The sentencing of Binayak sen, the PUCL activist from Chattisgarh brings to the fore the way the country looks & treats naxalism. Naxalism is getting equated to terrorism & lot of innocent people are being targeted just because they are protesting against government's inaction. The governments of the day seem to be either hell-bent on taking advantage of naxalism or have tried to address the symptoms at best. No one is trying to address the root cause.
What is the root cause of naxalism? It is a deadly mix of poverty and perceived belief of being wronged. In most of the cases it is true. In a hurry to sanction lands for development (for obvious reasons), the state forgets its responsibility of the need to take care of its citizens in a wholesome manner and provide for their bare necessities at the least.
Whenever land is identified for a particular project, a thorough analysis is not done about the effect of the intervention on the ecosystem at that location. For example, when land is acquired for a mine in a tribal dominated area adjoining a forest, what could be the impact? The tribals who are generally dependent on the forest ecosystem are suddenly reduced to penury since the resource which they depended on is no longer there nor they are provided any alternative means of livelihood. The forest ecosystem is also disturbed, but so far I have not heard anybody paying serious attention to analyzing the impact on the animals & forest ecosystem. Ideally, both the tribals & the forest need to considered together while working on a rehabilitation process. Otherwise, tribals become naxals while the forest animals run into people in neighboring villages & get killed.
The case of acquisition of agricultural land is much more simpler. Either the complete ecosystem should be created elsewhere or people compensated appropriately so that their standard of living does not get negatively affected. In fact, the government should ensure that their standard of living becomes better since they are in a way sacrificing their convenience for the betterment of the country by surrendering their land. Unfortunately, the people who come up with the relief & rehabilitation programs either do not understand what needs to be done or simply not bothered.
So, in a hurry to get more projects off the ground quickly, the governments end up creating Singurs across the length & breadth of the country. In some places, the people succeed in halting the project while in some others, the movements are just suppressed and the result is there for everyone to see. While India's GDP is increasing at a scorching pace, more than half of the country lives in poverty. More development projects will lead to more chaos unless enough attention is not paid towards relief & rehabilitation. The end-result could be a Laloo-time-Bihar kind of situation across the country with affected people taking to unlawful means to earn their livelihood.
Monday, December 27, 2010
Monday, December 6, 2010
Should political parties be run like businesses?
More than a year ago, seeing the sad state of Congress party, I had written a letter to Rahul Gandhi about the need to fix the rot quickly. Otherwise, the party as a whole is headed towards a state in which it is in Bihar now. I had also asked an audience with Rahul to explain my strategy to fix the rot. I have not heard from him since then. Needless to say, the Congress party has sunken to further lows since then.
What if Congress party is run like a business? For the benefit of Gandhi family, let us assume a comparable family business situation like that of Reliance Industries. If Congress party is run like a business, then the voters will be its customers and different states will be the market segments it operates in. Needless to say, it has to be in No.1 (Delhi) or No.2 (Punjab) position in each of the markets in which it operates. Otherwise, it loses its relevance (Bihar). In markets, where it cannot go alone, it needs alliances (Tamil Nadu). But it needs to ensure that the alliance partners (like JD in Karnataka) do not eat into its margins (voting percentage).
What is really happening to Congress as a business? Sonia Gandhi is the Chairman & CEO while Manmohan Singh is the COO and Rahul Gandhi is the second-most influential director on the board. Sonia's so-called coterie is the list of other board members who influence decision-making. Congress, instead of operating like Reliance Industries, is operating like Hindustan Motors. In most markets it is neither No.1 nor No.2. Even in places where it is No.1 or 2, it is losing market-share very quickly.
Is the situation so bad that Congress is on the verge of becoming history? No. The reason is because the competition is not doing well either. Though BJP controls many major states, it is also losing control. The customers (voters) don't have credible alternatives to move to (like in Bihar). This is what is protecting Congress from becoming history.
What can the party do to stem the rot? To start with, the people who are running the party (Sonia & the coterie) need to get connected with what is happening at the ground level (lowest levels of party machinery). Otherwise, you end up devising strategies which don't work. Rahul's strategy for Bihar is one such example. When some of your business units are continuously making losses, you will have the board spend more time to get into the last detail and take measures to fix the problems. You can't assume that the middlemen will always get you the correct information. This is what is happening in Congress now. There should be a mechanism to verify the authenticity of the information, which is the missing link.
Another item that the Congress, the business, needs to focus on, is to groom mid-level management which does not always look up to the top management before taking any decision. The high-command model is not sustainable for a long time. Congress badly needs good salesmen at the state level & lower who not only do the selling (promoting the party's views & policies) but also do the account management (take care of voters issues) on a day-to-day basis. This is how businesses are managed and that is what Congress needs to do at the organization level.
In summary, it is high-time that Congress party leadership learns a trick or two from the businessmen and runs the party like a business (act like as though there is no tomorrow!) which could potentially become history if the issues are not addressed immediately.
What if Congress party is run like a business? For the benefit of Gandhi family, let us assume a comparable family business situation like that of Reliance Industries. If Congress party is run like a business, then the voters will be its customers and different states will be the market segments it operates in. Needless to say, it has to be in No.1 (Delhi) or No.2 (Punjab) position in each of the markets in which it operates. Otherwise, it loses its relevance (Bihar). In markets, where it cannot go alone, it needs alliances (Tamil Nadu). But it needs to ensure that the alliance partners (like JD in Karnataka) do not eat into its margins (voting percentage).
