IT industry at cross-roads: Top three priorities for IT companies in years ahead

This was the theme of IIMB-NASSCOM Leadership Summit 2010 where I had opportunity to share my views as a panelist. It was a great evening where we panelists got to share our thoughts, and also learn from each other and from the enthusiastic participants, essentially students of PGSEM and PGP and other courses of IIMB. In this blog, I will share some of my personal reflections that I shared at the summit.

One thing about predicting future is while short-term predictions tend to be conservative, the long-term predictions tend to be optimistic. So, while we still don’t have personal flying machine, fuel cells, foldable LCDs or many of the several James Bond gizmos, it is also a fact that short-term bandwidth requirements, mobile handeset adoption, and even the longevity of recently conclused recession have all been proven wrong and how! The recent controversy about melting of Himalayan glaciers and threat to Amazon forests has only once again vindicated the theory. 

Issues

As we step into post-recession year 2010 – the year that probably will matter much more in the long run than any other year – a lot of battlelines are being redrawn, new socio-econo-geo-political issues are being debated and the pyramid seems to have been turned on its head. Without being judgmental about these issues, let’s see what they look like:

  • Anti-outsourcing sentiments – while some of it might just be playing to the gallery, there are definite issues underneath those jingoistic slogans that should not be lightly discarded.
  • Rising costs of Indian operations – while we have gone up the food chain, we also need to realize that cost of higher competence has also gone up. Whether we should kill the goose that lays the golden eggs, or play with patience – this indeed is the billion dollar question.
  • Other emerging low(er)-cost destinations – whether that is China, erstwhile East Bloc, Latam countries, Philipines, Vietnam or eventually Africa, the race is on to provide services at the lowest price-point. While not all of them might offer the simultaneous advantages of English language skills + scale + open market + existing base of skills and several other key success factors uniquely available at India, I think it still is a credible threat if we simply sit back on our laurels.
  • Rather low domestic consumption (under $10 Billion) – this is a real underserved market and a real goldmine. The fact that our domestic consumption is so low, it not only lowers our credibility in the world market, it also limits our ability to build world-class facilities and infrastructure.
  • Pressure to deliver more value within reduced IT budgets – post-recession is a whole new world. The IT and new product development budgets are lower than before, and the pressure to deliver more in less is the new universal truth.
  • Growing digital divide – while some 2.3 million of us have benefited from the IT boom (and another 8 million having benefitted indirectly), there are hundreds of million who are forced to be mute spectators while the carnival passes by in front of them. Not only are we depriving ourselves of an opportunity to bring more talent and thereby expand the envelope, I think we might even be setting the field for a social unrest (going by the rising crime in metros, I don’t think this is a far-fetched fantasy).

I am sure there are many more. However, none of them are brand new. I also think most of these have limited potential to affect our story just by themelves. What is worth realizing is that many of these are happening simultaneously, and it doesn’t matter if the relation is causal or collateral, the damage will surely be comprehensive and complete!

Trends

Let’s also look at the current trends, facts and opportunities:

  • Hiring is up
  • Attrition is up
  • 7 Million micro-firms in India are waiting to hop on to the bandwagon of information superhighway
  • 95% of software exports come from just 7 cities
  • 2.3 Million direct jobs created and 8 Million indirect jobs created
  • SME potential ~ $16.8 Billion in 2010 on technology, software, hardware, bandwidth
  • Over 550 Million mobile subscribers, but probably not more than 50 Million on any data plan

These trends are not necessarily good or bad. We need to devise our strategies such that we can exploit these trends in way that allows us to move past those issues that we discussed earlier.

What next ?

So, what can we do next ? It is very tempting to continue the number game, and if 100,000 IT professionals can give $5 Billion annual revenues, then it must be simple math to reach $10 Billion and then $15 Billion and so on. Right ? Wrong! Sadly, that might not be so easy. As we saw earlier, there are far too many negative issues that might limit the dream run. From where are we going to get 5x manpower (at the industry level) to get 5x revenues (though, it might not be a linear relation anymore, but that’s another point)? From where are we going to get civic infrastructure to house office space, residential localities, hospitals, schools, living spaces in teh already supercrammed metros to house even more  carbon-emitting professionals, their industries and their super-sized cars ? From where are we going to create a domestic industry that can act as a shock absorber when the next global recession hits us ? How are we going to ensure an inclusive society where we are able to help people realize their potential and become a proud partner in tomorrow’s India ? How are we going to grow up from maintaining software for the world to innovating for the world ? From where are we going to get the next 50 million internet users, the next 50 million mobile internet users, the next 50 million credit card customers ? From where are we going to sustain world’s largest middle class of 400 million without giving them any realistic means to 2x or 5x their potential ?

