Software industry thought leaders are unanimous on the need for a long-term strategy to retain India’s pre-eminent position.
Very few in the Indian software and services industry are ready to hazard a guess about how the current slowdown will pan out and fewer still on when recovery will come. But one industry veteran, Sridhar Mitta, is willing to stick his neck out.
He sees growth in the current year slowing down to between 20 per cent and 5 per cent, depending on which section of the industry you are in. More interestingly, he sees recovery slowly following and expects the growth rate to be back to “a little less than the previous peak in 2010-11.”
Mitta, managing director of e4e Labs, is also very clear as to who will be hit. “Only the smart will survive,” he says. While few will argue with this, opinion in industry differs on whether it will the big or the small and medium who will have to bear the brunt of the adjustment. MindTree Consulting chairman and MD Ashok Soota, heading one of the most promising mid-seized software services firms, goes against conventional wisdom to assert that mid-sized firms won’t be hit harder.
On the other hand Raman Roy, arguably the father of the BPO industry and currently chairman and MD of Quatrro, takes a more nuanced position. The smaller firms are both “important and robust” but when it comes to getting payments on time so as to have the cash to pay bills, those with deeper pockets (read large firms) naturally survive better.
There is also a divergence in views on what the downturn will do to jobs. Soota sees most honouring their campus commitments, with a cloud hanging over only what will be committed next year. But Mitta is quite forthright, “unwanted expenses and people have to go as a lot of muck has been collected, as inevitably happens during a period of fast growth.”
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While perceptions differ on the immediate future, industry thought leaders are remarkably unanimous on the need for a long-term strategy to retain India’s pre-eminent position and underline the need to think new thoughts. While doing so they do not hesitate to be self-critical.
Sanjay Kalra, president of Tech Mahindra, one of the growth leaders of the industry, is categorical that “We can’t keep being pure play offshore entities, we are still very India-centric. An engagement and relationship model has to be built with the client as only then can we deliver value for him and ourselves.” There is a need to appreciate local practices and getting the “local flavor is critical.”
Roy is another critic who says we don’t have a strategic plan for the next 3-5 years. Such a plan must ensure that our industry faces a level playing field vis-à-vis global competition. The firms in the Philippines do not have to worry about power supply or the tax regime, whereas we have to provide for one and lobby for the other.
Karla adopts a long-term perspective by arguing that while cost cutting is inevitable for the industry, it must not stop investing. All firms have a “current” and “aspirational” state. Pointing to how Japanese firms typically invest in new technology during a slowdown, he says that while optimising current capabilities firms must ready themselves to reach out to their aspirations.
Roy indicates that concern over the present must not become obsessive. “We must realise that we will be part of the solution when things get back to normal. When it is business as usual again client focus will shift to areas like integration and acquisition. Then offshoring and outsourcing will become a central theme.” Now is the time to worry over the knowledge gaps that our kids have – be it over the US GAAP (Generally Accepted Accounting Principles) or actuarial practices.
Mitta says “You have to be agile, invent new business models. You cannot plan for the future by simply extrapolating the past.” The domestic market has to be targeted to build capacity. MindTree has appointed a new India head.
Indian IT services has to get into new areas like strategy – understand customer problems and offer solutions. “IT and BPO must be seamlessly integrated to offer the customer cheaper processes. Software as a service, which integrates product and services offerings, is more amenable to delivery out of India.” The future will belong to branded firms like Wipro and Infosys and not so much to brands per se.