisation, inflation remain arrested that creates a stabilizing factor in society.
  36. Things become cheaper so that more people can afford things improving overall lifestyle and prosperity and bringing more homogeneity in society.

IT Services Vs. IT Product

Indian IT industry and IT players have often been criticised by so-called 'arm chair critics' for being service oriented and not being product oriented. They often criticise companies like TCS and Infosys for not investing much in creating products instead looking for quick money by going after service market where money in relatively easy to be made.
But I see nothing wrong in this. It's with this same service industry that entire India got the confidence which it enthuse today. Before the birth of same the IT industry, hardly any industry was confident enough to stand up on it's own feet forget about going into the world arena but today many players from other industries like steel, automobiles, FMGC, electronics ect. are becoming global thanks to the path shown this IT service industry.
Critics forget this. They forget that to reach to the top one has to take small steps. You can not simply spring to the top but you have to take small baby steps initially then take faster steps and once confident you go into fast lane. That's what IT industry has been doing. Now we are even seeing some product companies in India as well. I will not say that we'll displace US just tomorrow in product space, that will again take time. Moutains can not be moved just overnight, they take their own time. So we'll also take time to build IT product industry.
Critics compare that TCS was even born before Microsoft and they say look where Microsoft is, but they turn blind eye to the environment each of these companies born in. Where India was when TCS was born, that was not the market supportive of any kind of industry. India was a bleeding ground for freed enterprises before 90s whereas US have been breeding ground.
So you can not compare a poor's son with that of a King's when comparing their lives and achievements. But with the kind of environment created by these giant IT service players, not the ground is set for product companies to take birth.

Saturday, 28 July 2007

Oracle in DWS Space

Oracle database is mainly a product suitable for transation processing systems (OLTP) and it's got a dominant position in that market, a clear leadership. This market is almost saturated now with not much growth or expansion left in this area. Newer market for growth is datawarehousing (DWH) space where the growth is at the moment and it would be high growth area in forseeable future as corporations across the world try to make sense out of data stored in OLTP systems. Such DWH systems require huge storage capacity and huge data processing capabilities. Normally the database products suitable for OLTP are not suitable for DWH.

The leader in DWH space is Teradata which can store huge amount of data and has got huge processing capabilities as well. Netezza is another promising product in this area.

Oracle being such a agressive company currently has got no product in this area and Larry Elison would definitely not give a miss to such a growth-promising area. He would definitely try to enter into this area. Building a product from scratch would not be a feasible solution for him. So Larry would definitely try to gobble up any of existing product either Teradata , which is listing soon on bourses, or Netezza.
We would not be surprised if Larry does a hostile bid, like done many in recent past in ERP space, for any of these or any other such product in DWH area.

Sunday, 15 July 2007

Leaders are made. Full Stop.

People say that the leaders are born and not made but I disagree with this to a great extent. I strongly believe that most leader are made and not born. It they are just born then every such person would just be declared at the time of birth that this is a leader. And by now scientists would have found out a way or a detective device to identify whether a person born is a leader or not. Then if she is leader then she would not be sent for formal education and simply given responsibilities of leadership instead of wasting time in getting formal education and taking small and hard steps to go up the laddar in any organisation, be it corporate or political or of any other kind .

Why a person go for formal education and then join an organisation at very low level and reach to the top after very gruelling learning journey of life, is to learn leadership. Look around in any walk to life and we find leaders, in business, in politics, in society, in sport, or any fields. And the people we find there whom we call leaders are those who have learnt leadership hardway, toiled hard to reach where they are today. Some learnt in business schools, some learnt on job but every one learnt in this world only. A successful sportsman can not become one just like this she has put a great amount to work to be what she is. Gandhi was never a born leader. By the time he started pactising law in South Africa he was just a normal person. But then circumstances taught him and he became a leader. Take any successfule businessman or executive, she would have gone to some school to learn a few lessons and then work hard to be what she is today.

Now the question arise then why not every person who takes formal education or joins an organisation becomes a leader. The reason is those who becomes leader very early decides that they have to become leader, they know where they have to reach and accordingly they start aquiring those skills on the way. They keep learning lessons of leadership at every small step and those learnings finally make them leaders. Some just languish here and there are those who have never decided to be a leader.
So every born person is a potential leader. The only thing is she has to learn to be leader.

Tuesday, 3 July 2007

Rising ruppee and experienced IT guys

Indin IT companies had been growning at more than 35% y-o-y for many many years now but now that growth seemed to be slowing down considerably. There are many reason for this slow down. Rise of ruppee against the dollar is one of them.
With ruppee rising against dollar significantly in the last year and no slowing down in sight for this ascent in near future the IT compnies are hard pressed to maintain their margins and past growth. They have to look for ways to maintain margins.
One of the way being followed is to hire more and more freshers and take less of experienced guys to work on projects. There was time when all would be experienced guys on all projects in IT companies but now they are putting freshers and one experienced person for a team of 4-5 freshers. Freshers are given some initial training and are expected to work and experienced guy is expected to enforce quality on the deliverables. This way compnies are saving a huge amount by paying pittance to freshers in comparison to experienced guys. When it comes to internal appraisal /increment, not-so-freshers-now are given better increment than experienced, because if given same absolute amount, for a less experienced guy it is better increment than an experienced guy. That means company is saying indirectly to experienced guys that you are not as important as the guys next to you.
This means experienced guys have to work doubly hard to keep themselves relevant. It's not only IT skills which will be enough but also management skill, leadership skills will be required.