What is really happening to Congress as a business? Sonia Gandhi is the Chairman & CEO while Manmohan Singh is the COO and Rahul Gandhi is the second-most influential director on the board. Sonia's so-called coterie is the list of other board members who influence decision-making. Congress, instead of operating like Reliance Industries, is operating like Hindustan Motors. In most markets it is neither No.1 nor No.2. Even in places where it is No.1 or 2, it is losing market-share very quickly.
Is the situation so bad that Congress is on the verge of becoming history? No. The reason is because the competition is not doing well either. Though BJP controls many major states, it is also losing control. The customers (voters) don't have credible alternatives to move to (like in Bihar). This is what is protecting Congress from becoming history.
What can the party do to stem the rot? To start with, the people who are running the party (Sonia & the coterie) need to get connected with what is happening at the ground level (lowest levels of party machinery). Otherwise, you end up devising strategies which don't work. Rahul's strategy for Bihar is one such example. When some of your business units are continuously making losses, you will have the board spend more time to get into the last detail and take measures to fix the problems. You can't assume that the middlemen will always get you the correct information. This is what is happening in Congress now. There should be a mechanism to verify the authenticity of the information, which is the missing link.
Another item that the Congress, the business, needs to focus on, is to groom mid-level management which does not always look up to the top management before taking any decision. The high-command model is not sustainable for a long time. Congress badly needs good salesmen at the state level & lower who not only do the selling (promoting the party's views & policies) but also do the account management (take care of voters issues) on a day-to-day basis. This is how businesses are managed and that is what Congress needs to do at the organization level.
In summary, it is high-time that Congress party leadership learns a trick or two from the businessmen and runs the party like a business (act like as though there is no tomorrow!) which could potentially become history if the issues are not addressed immediately.
Business Policy: Simple IT strategies which would have worked
In my corporate career, I have been fortunate to be part of different kinds of IT businesses including start-ups. In the process, I have been involved in situations which required us to come up with solutions to business problems, most of them involving business policy decisions which changed the direction of the business most of the time. I would like to discuss some of the interesting ones for the benefit of everyone.
In one of my first jobs with a leading Indian IT services major, I was thrown into a situation where one of the US customer accounts in the Insurance sector (in the late 90s) was in trouble. When I landed there and had some initial informal conversations with the customer & our folks working there, I realized that the problem was on the customer side. As soon as the first set of folks from our company started working on their premises on-site, some of their employees had got laid off and the word had spread that these two are linked and more heads will roll. I had to work with the senior management on the customer side to ensure a clear message was sent across to all employees that the new IT contract has nothing to do with jobs being lost in other divisions. In fact, I convinced them to hold back some of the other layoffs till things stabilize. This ensured co-operation from the customer side for us to take over some of their IT functions while their employees focused on new application development. This account later went on to become one of the marquee customer accounts for the IT major in the BFSI segment. This is the best example how right messaging can change the whole game.
In one of my stints with a IT services startup started sometime before the dot-com burst, we were focused on one specific technology segment where we had a lot of expertise. When the dot-com bust happened and some of the customers pulled the plug on some projects, the founder-investor really panicked. He wanted to do 2 things. One, layoff some consultants and dilute the focus of the company to include all kinds of services. I had no problem with the first step, but argued that the second step would take away our USP and when things turn-around, we will be classified as yet-another-it-services-company and that can be disastrous. But the founder went ahead with his plan. The end-result was that most of the experts left the company and now, even after 10 years, it has not managed to grow even 10 times in revenue terms & is still a struggling IT services company. Had it stuck with the niche segment where the margins were higher & we had the best people on-board, the company could have done really well instead of being forced to compete with thousand other IT services companies as it is doing now.
In one of my later assignments with a venture capital firm, I had a mandate to come up with business ideas suitable for the India market. One such idea was to build a technology platform for preventive healthcare in India. For this to take off, having at-least one hospital chain as anchor was important as this requires feeding patient data into the platform. None of the leading hospital chains I talked to showed any interest in this idea. But, I later found out that Apollo Hospitals (whom I had approached) had started a similar venture. Another new startup called LifeMojo has also started operating in the same segment. This goes on to show that if you don't pursue your idea someone else surely will. Another idea that I had come up with was to have a SMS based GIS service on the mobile phone. This was in 2006 when there was no market for smart-phones in India. Some companies have started offering this service now. I could not pursue either of these ideas myself as my venture firm could not put the heavy upfront investment required for these content-intensive ventures.
In one of the subsequent jobs where I had a chance to head APAC for a valley-based telecom solutions startup, I realized how biased thinking can prevent someone from seeing the obvious. We had a development center in India and we had finalized channel-based selling strategy for the APAC region since we were too small for going solo. I had also generated some leads in the region. Suddenly we had the 2008 bust hitting us and the US market where we had all our business coming from, orders just vanished. At that time, I advised the top management that the APAC region is the one which is going to recover first and if we aggressively pursue the leads in this region. But, they went ahead and wind down the APAC operations which included the India development center. The company decided to focus on the US market only. The US market has still not recovered fully and Europe is not doing great either while APAC has surged ahead.
In summary, most of the so-called strategic decisions of companies are just simple changes in the way business is done and most of the time, companies end up making the wrong moves without seeing the obvious. The experiences I have shared is just a small sample of what really happens in the corporate world on a daily basis.