I believe the solution lies in our own backyard. We must go back to our roots and strengthen them to get ready for the big game. What we have achieved in all these years is nothing short of a miracle from a country that till just fifteen years back was still trapped in pseudo-sociolistic hangover that only led to a solitary contribution to the world of economics – the ‘hindu rate’ of growth. However, the world has not sat still while we blazed the trail last fifteen-odd years. It has grown up to pose credible challenges that simply can’t be met with sweetening the deal anymore. We must think differently.

So, what do I think ? I think we should invest in the following, as an industry or whatever it takes for us to get together, to set us up for success in the long-run:

Radical changes in eGovernance

The eGovernance must simply reach every internet kiosk, every cellphone, every doorstep. Anything short of that is just an eyewash. It doesn’t help if the urban youth can book railway tickets  or pay electricity bills. How about making the average Joe in a dustry town get micro-loans using his cellphone ? How can we eliminate the middlemen from every transaction that deprives a farmer his fair due ? How can we ensure that construction workers get their full wages for their hard work ? Bill Gates mentions Rahul Gandhi in his annual letter, and appreciates Rahul Gandhi’s candidness when he says that the money meant for the poorest of the poor doesn’t reach them. How can we ensure that this happens, every time, for every citizen, every single day ? We develop solutios for countries, cities and counties but we are not using that knowledge and expertise to develop our own backyward ?  

R&D / Innovation

I refer to applying ‘jugaad’ innovation to make simple, everyday things even more simpler so that an average 5-year old and an 80-year old grandma can easily use those services to access information and services at their fingertips. We need to make systems so that a cabbie in Mumbai can remit his daughter’s school fee in a remote village – instantly. We need ability to bring healthcare to the needy and poor to their homes. We need solutions to make our farmers more informed and better prepared to handle adverse weather situations and use more efficient farming methods.

Manpower Development

Manpower development is often restricted to the elite technical and business schools, but I think that perspective needs to be readjusted. How can we develop solutions that can benefit poor, needy and illiterate farmers, workers, cabbies, mom and pop shops, kirana traders, physically challanged and socially isolated if they are not taught how to use those gadgets ? Even if we produce 10x IIT/IIM grads, the bottom of the pyramid won’t shrink. Real benefits will only accru when the society is ready to absorb the supply. So, developing manpower at grassroot level seems to me as the only way to create a robust, need-driven and sustainable demand system that can effectively absorb the increased supply (that becomes available by methods outlined earlier).

Job Creation

As I noted earlier, our IT intensity is restricted to just 7 main cities. Neither industries want to move to other Tier B and Tier C towns, nor the professionals want to move away from chaotic metros (we just love to blame Bangalore traffic, but don’t ever ask us to move away from Bangalore :)). It is like a Catch 22 revisited. This forces money to stay in metros, and makes people from rest of the country to move into metros. While this is not unusual in any part of the world, it forces youths from villages to move away from agriculture and other trades that might have brought economy to their homes rather than forcing them out of their homes. We need to reverse the trend and decongest cities and spread the fruits of economic boom with more of the lesser privileged ones. I am not for peanut butter spreads, but surely there is a huge gap between what we have now and the peanut butter spread. Moving industries back to smaller cities, towns and villages will help create a more ribust local economy and ease-up pressure on cities. 
 

Conclusions

We have the lifetime opportunity to alter the course of future by taking some far-reaching and hard-hitting steps at an industry level. Honestly, one company or one player alone might not be able to make that huge a difference, but surely we all need to think about. Your prescription might be diferent, and that’s fine. What is important is to agree on what we want to be and hopefully we all will find a way to agree on how we want it to be.

6 thoughts on “IT industry at cross-roads: Top three priorities for IT companies in years ahead

  1. Dushyant

    Rural India has already started on the path described by you. refer Rural Shores Business Services Pvt. Ltd (http://ruralshores.com/).It will take some time but we are gradually getting there. Besides major India players have started moving to second tier cities like Mysore, Chandigarh etc.Additionally people moving out of small scale agriculture will provide potential employees/entrepreneurs as well as economies of scale seen in the West. The same will lead to increase in consumerism though the Asiatic region has been known for its saving capacity. So consumerism will have a moderate increase only.

  2. Kavash Sharma

    Nice article sir. Thank you from the IIM-B SAC (Students Affairs Council) community for enlightening us in the leadership summit with your thoughts.

Leave a Reply