Sunday, 1 July 2007

Infosys lapping up Capgemini: will politics allow it.

Ever since the rumours of Indian IT service giant Infy taking over Europe's largest IT serices & consulting company Capgmini cropped up in the media last Friday, the shares of Capgemini on european bourses have gone up substaintially whereas Infy's shares hardly moved that shows how much European shareholders expect to gain from this deal, whereas Infy shareholders hardly see any short-term gain out of this deal.
Shareholders are mostly the creatures who see just the short term gains. They want to see how much money they can make from now upto a year or two. They hardly see if the deal is a strategic fit or it's going to be a good one for long-term or it's good for social fabric of the area where the company operates.

Definitely if eventually Infy does take over Capgemini, the first thing shareholders of CG would expect is to cut the cost. Since the operating margin of CG is hardly 5.5% whereas that of Infy's is above 25%. So shareholders of CG would expect this margin going up significantly up. For since cost cutting is the most important step management can take to improve margins in service companies. And service companies being people intensive, they would cut down employees in Europe and such other high cost western markets and hire more and more in India and other low-cost markets.
This would surely create a huge political and workers-union tension in Europe, where already unemployment rates are high.
And problem Infosy management would face is that of retaining consulting unit employees. Main reason why Infy wants to buy this is to make easy and fast inroads into lucrative consulting pie which have so far proved to be tough nut to crack for all Indian players. This business is mostly dependant on how good people you have in your team. So if Infy can not culturally merge CG than all important people would leave CG and making deal meaningless for Infy. So Infy have to leave core consulting business of intact in the way it functions and have to give full freedom to operates then only it can reap the benifit of deal in the long term.

Sunday, 17 June 2007

Globalisation and a hair dresser's reaction.

This weekend the first priority for me was to have haircut as I had not had one for many weeks. I went to a local hairstylist where one did’t need an appointment, just walk in. That shop has 3 hairdressers so you get chance faster. I hardly waited for 5 minutes, which I did not realise as I had picked up a local newspaper to read, before my turn came. It was Carlos who was doing haircut for me. Incidently his girlfriend is an Indian so he has learnt quite a few hindi words/phrases /short sentences. So you can just tell him that you want 'chhota hair' instead of short hair and at the end you can tell him 'badiya haircut' and dhanyawad. So that's globalisation of a sort.
The main hairdresser,named Charlie, of the shop, I guess he is owner as well, has been working on that shop for decades now as I came to know from himself on my one of my earlier visit to the shop.
When yesterday I was having haircut I overheard Charlie speaking to his customer while giving him haircut. He was talking about the current phenomenon of outsourcing to Asian countries like China & India. What Charlie was saying to his customer is that these Chinese are manufacturing everything in their country and selling back to us stealing our jobs. And the politicians and businessman are not having a long-term view of this situation and indulging in short-term profiteering. He was saying that when he was very young, around 40 years back, he read in Bible that time would come when yellow people would rule the world and he said it looked like the time was very near now. Specially he was trying to mention how Chinese are manufacturing British cars like MG in china and selling them back in Britain. But what he does not understand is that this car company had already gone bust and Chinese came after last moment to save this brand. Had Chinese not come and taken over this MG brand of cars would have become a history. Now that Chinese are manufacturing these cars a lot of businesses in dealerships, maintenance, etc are saved and so are saved the jobs in such supporting industries. Even Chinese are promising to start some manufacturing at local British factories as well means creating some manufacturing jobs.
I was sympathetic to his views as I understood what it was like loosing a job to some other country and not having much hope for future. But I can’t do anything. I am also here to steal somebody’s job. But it’s global phenomenon and everyone has to bear the fruits of this, even we Indian are also bearing in some of other way and I am sure even Chinese would also be bearing. It’s give and take thing. You loose some we gain some and vice-versa.

Presidential election

The announcement of name of Pratibha Patil as the candidate for presidential elections was almost a shock to most of Indians (I think so). She was hardly known to most of Indians before her name was announced barring few areas like Maharashtra and Rajsthan where she has been active in political life.

According to the media reports she was selected because left and congress were are agreeing on any one candidate so then they chose a least controversial candidate. Least controversial means being a rubber stamp. Criteria for the highet post in nation is not credential of a person but how easily he/she could toy a party or a person's line.

Everyone is bragging now that it's triumph of womer power in India yes that is very true it's triumph of women power not because Pratibha Patil was selected but because she was selected by Sonia Gandhi.

She was only selected at the last moment tell itself that she was the last choice and all these days name of not a single women firgured in discussions.

What are we doing with our great institutions, like president's post, putting people who are more loyal to a particular family? Is this how a democracy should work.

President like Dr. Kalam has raised standards for this institution to a very high level. It'd be very difficult for any new person to even match them, forget raising them further.
I just hope that Pratibha Patil lives up to the standards of that post and she herself creates new
benchmark and leave a mark of her own.