In one of my first jobs with a leading Indian IT services major, I was thrown into a situation where one of the US customer accounts in the Insurance sector (in the late 90s) was in trouble. When I landed there and had some initial informal conversations with the customer & our folks working there, I realized that the problem was on the customer side. As soon as the first set of folks from our company started working on their premises on-site, some of their employees had got laid off and the word had spread that these two are linked and more heads will roll. I had to work with the senior management on the customer side to ensure a clear message was sent across to all employees that the new IT contract has nothing to do with jobs being lost in other divisions. In fact, I convinced them to hold back some of the other layoffs till things stabilize. This ensured co-operation from the customer side for us to take over some of their IT functions while their employees focused on new application development. This account later went on to become one of the marquee customer accounts for the IT major in the BFSI segment. This is the best example how right messaging can change the whole game.
In one of my stints with a IT services startup started sometime before the dot-com burst, we were focused on one specific technology segment where we had a lot of expertise. When the dot-com bust happened and some of the customers pulled the plug on some projects, the founder-investor really panicked. He wanted to do 2 things. One, layoff some consultants and dilute the focus of the company to include all kinds of services. I had no problem with the first step, but argued that the second step would take away our USP and when things turn-around, we will be classified as yet-another-it-services-company and that can be disastrous. But the founder went ahead with his plan. The end-result was that most of the experts left the company and now, even after 10 years, it has not managed to grow even 10 times in revenue terms & is still a struggling IT services company. Had it stuck with the niche segment where the margins were higher & we had the best people on-board, the company could have done really well instead of being forced to compete with thousand other IT services companies as it is doing now.
In one of my later assignments with a venture capital firm, I had a mandate to come up with business ideas suitable for the India market. One such idea was to build a technology platform for preventive healthcare in India. For this to take off, having at-least one hospital chain as anchor was important as this requires feeding patient data into the platform. None of the leading hospital chains I talked to showed any interest in this idea. But, I later found out that Apollo Hospitals (whom I had approached) had started a similar venture. Another new startup called LifeMojo has also started operating in the same segment. This goes on to show that if you don't pursue your idea someone else surely will. Another idea that I had come up with was to have a SMS based GIS service on the mobile phone. This was in 2006 when there was no market for smart-phones in India. Some companies have started offering this service now. I could not pursue either of these ideas myself as my venture firm could not put the heavy upfront investment required for these content-intensive ventures.
In one of the subsequent jobs where I had a chance to head APAC for a valley-based telecom solutions startup, I realized how biased thinking can prevent someone from seeing the obvious. We had a development center in India and we had finalized channel-based selling strategy for the APAC region since we were too small for going solo. I had also generated some leads in the region. Suddenly we had the 2008 bust hitting us and the US market where we had all our business coming from, orders just vanished. At that time, I advised the top management that the APAC region is the one which is going to recover first and if we aggressively pursue the leads in this region. But, they went ahead and wind down the APAC operations which included the India development center. The company decided to focus on the US market only. The US market has still not recovered fully and Europe is not doing great either while APAC has surged ahead.
In summary, most of the so-called strategic decisions of companies are just simple changes in the way business is done and most of the time, companies end up making the wrong moves without seeing the obvious. The experiences I have shared is just a small sample of what really happens in the corporate world on a daily basis.
Thursday, December 2, 2010
Value-sourcing: Next frontier for Indian IT MNCs
The Indian IT companies, most of them, including the likes of Infosys, TCS, Wipro, etc. have had a very good run so far. They have been reporting good results quarter on quarter, good profit margins, good growth & good outlook. Is this growth sustainable in the long run? Yes, if these companies are ready to move up the value chain instead of focusing mostly on the low-hanging fruit, as they have been doing till now.
In order to put things in perspective, some discussion about the way the Indian IT industry has grown so far is due. In the first round of out-sourcing / off-shoring that started in late 80s & ended during the dot-com burst, we saw most of the IT companies do well irrespective of their size. This was possible because the cost-differential was huge and even companies operating at the 3rd or 4th level in the out-sourcing chain could make a decent margin.
The dot-com burst of 2001 changed the rules of the game. Most of the corporations across the world had become aware of the benefits / pitfalls of out-sourcing, off-shoring and also the costs / risks associated with it. Hence they started demanding more. This reduced the number of layers in the out-sourcing chain leaving less room for the smaller players to make money, unless they could offer some special advantages like domain expertise, very good understanding of the client's business, etc.
Post 2004, lot of changes were happening in the emerging markets like India, which started seeing a lot of development. With double-digit growth year after year, the developed world started taking notice. Corporations across the world started focusing on India as a market for their products / services in a big way. This included companies like IBM, GE, DELL, HP, CISCO etc. While the world started focusing on India in a big way, the Indian IT majors still continued to focus only on overseas markets without making an attempt to understand the long term implications of that strategy.
Now, in 2010, most of the big Indian IT MNCs are still doing well, but their margins have reduced. They are going after billion dollar contracts, but the competitors like IBM, HP, Accenture are way ahead. With so much cash on their books, what is that our IT MNCs are not doing right to make the competition even? In order to understand that, we need to dig deeper into the competencies that Indian IT MNCs have managed to build so far.
