For Capgemini,India a source of innovation, not cost arbitrage

In what marks a fundamental shift in its approach, French software major Capgemini has said it is looking at its India presence of over 1 lakh employees as a source of innovation, rather than merely as a source of cheaper workforce.
The company is doubling its incremental hiring from premier tech schools like IITs and NITs here, and has also included innovation as a key resource area for all its employees, without which they cannot progress in their career.
"Capgemini in India is not merely a cost arbitrage, delivery centre," its country chief executive Srinivas Kandula told PTI in an interview here, adding they have started on the business transformation to focus more on innovation.

He said Capgemini, celebrating its 50th anniversary, has adopted a three-pronged strategy wherein the traditional outsourcing business, along with consulting and technology work, is intertwined with innovation without losing focus on governance requirements.
"If you ask me, what does India Capgemini stand for within the group? I would say it's not only delivering the projects, but also participation in innovation and IP generation," Kandula said.
It can be noted that presence of cheap yet technically adept workforce has been one of the key assets which has led to the growth of the IT services space in the country over the past three decades, which now grown to be a USD 160 billion forex earner for the nation.

It has led to domestic companies like TCS, Infosys, and Wipro growing into multi-billion dollar corporations competing with their global peers like IBM and Accenture, which have also set up a base here over the years.

Capgemini entered India in 2000 and since then, has grown its business with over 1 lakh employees. However, the ongoing changes in the technological landscape, which focus on digital technologies and automation, have led to question marks amidst declining revenue growth.
An appreciating currency and rising protectionism in the key Western markets are also aggravating the problem.
Kandula said Capgemini has already trained half of its employees in new skills, and will be simultaneously doing an advanced course for them apart from training the remaining half. For the existing employees, innovation has been made a part of their key requirements without which they cannot progress, he said.

"If you want to get a better rating, you want to grow in career, you need to tell us innovation."
The company, which has a target to hire 20,000 this year, is now doing 10 per cent of the new hires from the top tech schools, and expects the same to grow to 20 per cent over the next few years, he said.
Asked if the increased reliance on high cost hires from premier tech institutions will hurt margins, Kandula replied in the negative.
"If you innovate, your margins or cost advantage is significantly higher. It is not only about paying more salary to a guy, but his productivity or value addition is ten times more. We are extracting more value."

He said the focus will be on 'applied innovation', wherein the company uses existing technologies to innovate in such a way that it is value adding to the client.
Over a period of time, there will be a slowdown in the total number of people that the company hires here, but it will continue to be the biggest geography where it works and the headcount here will grow faster than elsewhere, he said.
Kandula, however, said India will continue to be an important geography for the company and there is no emerging alternative which has the same talent.
"India will remain a nerve centre for excellence. independent to the change in technologies. The fact is, we've a huge concentration of well trained IT engineers here. There is the whole ecosystem, there is the leadership, there is infra built. It is not going to go away.

"Its structure may change, but India will remain a hub for software services for us and for the whole world," he concluded.