It’s been a decade that started with fear, uncertainty and doubt and seems to be ending that way again for the Indian IT and Business Services Sector. But the industry proved the pessimists wrong then by moving up the value chain and enabling multi process outsourcing through innovative processes with the result that the first eight years saw all significant players report CAGRs of over twenty percent plus. The downturn which began over eighteen months ago has seen the inevitable decline in growth numbers and it is to the credit of the industry that growth has continued in both revenues and profits, albeit at a slower clip!

As global economies limp back to positive GDP growth and the high unemployment percentages in the West continue to create protectionist voices that work against outsourcing to other countries, the industry will continue to face the twin pressures of low incremental demand on one hand and persistent demand for more for less higher output from the same offshore resource base and reduced prices while volumes remain near stagnant.

To attain and sustain the level of growth that we have seen in the past, the imperatives for the industry are broadly in three areas- First is the need to explore innovative business models to move from the linear model and dependence on constantly increasing manpower. Investments in intellectual property and hosted applications and platforms and transformed processes where global centres around the world can be seamlessly integrated to deliver value are needed. In addition, revisiting revenue and gain sharing arrangements with customers and charging premium for expertise and result guarantees while developing deeper trust based relationships with customers will enable more sticky relationships to evolve. Second, the services portfolio will have to come under a microscope as a major share of new opportunities will come from new markets where wage arbitrage is not the key driver and a much more consulting led approach will be required to find real solutions to complex business and technology issues. New industry segments like public services, healthcare and education will need integrated solutions to be developed and high end segments like industrial design and clinical research outsourcing will need more investments by incumbent and new players in the industry.

The third and possibly the most significant challenge will be to reduce the industry concentration in the top seven cities which are already bursting at the seams and unable to cope with the pressures on physical, digital and social infrastructure and develop skilled resources all over the country. Industry has to see itself as part of a skills eco-system which enables robust partnerships with academic institutions and Governments at the State and Central levels to build technology enabled learning infrastructures that include young aspirants in every part of the country in the larger talent building effort.

Though the coming year might lead to slower growth in terms of revenues and profits, it will be about with opportunities for all. Let us dream of even bigger dreams for the future and another decade of astounding growth for the industry!
Ganesh

So is it a new beginning for our industry - most of the significant firms are getting new business, increments that were held back are now being given and clearly the budgets taht were once frozen are showing signs of a thaw.

The slow period has been good for the industry - it has forced all CEOs to take a hard look at costs and utilisation, the rampant attrition that was affecting predictability and quality has slowed and we are emerging as a more stable industry.

Clearly some of you out there would have been affected adversely but dont lose heart, we are at a new beginning and companies and professionals who focus on results will do even better in the months and years to come

Sincerely

Ganesh

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NASSCOM announces a 16 % growth for 2008-09 and a single digit growth outlook for the current fiscal year and almost inevitably, predictions of doom have started for the Indian IT sector. Nothing could be further from the truth - it is a tough year for all sectors and all countries folks, but mark my words - the double digit growth will be restored in 2010 and we are still well on track to meet a 100 Billion Dollar goal by 2015.

Not that there are no concern areas - jobs are scarce for the lakhs of young people graduating this year from engineering and IT streams and the situation may improve only marginally next year. Find a good finishing school for technical and soft skills and use the waiting time productively. Your career will be the better for it.

Ganesh

For the IT sector ‘ this is a good budget, where the Government has taken decisive steps by enabling policies like the extension of the STPI scheme by another year however a longer extension would have definitely helped the industry. Â Removal of Tax anomalies for SEZ units and abolition of the Fringe Benefit Tax (FBT) brings respite which was mostly affecting the IT and ITeS industry. With the tax gone, the Employee Stock Options will get attractive again and will help us in attracting and retaining talent. The introduction of Dispute Resolution Cell and proposed safe harbour rules should address the issue of unwanted litigation in India, which has been one of the biggest concerns of Indian and foreign taxpayers. The proposal to create an alternative dispute resolution mechanism within the Income Tax Department for the resolution of transfer pricing disputes will reduce the impact of errors in determining transfer price in international transactions. These initiatives reflect a new thinking at a policy level and this renewed approach will help in creation of a level playing field for Indian firms competing against aggressive global competition. Â The exemption of packaged softwares from excise duty could make the prices of these softwares cheaper and affordable for smaller IT firms.