Indian IT MNCs, including Infosys, TCS, Wipro started off as body-shoppers and that was their main business till late 90s. After the dot-com bust, most of them started focusing heavily on fixed price contracts as the margins were higher there and also they had mastered the global delivery model. At the same time, IBM, Accenture and other global MNCs realized that the Indian IT MNCs have an undue advantage in terms of their heavy off-shore presence. To off-set that they started investing heavily on building their off-shore presence here. In addition, they also started looking at India as market and started beefing up their sales/marketing organization here.
Another area where companies like IBM & Accenture score over their Indian counterparts is domain expertise. Over the years, consciously, the IBMs have built domain expertise in key business verticals as well as technology horizontals. The Indian IT MNCs have realized this but their approach to bridge this gap has been patchy at best. The Indian IT MNCs must first get their definition of domain expert right. They think that anyone who has worked on Insurance projects for 7-8 years is an expert on Insurance. Some of them even went to the extent of hiring retired bankers to beef up their banking domain expertise.
In my view, a domain expert in banking would have spent lot of time in not only understanding the banking domain, but also the kind of technologies being used in the industry. He/she would also be an authority on the direction the industry is taking in terms of application of technology for better ROI (Return On Investment). Unless an IT major has top-of-the-line domain experts, they cannot even bid for taking over entire IT function of large corporations like Citibank, Walmart, Airtel, Exxon Mobil etc. Even in case of well-established relationships, the IT majors need to work with their client businesses as partners. To be able to do that, they need to understand the client's business domain very well. Companies like IBM & Accenture, I hear have folks who can operate at that level.
After having discussed the state the Indian IT majors are with reference to their foreign counterparts, I would like to propose a long-term solution to the problem. Before I discuss the solution, a little context-setting is necessary, especially with regard to the growth of the Indian IT MNCs.
In the first era of out-sourcing, the Indian IT majors were well positioned to cash-in. During this era, the focus was mostly on body-shopping kind of contracts. In the next era which pretty much ended with the 2008 bust, the focus was on fixed price contracts, but the mindset did not change. The Indian IT majors still focused on $ per hour before they even decided to bid for contracts. That is why we did not have any Indian IT names even being heard when the high-profile Bharti contract was signed not too long ago. The current era, which, in my view, started after things stabilized (2009-10) and the focus totally turned on emerging economies, the focus is going-forward will be completely on value which I would like to refer as "Value-sourcing".
There are two reasons why I feel "Value-sourcing" is the way-to-go for Indian IT majors. Firstly, we Indians have always looked for value in anything we put our money on. It is in our DNA. Secondly, for organizations, it is not what they spend on IT which counts, but the ROI (nothing but value) is what counts in the end. For example, in the IBM-Bharti deal, I am sure nobody would have discussed in terms of rate per person-hour, but instead focused on SLA (service-level-agreement), penalties for not meeting SLA, how to tie payments to IBM to Bharti's revenue & customer-satisfaction etc. Our Indian IT majors have realized this and have started making amends, but they have lost a lot of time already.
Secondly, Indians have traditionally been very good at analysis, number-crunching, etc. This particular quality, coupled with a lot of domain expertise is what will prepare the Indian IT majors to succeed in this era of out-sourcing. For example, if Wipro goes to Reliance Industries with a proposed solution which will help Reliance increase their operating efficiency by 10%, won't Reliance sit back & listen? definitely yes. For a company of the size of Reliance, a 10% reduction could even mean a couple of billion dollars which is almost equal to Wipro's turnover for a quarter. The analytics business, if leveraged well, can give the Indian IT majors a good foothold not only in India, but also outside India.
The "Value" business of which the analytics business is a sub-set does require very strong domain expertise, good understanding of the market and attention to detail. But the most important is of-course the ability to find patterns / trends which need be identified for the clients much ahead of everyone else. This is where the Indian IT majors can leverage a fast-growing domestic market to try out their "value" offerings and take it to the world market at pretty much the same time.
In the first era, companies looked for software & services, both of which were expensive. In the second era, they started looking at solutions and not software & services separately. In the current era, the businesses are looking only for "value". Before they spend any money on IT, they want to understand what return they can expect from their investment. To cite an example, at the height of the financial bust in 2009, one sales person known to me was trying to convince a top-10 bank in the US to buy his high-end contact center solution which would enable them to handle all forms of media (voice, chat, e-mail, ...) together. An excellent proposition in the by-gone era. In this case, the customer refused to upgrade saying that the ROI is not convincing enough to make the investment ( just a few million dollars for a Fortune-50 company ).
In order to re-iterate the potential of value-sourcing, let us take a few illustrative examples. Every company operating in India will be launching new products / services as frequently as their industry segment requires them to. Each one of them will also be running lot of internal initiatives to improve efficiencies, increase customer satisfactions levels, look at new market segments, etc.
Let us take a FMCG conglomerate like Hindustan Lever. By now they must have already invested sufficiently in IT across different departments and also at the corporate level. They would already have an SAP solution (or similar) across different processes, a good call-center solution to handle customer calls & other software / solutions used in their domain. In all probability, they already would have out-sourced their entire IT function to a third-party like IBM or TCS. Most of Hindustan Lever's competitors would also be in a similar situation. Under such circumstances, if someone like Wipro wants to increase their market share in the FMCG vertical, where do they start? They will have to either wait till contracts come up for renewal or pray for the existing vendors to goof-up big-time.
