International IT sector attention was last week focused on Indian
software industry apex body Nasscom's annual India Leadership Forum,
held on 11-13 February 2009 in Mumbai, to ascertain the extent to
which global economic turbulence has affected India's hitherto robust
software services exports sector.
The verdict? While attendance and sponsorship was visibly thinner than
at last year's show (unconfirmed estimates put both at about 20
percent lower), and the mood far from euphoric, it's pretty evident
that the Indian IT sector is resolute in its goal of ensuring that the
heartening 16 percent growth of software and services exports
estimated for FY 2008-09 will be maintained in the year ahead.
There is no doubt though that the current economic scenario is being
recognized as truly challenging by an industry habituated to growing
at 30 percent or better, prompting even the usually restrained co-
founder and chairman of Infosys Technologies, N R Narayana Murthy to
dub it "the mother of all recessions."
As the figures and the forecast by Nasscom revealed, the overall
Indian IT-BPO industry (including hardware) is estimated to aggregate
revenues of $71.1 billion for FY 2009 (ended March 31), accounting for
a sizeable 5.8 percent of gross domestic product of the country.
Analysts believe that India's fundamental advantages – low cost and
quality (which Egidio Zarrella, KPMG's global partner in charge of IT
Advisory, described as the "two big punches") – will help India keep
its competitive long-term advantage even in these recessionary times.
That said, the mood was grim yet determined, reflected in the titles
of some of the discussion topics: "Hard Times: Slow economy, sales
slump – Will it get worse? Will you survive?"; "Market Spiral:
Bottoming Out?"; "Making the most of a crisis"; and, "Balancing the
troughs to scale the peaks". Every industry captain that we spoke to
stressed on the need to enhance operational efficiency, improve
employee utilization rates and enter new markets. Engaged to explain
the changing dynamics of an increasingly volatile world, was an
impressive speaker roster comprising global thought leaders such as
management guru C K Prahalad (professor of strategy at University of
Michigan), Shashi Tharoor (former United Nations Under Secretary
General), Rosabeth Moss Kanter, (specialist in leadership and
innovation at Harvard Business School) and Pankaj Ghemawat (professor
for global strategy at IESE).
While there are still no clear answers or silver bullets, most
industry leaders expressed confidence and optimism that the industry
would emerge stronger coming out of this recession. The tone for the
Nasscom summit was set by John Chambers, chairman and CEO at Cisco
Systems, who said that this recession was an opportunity to reinvent,
and prepare for the inevitable upturn. "You will never create a great
company until you face a near-death experience," said Chambers, as he
spoke of his company's learning from past downturns, and how Cisco
used every such downturn as an opportunity to differentiate and
increase market share.
The need to reinvent and grow stronger was echoed by every Indian
industry leader, as they discussed ways to beat the slowdown. Vineet
Nayar, CEO at remote infrastructure management leader HCL
Technologies, spoke of "having to eat somebody else's lunch" in order
to gain market share, while Infosys co-chairman Nandan Nilekani
advocated a strategy of helping clients to extract more out of their
existing IT investments as applicable regardless of market
conditions.
Lessons from the slowdown
Current conditions also offer a great opportunity to get closer to the
customer and build great relationships, as most clients of the IT
majors are in trouble themselves, and are looking for ideas that will
help them improve their market share. Denny McGuire, chairman emeritus
of US research firm TPI, articulated this premise as he spoke of the
need for transforming 'transactions' in the form of projects to
'relationships' that are focused on creating long-term value for the
client.
During the course of the three-day summit, there were several thought-
provoking observations that perhaps call for deeper introspection. Jim
Champy, chairman of Perot Systems, spoke of the need for simplifying
the huge complexity that is an integral part of every IT
implementation today. Champy cautioned that some industry players
could become extinct unless they revisit their business models, and
focus anew on systems and applications that are simple to understand
and implement. In this context, India Inc can learn from the immense
success of companies such as Google, which have built the brand from
ground up by understanding the needs and behavior of the consumer, and
are now leveraging this knowledge in the enterprise market. After all,
every enterprise has a consumer, who needs a system that is quick and
economical to understand, implement and maintain.
With the downturn overseas, the Indian IT services sector is beginning
to look more seriously at domestic clients. But this is no bed of
roses. Alok Kumar, senior vice president for IT at large Indian
conglomerate Reliance Industries, opined that the needs of Indian
enterprises were poorly understood by the Indian IT service providers,
thus slowing uptake. Kumar spoke of the need for IT services majors to
evolve different India-pricing models and demonstrate more
flexibility. "Due to the rigid policies of most IT service providers,
Reliance is now increasingly considering and using open source
technologies. If IT service providers keep at this path, their
business is bound to come down drastically in the Indian market,"
cautioned Kumar. Outgoing Nasscom chairman Ganesh Natarajan responded
that the Indian IT services sector is cognizant of this gap, and in
fact needs to evolve a separate strategy not only for India but also
for other emerging markets including Brazil, Russia and China.
Moving beyond Satyam
Nasscom and the Indian software industry are well aware of the damage
caused to "Brand India" by the recent financial fraud unearthed at
Satyam Computer Services. The issue was alluded to repeatedly at the
conference, and officials were keen to categorize it as a one-off
aberration rather than an indication of systemic problems with
corporate governance in India. In concrete terms, Nasscom announced
the formation of a corporate governance and ethics committee, to be
chaired by Murthy of Infosys. The committee aims to sharpen the
existing code of ethics, values and corporate code of conduct for
industry and emphasize existing regulations and practices on corporate
governance, an official statement said. It will also develop and
create awareness of best practices to be followed by the board, audit
committees and independent directors of organizations.
With consistently rapid growth rates over the last eight years, the
Indian software industry has rarely had time to sit back, introspect
and weed out inefficiencies. The current slowdown is thus also being
viewed as an opportunity to re-evaluate existing models, and gauge
whether the linear growth model is still the right way to measure
growth and profitability.
Clearly, apart from the usual diversification strategies and touting
the 'move up the value chain' mantra, the Indian software industry
seems eager to formulate new strategies that will help it emerge
stronger and more profitable when global spending on IT gets back on
track.
Sent from my BlackBerry® smartphone
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