The emphasis on the social sector development is in line with the government’s mantra of ‘inclusive growth’,and special emphasis on education is a welcome step. The provision for the Scheme ‘Mission in Education through ICT’ has been substantially increased to Rs. 900 crore and will create a better talent flow in the years to come. The speed of progress `in talent assessment, training needs analysis for a range of services sectors including IT and the development of a new technology architecture which would support learner centric education by connecting campuses, content specialists and the student community will now be possible by the up-gradation for Polytechnics under the Skill Development Mission for which allocations have also been increased. The enhancement of overall Plan Budget for higher education by Rs. 2000 crore over Interim Budget Estimates and allocation of Rs. 2,113 crore for IITs and NITs, which includes a provision of Rs. 450 crore for new IITs and NITs is just one of many initiatives our country needs ‘ especially in Jammu and Kashmir, North East, and other states to reduce the digital divide that grows deeper between the have and have nots in the country. New Projects such as modernization of the Employment Exchanges and First Unique Identification Card for citizens to be launched in the years ahead also focuses on efficiency of delivery of government programmes and is an important step in ushering greater transparency and accountability in the public decision-making process.

So while India Inc was expecting to see more action on he focus on inclusive growth and the importance given to Education, e Governance and rural development are all steps in the right direction and in the medium term will spur consumption and investment all over the country.

It all began a few months ago when a chance meeting with the young and dynamic Chief Minister Omar Abdullah and understanding his vision of building high quality resources in the state encouraged us to put together a small NASSCOM delegation to visit the state. The speed of progress ‘ in talent assessment, training needs analysis for a range of services sectors including IT and the development of a new technology architecture which would support learner centric education by connecting campuses, content specialists and the student community in the valley would not have been possible if the Chief Minister had not led from the front, brought in dynamic leaders like the Chairman of J&K Bank, the Vice Chancellor of the University of Kashmir and the head of the Education Multimedia Research Center to work with the private sector participants of the delegation in a spirit of true Government ‘ Industry-Academia ‘Financial Institution collaboration for the benefit of Kashmiri youth.

With this duality of thinking ‘ a feeling of security brought in by the army but still a sense of disquiet and concern on their omnipresence, it is hardly surprising that the recent rape and murder of two young women should bring forth such a torrent of protests. Which is what makes it all the more creditable that a real effort is being made by all the participants of the Talent Valley program to bring in a new climate of hope and a positive view of the future for so many thousands of young members of the community. Here is a fervent appeal to all of you who have the larger interest of the nation at heart. Let us help young graduates with employable skills from the hill states and disadvantaged communities to find their place in the sun and march proudly with the rest of the industry as the IT and BPO boom revives and the growth processes are resumed across the country.

Ganesh

Its amazing how a couple of weeks of “feel good” can transform a recession of sentiment that we have been experiencing in our country into a revival of the halcyon days of a couple of years back. A rampaging stock market, a revival in the fortunes of many domestic industries and a strong new Government promising all the right investments and changes in policy to enable infrastructure, healthcare, education and even exports to see the green shoots of economic recovery ‘ all this and more good news have made many people believe that happy days are indeed here again!
The good news about this relatively slow period that the industry has seen in the last six months and more is that some burning issues are now been addressed by industry, academic institutions and the government. One of the most worthy experiences I have been part of is the CII initiative in Maharashtra to empanel companies that are willing to extend a helping hand to al interested academic institutions through a collaborative assessment process and the establishment of IT finishing schools in the premises of the institution. At a time when employment is still a tough ask for many worthy engineering and IT graduates, the willingness to support the colleges in their endeavour has been welcome by all participants and will soon be a model worthy of replication across the country.

For a long time technology has been the holy Mecca of the graduates of educational institutions but now the time may have come for technology to become the enabler of better education. CISCO Systems the exemplar in all matters pertaining to networking and unified communications has taken major leaps in enabling this with their superior telepresence video-conferencing capabilities and the acquisition of Webex given them an edge in enabling learner centric education. Global Talent Track the Pune company which has now spread its wings to Punjab, Rajasthan, Jammu & Kashmir and even Malaysia with its unique model of collaborations ‘ with Government, Academia and Technology providers has enabled the industry to provide the expertise needed by students in the classroom and may well augur a new generation of highly employable graduates even as the recession subsides and placements starts at a brisk pace all over again.