The other option is to look at what kind of solutions would add value to Hindustan Lever's business either in terms of top-line growth or improvements in bottom-line. What could this be? If customer service at Hindustan Lever is really bad when compared to its competition, Wipro folks can try to figure out how that can be improved. It could be just that Hindustan Lever is using an outdated set of solutions for handling customer service or they may not be running it efficiently. In either of these cases, Wipro can really come up with a better solution and go to Lever with the clearly articulated ROI (like extra investment of $1 million which will improve customer satisfaction ratings to 90% or more and also saving $0.5 million every year due to increased efficiencies) Hindustan Lever will definitely be interested. This is a classic case of identifying the customer pain-point & proposing a solution to address it.
Let us take another case where a particular customer has everything going right and no visible pain-points. Even in such cases, they will be ready to listen if the IT vendor that they are dealing with comes up with a solution / offering which will make their business more profitable or enable them to grab more market-share or even better help them expand the market itself. As we all know, IBM is running Airtel's IT in India. Airtel's 2G business has almost reached saturation. How does IBM increase its revenue from Airtel under such circumstances? IBM has complete access to Airtel's data. They can do wonders with that. Lot of analytics can be done and patterns identified and solutions proposed to the customer. If one such solution can enable Airtel to reduce the tower-density by 50%, wouldn't they be ready to pay even a fortune to IBM to buy that kind of a solution?
In summary, value-sourcing is all about showing customer the value. Indian IT majors are well positioned to leverage the India advantage in order to move up the value chain. It does require good amount of up-front investment. Are the Indian IT majors ready to make that investment? I am not really sure about that, going by the past trends, but hopeful that I am proved wrong.
In order to put things in perspective, some discussion about the way the Indian IT industry has grown so far is due. In the first round of out-sourcing / off-shoring that started in late 80s & ended during the dot-com burst, we saw most of the IT companies do well irrespective of their size. This was possible because the cost-differential was huge and even companies operating at the 3rd or 4th level in the out-sourcing chain could make a decent margin.
The dot-com burst of 2001 changed the rules of the game. Most of the corporations across the world had become aware of the benefits / pitfalls of out-sourcing, off-shoring and also the costs / risks associated with it. Hence they started demanding more. This reduced the number of layers in the out-sourcing chain leaving less room for the smaller players to make money, unless they could offer some special advantages like domain expertise, very good understanding of the client's business, etc.
Post 2004, lot of changes were happening in the emerging markets like India, which started seeing a lot of development. With double-digit growth year after year, the developed world started taking notice. Corporations across the world started focusing on India as a market for their products / services in a big way. This included companies like IBM, GE, DELL, HP, CISCO etc. While the world started focusing on India in a big way, the Indian IT majors still continued to focus only on overseas markets without making an attempt to understand the long term implications of that strategy.
Now, in 2010, most of the big Indian IT MNCs are still doing well, but their margins have reduced. They are going after billion dollar contracts, but the competitors like IBM, HP, Accenture are way ahead. With so much cash on their books, what is that our IT MNCs are not doing right to make the competition even? In order to understand that, we need to dig deeper into the competencies that Indian IT MNCs have managed to build so far.
Indian IT MNCs, including Infosys, TCS, Wipro started off as body-shoppers and that was their main business till late 90s. After the dot-com bust, most of them started focusing heavily on fixed price contracts as the margins were higher there and also they had mastered the global delivery model. At the same time, IBM, Accenture and other global MNCs realized that the Indian IT MNCs have an undue advantage in terms of their heavy off-shore presence. To off-set that they started investing heavily on building their off-shore presence here. In addition, they also started looking at India as market and started beefing up their sales/marketing organization here.
Another area where companies like IBM & Accenture score over their Indian counterparts is domain expertise. Over the years, consciously, the IBMs have built domain expertise in key business verticals as well as technology horizontals. The Indian IT MNCs have realized this but their approach to bridge this gap has been patchy at best. The Indian IT MNCs must first get their definition of domain expert right. They think that anyone who has worked on Insurance projects for 7-8 years is an expert on Insurance. Some of them even went to the extent of hiring retired bankers to beef up their banking domain expertise.
In my view, a domain expert in banking would have spent lot of time in not only understanding the banking domain, but also the kind of technologies being used in the industry. He/she would also be an authority on the direction the industry is taking in terms of application of technology for better ROI (Return On Investment). Unless an IT major has top-of-the-line domain experts, they cannot even bid for taking over entire IT function of large corporations like Citibank, Walmart, Airtel, Exxon Mobil etc. Even in case of well-established relationships, the IT majors need to work with their client businesses as partners. To be able to do that, they need to understand the client's business domain very well. Companies like IBM & Accenture, I hear have folks who can operate at that level.
After having discussed the state the Indian IT majors are with reference to their foreign counterparts, I would like to propose a long-term solution to the problem. Before I discuss the solution, a little context-setting is necessary, especially with regard to the growth of the Indian IT MNCs.
In the first era of out-sourcing, the Indian IT majors were well positioned to cash-in. During this era, the focus was mostly on body-shopping kind of contracts. In the next era which pretty much ended with the 2008 bust, the focus was on fixed price contracts, but the mindset did not change. The Indian IT majors still focused on $ per hour before they even decided to bid for contracts. That is why we did not have any Indian IT names even being heard when the high-profile Bharti contract was signed not too long ago. The current era, which, in my view, started after things stabilized (2009-10) and the focus totally turned on emerging economies, the focus is going-forward will be completely on value which I would like to refer as "Value-sourcing".
