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Infosys 3.0 was its undoing: Partha Iyengar

Interview with India Head, Gartner

Partha Iyengar
Partha Iyengar
Shivani Shinde Nadhe Mumbai
Last Updated : Sep 17 2013 | 1:42 AM IST
Partha Iyengar, VP distinguished analyst and India Head, Gartner feels that the $108 billion Indian IT industry has ignored the domestic market in the race to gain market share in the developed market. This has also meant that MNC like IBM, Accenture and others gaining market share. With growth in developing markets looking better Iyengar in an interview with Shivani Shinde Nadhe, talks about the need to look at the domestic market, why Infosys 3.0 strategy was half baked and changing trends in the industry. Edited excerpts…
 
How significant is the domestic market for the Indian IT industry?
 
I think one of the biggest pieces of the story for the Indian IT players is what is happening in the domestic market. The unhealthy fixation we have on the global sourcing market is not correct. 

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I remember having this conversation with (Mr) Narayana Murthy some eight-10 years back, this was time when he had publically said that they will not look at the domestic market. When I asked why he had said, ‘there are other hundreds of companies who can look at the domestic market’, Infosys will not look at it. This mindset that the domestic market is not mature, and that if they work they will have to compromise on margins, is all coming to roost. Murthy may have been vocal but others too shared a similar mindset. There was a level of short sightedness that has hurt Indian companies.
 
At the same time, for players like IBM, Accenture or Capgemini India is a profit centre first, and then a resource pool for their global business. The India head of such companies are tasked with or evaluated on the performance of India as a market place. Moreover, Indian industry has leap frogged the technology landscape. Whether it was IBM-Bharti deal or Mahindra & Mahindra going in for a SAP implementation, it was about leap of faith and a risk that these companies took. Indian players missed on the opportunity of creating such stories. 
 
Clients are still varying to go with domestic player and they are questioning if this sudden interest is because of the global uncertainty. 
 
But IT firms always maintain that the domestic market is lumpy in nature?
 
I do not think so. I think it goes back to what are you are selling. If you are selling them some number of seats then it’s a commoditised seat based model and hence it becomes lumpy. 
 
The peeking order of the Indian IT industry has seen a lot of churn. How do you see it evolving?
 
Companies have started differentiating themselves. The go-to-market, offerings, sales team is all looking different and that is why you see the difference in the performance of some of the companies. You will see more of this. You will also see new winners emerging. I would say Infosys and Wipro have dropped from the top five ranking due to internal issues; we have players like HCL Technologies and Cognizant who are taking their place. 
 
The next phase is the marketing or DNA elements emerging in every company. For instance, TCS continues to focus on depth and breadth of its offerings, Cognizant focuses on their client relationship at senior level, at HCL the focus is on sales. The next step will be that these elements will get baked into the client strategy. 
 
Do you think Indian players are marketing themselves better?
 
When it comes to marketing for lead generation or for supporting the sales team, Indian players do a good job. When it comes to strategic marketing, where it is used to set directions for the company, not a single company among the Indian IT services is close. At the IBMs of the world marketing drives their future strategy. They craft their strategy, their go-to-market strategy to the goal and then move that way.
 
Was Infy any closer on this route with its 3.0 strategy?
 
No, I think their strategy was their undoing. This model was more about moving from services led model to product led. I don’t think the market is interested in another major product focused vendor. Moreover, when Infosys says they want to be a product company based on a thin stream of IP scattered around the company, it is difficult choice. To truly be a product led company you need to have an absolute industry leading product. Also you cannot move to a product mindset company when you are such a mature player.
 
Do you think Wipro and Infosys can get back to their original growth rates?
 
I think it is possible for them to come back. But they have lost momentum at a crucial stage. Just returning to growth will not suffice; they will have to come back at 2x than the industry. The question is do they have the wherewithal to bounce back. 
 
Immigration Bill has brought in focus the need for a shift in the business model of the industry. Do you agree?
 
I feel the immigration bill will turn out to be like a storm in a teacup. As for having a local presence, the top five players had started investing into it even before the slowdown hit the industry. This is crucial if you want to have a lasting relation with clients. You need to have local connect. This has been a requirement for long, the immigration bill brought this in sharper focus. 
 
However, the offshore centricity of the Indian model will not change at least in the medium to short term. One of the biggest crisis in the developed market is that students are abandoning STEM curriculum. If that’s the case then where are you going to get work force. 

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First Published: Sep 17 2013 | 12:50 AM IST

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