So is all well? Not yet but there are stirrings of life which should serve as a call to action! To enable India’s green shoots to flourish and IT to be the favoured destination again, each of the players- in the IT eco-system ‘ large firms, entrepreneurs, academic institutions, associations , financial institutions and even the Government must demonstrate the willingness to go the extra mile in the next six months. Clearing the way for private sector entry into higher education, substantial investments in infrastructure and extension of the STPI scheme - lets see the new Government making all this happen for us !

Ganesh

This is a time of reckoning for India - will the newly elected Government with one of the strongest mandatres in recent history deliver on its promises or will this prove to be one more opportunity for good governance and economic progress get sacrificed at the altar of political compromises and expediency ?

India has done well in the last five years, bringing tens of millions of our countrymen up from the poverty line. Industries like IT and Telecom have brought a ray of hope for aspiring youth to hold their heads high in the world. But if we have to truly fulfil our destiny to be a knowledge superpower and meet the promises laid out in the recent NASSCOM-McKinsey report of achieving a 200 B USD plus revenue in IT and business services by 2020, a lot has to be done - by Government and Industry together.

The top three expectations that we have as an industry are…

1. Continuation of the STPI scheme to provide a level playing field for young Indian entrepreneurs to compete and succeed against the bigger players and also against their counterparts in other countries

2. Liberalisation of the Education sector by encourage private sector to participate and set up profit making ventures in higher education. This is the only way quality with scale can be achieved in the country.

3. Transformation of physical, digital and social infrastructure in at least fifty new locations around the country to ensure that the benefits of IT and BPO are widespread.

Beyond our industry, we all need to work together and support the Government in building a truly inclusive India - where every citizen can expect to get basic education, healthcare and financial support to realise their aspirations for future generations.

Let us work at making this happen !

Ganesh

The curtains have come down on what has probably been the most exciting act ever played out by the IT industry on the stage of the Indian corporate sector. It all started for me personally when an irate investor from the US called up on the evening of 16^th December to complain about the wanton hijacking of the Board by Ramalinga Raju in pushing the Maytas deal through. While the deal itself was withdrawn the following morning following a hue and cry from vigilant shareholders, the tiger that Raju was riding was already speeding up and carrying him to the inevitable fall., The resignation drama of January 7^th and the subsequent furore that threatened implosion of the entire company was admirably handled by the Government, NASSCOM and subsequently a phenomenal Board of Directors led by Kiran Karnik with luminaries like Deepak Parekh of HDFC and Tarun Das of CII steering the Satyam ship through troubled waters and bringing it to safe port called the Mahindra group in the record time of less than four months.

In the last few months , the industry has been buffeted by many storms ‘ the global slowdown, the terrorism attacks on Mumbai and of course the Satyam saga have all dented the short term prospects of an industry which has made all Indians hold their heads high in the world. Speaking at an Outsourcing conference at the Asia Society in New York early this year, it was alarming to find the skepticism in many quarters about the Indian corporate sector. In an industry which has, for many years been a standard for corporate governance in the country with many iconic figures like Mr. Narayana Murthy showing the way to other sectors as well, the blow to our psyche has been deep but the quick actions of the Government and the Board led by Kiran Karnik have been applauded in all quarters. Corporate India can take justifiable pride in the fact that the quick and decisive actions will be applauded by industry watchers all over the world. Today, an empowered management team needs everybody’s support to succeed in future and take the company back to its position of strength.

There are many challenges that the Tech Mahindra team and the Mahindra group will face in the ensuing months to convince the analysts , customers and many sections of Satyam associates that they have what it takes to put the company back on the growth path. The road ahead for the company as well as the industry is not as thorny as it has been in the past but still needs to be traveled with care. The new owner will be given a few months to steady the ship and stem the customer attrition and at the same time do what it takes to bring the company back to robust profitability. The navigation of unknown dangers like the Class Action law suits in the US and the legal action in Europe should not divert attention from the primary task of stabilizing the company and integrating it well into the new owner group. And for the industry there is a lot to be done to ensure that such a situation never comes up again. The newly minted Corporate Governance Committee of NASSCOM is already at work to ensure that best practices towards all stakeholders are rigidly followed and all firms will demonstrate through their actions that this sector is still a beacon of excellence, not just within the country but around the world. The green shoots of economic recovery, the relative peace in our interactions with our neighbour and now the completion of the Satyam transaction ‘ the sun seems to be shining through the clouds once again!