There are two reasons why I feel "Value-sourcing" is the way-to-go for Indian IT majors. Firstly, we Indians have always looked for value in anything we put our money on. It is in our DNA. Secondly, for organizations, it is not what they spend on IT which counts, but the ROI (nothing but value) is what counts in the end. For example, in the IBM-Bharti deal, I am sure nobody would have discussed in terms of rate per person-hour, but instead focused on SLA (service-level-agreement), penalties for not meeting SLA, how to tie payments to IBM to Bharti's revenue & customer-satisfaction etc. Our Indian IT majors have realized this and have started making amends, but they have lost a lot of time already.
Secondly, Indians have traditionally been very good at analysis, number-crunching, etc. This particular quality, coupled with a lot of domain expertise is what will prepare the Indian IT majors to succeed in this era of out-sourcing. For example, if Wipro goes to Reliance Industries with a proposed solution which will help Reliance increase their operating efficiency by 10%, won't Reliance sit back & listen? definitely yes. For a company of the size of Reliance, a 10% reduction could even mean a couple of billion dollars which is almost equal to Wipro's turnover for a quarter. The analytics business, if leveraged well, can give the Indian IT majors a good foothold not only in India, but also outside India.
The "Value" business of which the analytics business is a sub-set does require very strong domain expertise, good understanding of the market and attention to detail. But the most important is of-course the ability to find patterns / trends which need be identified for the clients much ahead of everyone else. This is where the Indian IT majors can leverage a fast-growing domestic market to try out their "value" offerings and take it to the world market at pretty much the same time.
In the first era, companies looked for software & services, both of which were expensive. In the second era, they started looking at solutions and not software & services separately. In the current era, the businesses are looking only for "value". Before they spend any money on IT, they want to understand what return they can expect from their investment. To cite an example, at the height of the financial bust in 2009, one sales person known to me was trying to convince a top-10 bank in the US to buy his high-end contact center solution which would enable them to handle all forms of media (voice, chat, e-mail, ...) together. An excellent proposition in the by-gone era. In this case, the customer refused to upgrade saying that the ROI is not convincing enough to make the investment ( just a few million dollars for a Fortune-50 company ).
In order to re-iterate the potential of value-sourcing, let us take a few illustrative examples. Every company operating in India will be launching new products / services as frequently as their industry segment requires them to. Each one of them will also be running lot of internal initiatives to improve efficiencies, increase customer satisfactions levels, look at new market segments, etc.
Let us take a FMCG conglomerate like Hindustan Lever. By now they must have already invested sufficiently in IT across different departments and also at the corporate level. They would already have an SAP solution (or similar) across different processes, a good call-center solution to handle customer calls & other software / solutions used in their domain. In all probability, they already would have out-sourced their entire IT function to a third-party like IBM or TCS. Most of Hindustan Lever's competitors would also be in a similar situation. Under such circumstances, if someone like Wipro wants to increase their market share in the FMCG vertical, where do they start? They will have to either wait till contracts come up for renewal or pray for the existing vendors to goof-up big-time.
The other option is to look at what kind of solutions would add value to Hindustan Lever's business either in terms of top-line growth or improvements in bottom-line. What could this be? If customer service at Hindustan Lever is really bad when compared to its competition, Wipro folks can try to figure out how that can be improved. It could be just that Hindustan Lever is using an outdated set of solutions for handling customer service or they may not be running it efficiently. In either of these cases, Wipro can really come up with a better solution and go to Lever with the clearly articulated ROI (like extra investment of $1 million which will improve customer satisfaction ratings to 90% or more and also saving $0.5 million every year due to increased efficiencies) Hindustan Lever will definitely be interested. This is a classic case of identifying the customer pain-point & proposing a solution to address it.
Let us take another case where a particular customer has everything going right and no visible pain-points. Even in such cases, they will be ready to listen if the IT vendor that they are dealing with comes up with a solution / offering which will make their business more profitable or enable them to grab more market-share or even better help them expand the market itself. As we all know, IBM is running Airtel's IT in India. Airtel's 2G business has almost reached saturation. How does IBM increase its revenue from Airtel under such circumstances? IBM has complete access to Airtel's data. They can do wonders with that. Lot of analytics can be done and patterns identified and solutions proposed to the customer. If one such solution can enable Airtel to reduce the tower-density by 50%, wouldn't they be ready to pay even a fortune to IBM to buy that kind of a solution?
In summary, value-sourcing is all about showing customer the value. Indian IT majors are well positioned to leverage the India advantage in order to move up the value chain. It does require good amount of up-front investment. Are the Indian IT majors ready to make that investment? I am not really sure about that, going by the past trends, but hopeful that I am proved wrong.
Wednesday, December 1, 2010
Is India fundamentally right or left?
When India became a sovereign republic in 1950, we choose to be secular in our leaning. We have fundamental rights guaranteed in our constitution that guarantee every citizen the right to freedom of religion. But, is the noble intent outlined in the constitution really implemented in both letter and spirit? This is what I will try to delve into in a little more detail.
Firstly, no country in the world is secular in the true sense of the term. The religion of the majority will definitely influence the policies of the country. I am not saying that is bad, but knowingly or un-knowingly this changes the colour of secularism. In most of the countries the people belonging to minority religions do get heard but whether this gets translated into policy measures is a big question mark.
In India, the policies of the government have been more than accommodating by making exceptions to the minorities, especially with regard to personal laws, which, according to me, instead of benefiting the minorities is working against their progress!