The tale of two couples describes the picture of success that the Indian middle class have been able to paint on the Chinese landscape. Lakshman and Hetal Hemnani who started life managing a small APTECH centre in Pune are now running a successful chain of GANGES Indian restaurants in the capital city of Beijing, ensuring a quality of cuisine and service that would put many fine restaurants in our own country to shame. And two IIM graduates Ashok Sethi and Renu Khurana, who left thriving careers in India to explore the land of Confucius six years ago, are now Chinese in their occupations and even their thinking ‘ Ashok running a thriving market research business and Renu consulting on education and process quality to multinationals as well as local firms.

What is common to this enterprising quartet and indeed to many more young Indian families who have chosen to make China their home in this decade is not their capability and desire to embrace Chinese language and culture in all its diversity but the respect they have imbued for the discipline and processes that characterize Chinese work ethics and way of life. During the last year when I have made over four trips to this exciting country, every experience has left me more convinced that if there is one country that can truly aspire to take on the mantle of global leadership from America, it is not India but China ‘ unless of course we all collectively decide to do something about it!

The two significant characteristics that have built this conviction in me is the Chinese obsession with scale and quality and their ability to learn quickly and not only replicate but surpass the standards set by their own teachers. Every highway in China is twice the size of the Mumbai-Pune Expressway which even today remains an isolated beacon of excellence in the state of Maharashtra and an enchanting audio visual in the small city of Suzhou demonstrates how this small outlying village of Shanghai has been systematically transformed into a successful pilot city that demonstrates Chinese outsourcing capability at its best. A Communist party Secretary and Mayor committed to growing the one billion dollar plus of outsourcing business manifold, the country’s first outsourcing college training young citizens on the finer aspects of domestic and global outsourcing and the availability of outstanding physical and social infrastructure that could attract the best in the world to move to the city. And if just the Yangtze River Delta and its high growth cities of Shanghai Pudong Suzhou Wuxi Hangzhou and Nanjing can achieve so much in so little time, with Beijing and Nanjing in the North and Shenzhen Guangzhou and Fushan in the South setting an equally scorching pace, imagine the pace that will be set if non-coastal regions like Chengdu in the Schezwan province and other large cities and provinces come in to join the party.

For a long time we in India have seen the emergence of Dalian as an isolated example of success through its focus on Japan and Korea but with seventy million ambitious ambitious members of the Communist Party engaged in fierce competition with each other to demonstrate individual capability of their parks, cities and provinces to attract foreign investment, the second key aspect, that of quick learning can see the Chinese eco-system close the gaps exceedingly fast in the post recession years. When we started the APTECH Joint Venture with Beijing University a decade ago, few of us could have realised how successful the APTECH Beida Jadebird ( Beida is the commercial arm of the University ) would become in becoming the dominant computer trainer in the country. With the Wall Street Institute multiplying its reach of English language training and every significant educator from myriad Australian and British Universities to the numero uno Harvard Business School bringing the best of skills to the country, it is only a matter of time till the significant Chinese cities discover the secret sauce to develop the talent pool that has taken India to the top of the totem pole in global IT and Business Services Outsourcing.

Finally one aspect about China that has not changed in the decade that I have been visiting and soaking in their culture is the acute sense of salesmanship which is rivaled only in some respects by the more entrepreneurial salesmen of Crawford Market, Chor Bazaar and Chandni Chowk. Strolling the streets of the bustling Yu Yu Aan street markets with a young Indian friend, we were amused when a street fake watch merchant not only convinced her to buy a fake Rolex for a five hundred rupee note but also offered to give her the whole case of watches if she would marry him and stay on in China. So much for Hindi-Chini bhai bhai!

Watch out for China, folks !

Ganesh