As a country, in order to make sure that everyone is treated equal, we should have a common set of personal laws irrespective of religion. It is only then the country will be able to guarantee religious freedom to everyone. Otherwise, each religion will try to hold a given set of people to ransom by chaining them to their religion-specific principles interpreted wrongly for the benefit of some people while the rest suffer. This is what, we, as citizens should fight for. Instead the fight mostly ends up taking a communal colour.
Secondly, what most people in India, especially the intellectual folks, are not ready to accept is the fact that the secular fabric of India was destroyed beyond repair much before independence! We could blame the leaders at that time for this situation, but we are better off in trying to figure out how we can have uniform personal laws so that some section of the society does not suffer at the cost of the other.
The role of religious institutions in destroying the secular fabric of the country is not understood very well, courtesy the partisan media. Each media house in India is associated with some political party or the other. This distorts the focus of their reporting and the viewers don’t get the correct picture. Whenever some religious clashes happen in India, which generally have some political backing, I have not seen a single instance when the media has tried to get to the bottom of it.
In conclusion, is India, as a country really secular or is leaning to the right or left? I am tempted to conclude that we are right leaning at heart, but publicly claim that we are left leaning. This dichotomy has to change if we have to prosper as a true democracy. I am not even sure if this can happen in this century!
Firstly, no country in the world is secular in the true sense of the term. The religion of the majority will definitely influence the policies of the country. I am not saying that is bad, but knowingly or un-knowingly this changes the colour of secularism. In most of the countries the people belonging to minority religions do get heard but whether this gets translated into policy measures is a big question mark.
In India, the policies of the government have been more than accommodating by making exceptions to the minorities, especially with regard to personal laws, which, according to me, instead of benefiting the minorities is working against their progress!
As a country, in order to make sure that everyone is treated equal, we should have a common set of personal laws irrespective of religion. It is only then the country will be able to guarantee religious freedom to everyone. Otherwise, each religion will try to hold a given set of people to ransom by chaining them to their religion-specific principles interpreted wrongly for the benefit of some people while the rest suffer. This is what, we, as citizens should fight for. Instead the fight mostly ends up taking a communal colour.
Secondly, what most people in India, especially the intellectual folks, are not ready to accept is the fact that the secular fabric of India was destroyed beyond repair much before independence! We could blame the leaders at that time for this situation, but we are better off in trying to figure out how we can have uniform personal laws so that some section of the society does not suffer at the cost of the other.
The role of religious institutions in destroying the secular fabric of the country is not understood very well, courtesy the partisan media. Each media house in India is associated with some political party or the other. This distorts the focus of their reporting and the viewers don’t get the correct picture. Whenever some religious clashes happen in India, which generally have some political backing, I have not seen a single instance when the media has tried to get to the bottom of it.
In conclusion, is India, as a country really secular or is leaning to the right or left? I am tempted to conclude that we are right leaning at heart, but publicly claim that we are left leaning. This dichotomy has to change if we have to prosper as a true democracy. I am not even sure if this can happen in this century!
Monday, November 22, 2010
Karnataka crisis: Options before BJP central leadership
The attempt by BJP central leadership to replace Yeddyurappa, the Karnataka chief minister, has landed them in a spot. With Yeddyurappa refusing to resign, what are the options before the BJP central leadership? Not many. Before we get into those details some context setting is needed so that the options can be put in perspective.
First of all, Karnataka is the only place where BJP has a government in the south. Yeddyurappa and his close confidants have been with the party from the beginning and have been through its thick & thin. But, not too long ago, Yeddyurappa had lost his security deposit in an assembly election. It was only after he became the deputy chief minister for the first time, he can claim some following.
Secondly, Yeddyurappa's craze for the chief minister's chair has been well-known. On that count, his behavior now is not totally unexpected. But the support that he is claiming to have from the religious mutts is due to some magnanimity that he has shown for those institutions earlier. For someone in the position of power, buying the support of seers is not difficult.
Keeping the above two points in mind, the BJP central leadership has 3 options in front of them.
1. Allow Yeddyurappa to continue in the chair with some cosmetic change in the composition of the ministry. This option is not feasible because Congress & JD(S) will try to stall the assembly proceedings and the congress government at the center can also possibly invoke president's rule.
2. Throw only Yeddyurappa out of the party and warn his followers of similar action if they continue to support him. Most of them may fall in line while a few of them may show solidarity with Yeddyurappa. But most of the BJP MLAs are not ready to face the elections at this point with so much taint on their government. This may ensure that the government would survive & even if it falls, BJP should be able to face the elections confidently by boasting of being on moral high-ground.
3. Allow Yeddyurappa to nominate his crony to be the chief minister. The danger with this option is that people can see through it if the opposition plays their cards well. This would ensure that BJP will be defeated in the next assembly election whenever it happens.
In my view, option #2 is the best option under the present circumstances. That would ensure that BJP's image will not suffer much and they will be able to fight a snap election also, projecting someone else. After all there are very few people (less than 10) in BJP who can win election on their own. The rest will need party's support to win. This includes Yeddyurappa also, if he is thrown out of CM's chair at this point.
If Yeddyurappa is allowed to continue and manages to dissolve the assembly, it is a disaster for the BJP. He seems to think that he is bigger than the party and that needs to be fixed quickly before things go out of control. Going by the past behavior of the major political parties, I think BJP central leadership may choose either option #3 or option #1 but not option #2. Seeing the way the BJP leadership has handled the situation so far, we may have to wait for another week or so before we see any action on the ground.
First of all, Karnataka is the only place where BJP has a government in the south. Yeddyurappa and his close confidants have been with the party from the beginning and have been through its thick & thin. But, not too long ago, Yeddyurappa had lost his security deposit in an assembly election. It was only after he became the deputy chief minister for the first time, he can claim some following.
Secondly, Yeddyurappa's craze for the chief minister's chair has been well-known. On that count, his behavior now is not totally unexpected. But the support that he is claiming to have from the religious mutts is due to some magnanimity that he has shown for those institutions earlier. For someone in the position of power, buying the support of seers is not difficult.
Keeping the above two points in mind, the BJP central leadership has 3 options in front of them.
1. Allow Yeddyurappa to continue in the chair with some cosmetic change in the composition of the ministry. This option is not feasible because Congress & JD(S) will try to stall the assembly proceedings and the congress government at the center can also possibly invoke president's rule.
2. Throw only Yeddyurappa out of the party and warn his followers of similar action if they continue to support him. Most of them may fall in line while a few of them may show solidarity with Yeddyurappa. But most of the BJP MLAs are not ready to face the elections at this point with so much taint on their government. This may ensure that the government would survive & even if it falls, BJP should be able to face the elections confidently by boasting of being on moral high-ground.
3. Allow Yeddyurappa to nominate his crony to be the chief minister. The danger with this option is that people can see through it if the opposition plays their cards well. This would ensure that BJP will be defeated in the next assembly election whenever it happens.
In my view, option #2 is the best option under the present circumstances. That would ensure that BJP's image will not suffer much and they will be able to fight a snap election also, projecting someone else. After all there are very few people (less than 10) in BJP who can win election on their own. The rest will need party's support to win. This includes Yeddyurappa also, if he is thrown out of CM's chair at this point.
If Yeddyurappa is allowed to continue and manages to dissolve the assembly, it is a disaster for the BJP. He seems to think that he is bigger than the party and that needs to be fixed quickly before things go out of control. Going by the past behavior of the major political parties, I think BJP central leadership may choose either option #3 or option #1 but not option #2. Seeing the way the BJP leadership has handled the situation so far, we may have to wait for another week or so before we see any action on the ground.
Oracle's Sun Acquisition vs Dell's acquisition of Perot
Oracle acquired Sun Microsystems after a long battle while DELL did not have much difficulty in making the Perot acquisition. While both the acquisitions seem to fit well with the long-term strategies of the two companies, i.e Oracle & DELL, depending on how they go about integrating these acquisitions will decide if they will be able to derive any value from these transactions.
Oracle is a software product company which also offers services around its products, which are essentially solutions involving its products. DELL is a computer manufacturer which has done extremely well in computer hardware including desktops, servers & storage. So, the DNA of both these companies is different. One is a whole & soul software company while the other a hardware giant.
Oracle gets a good hardware portfolio from the acquisition of Sun. Sun's strength is servers and that is what Oracle's software runs on. This would help Oracle offer complete solutions (hardware & software) which otherwise it could not. But the key here is the role of hardware. Most of the money will still come from software & services while the hardware will make the solutions complete (one-stop-shop).
DELL gets a services portfolio from the Perot acquisition. Perot's strength is in the healthcare, government & data center business verticals. Hence the services portfolio is still not complete. Key verticals like BFSI, Retail, Automotive & Telecom are missing. DELL may be trying to take the IBM route to grow to the next level, but IBM has a very strong software portfolio in addition to a very good hardware (mainframe & servers) business. But most of DELL's revenue still comes from Laptops & desktops.
In my view, if Oracle uses Sun as a supporting aid in its software & services offering, it can derive maximum value from Sun acquisition. In all likelihood this is where it is headed. In the case of DELL, it should use its servers & storage business to support its services business. This seems to be very unlikely, given its DNA. Hence DELL may not be able to derive much value from Perot acquisition in the near future unless it manages to transform itself into a services-centric company from being manufacturing-centric.
Oracle is a software product company which also offers services around its products, which are essentially solutions involving its products. DELL is a computer manufacturer which has done extremely well in computer hardware including desktops, servers & storage. So, the DNA of both these companies is different. One is a whole & soul software company while the other a hardware giant.
Oracle gets a good hardware portfolio from the acquisition of Sun. Sun's strength is servers and that is what Oracle's software runs on. This would help Oracle offer complete solutions (hardware & software) which otherwise it could not. But the key here is the role of hardware. Most of the money will still come from software & services while the hardware will make the solutions complete (one-stop-shop).
DELL gets a services portfolio from the Perot acquisition. Perot's strength is in the healthcare, government & data center business verticals. Hence the services portfolio is still not complete. Key verticals like BFSI, Retail, Automotive & Telecom are missing. DELL may be trying to take the IBM route to grow to the next level, but IBM has a very strong software portfolio in addition to a very good hardware (mainframe & servers) business. But most of DELL's revenue still comes from Laptops & desktops.
In my view, if Oracle uses Sun as a supporting aid in its software & services offering, it can derive maximum value from Sun acquisition. In all likelihood this is where it is headed. In the case of DELL, it should use its servers & storage business to support its services business. This seems to be very unlikely, given its DNA. Hence DELL may not be able to derive much value from Perot acquisition in the near future unless it manages to transform itself into a services-centric company from being manufacturing-centric.
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