INDIVIDUAL STRENGTHS

Accenture: Has the broadest pool of domain expertise and presence outside of India TCS: Carries out the most complex packaged applications work Wipro: Has the broadest set of value added services Infosys: Has the deepest pool of modern language talent EDS: Present in the largest number of geographies IBM: Fully redundant world class network infrastructure

It's official. Indian IT services vendors have better global delivery capabilities than their overseas counterparts. Global tech research firm Forrester has passed that verdict in a research report titled Low-Cost Global Delivery Model (GDM) Showdown, published earlier this month. The report places Indian vendors TCS, Wipro and Infosys a few decisive notches above IBM, EDS and Accenture, on offshore capabilities (see BT 60 Minutes on Page 96).

All three Indian vendors appear in the "Leaders" category of a detailed Forrester 'Wave' diagram on offshore capabilities (TCS just about makes it into this category), while the overseas vendors all lag behind in the "Strong Performers" category. Infosys and Wipro vie for the top slot in the leader category, while TCS just about makes it into the 'leader' segment. US-based software services vendor EDS is plotted last in the strong performer category.

"In November 2002, we had talked of it services adopting a tiered delivery model. Now this report is about how it is going to evolve. There are two different camps leading this development, onshore (US-based) and offshore vendors (Indian); the whole idea here was to look at where they are in that evolution. It is not meant to be an exact vendor to vendor analysis," explains John McCarthy, the Forrester researcher who is the lead author of the report.

The study evaluates the players on over 60 parameters to measure a firm's low-cost GDM skills. The skills stretch across current offerings, strategic direction and market presence. The focus is largely on application-related work, which comprises the bulk of client work on a low-cost GDM. "Third party validation of this kind always helps when we talk to clients" says Sangita Singh, Chief Marketing Officer, Wipro Technologies. "The most important thing about the report is that it helps us bring a standard nomenclature to GDM," she says.

The study makes interesting observations on the time budget variance between the two sets of players. Like this one: "One reference stated that the typical time and budget variance with IBM was 20 per cent, it dropped to less than 1 per cent when the application work was shifted to Infosys.''

The Indian firms win hands down on the number of clients doing applications maintenance, new development, packaged apps maintenance and number of dedicated offshore development centres (see Individual Strengths). "We are still in the early or middle stages of the GDM development and each set of vendors have their challenges. In this set of criteria, this is the way they graded out," says McCarthy.

The report obviously hasn't gone down well with the laggards. "We think the report is too India-centric and we also sign much larger contracts than the Indian vendors whereas the report has only taken into account number of contracts," points out Cathy Meister, Marketing head for Applications Services at global it Services giant, EDS. Defends McCarthy: "When we spoke to clients we found that 80 percent of the work they were sending offshore was to India and also we don't have the calibre of vendors that we see in India in any of the other offshore destinations."

The race to the finish has clearly begun. The question is: Will the Indian vendors be able to maintain the lead when their overseas rivals put all their investment capacity behind GDM? "Well we are all climbing the mountain from different sides in a bid to make it to the top" says Singh, before adding a trifle philosophically: "Let's just say the wheel is spinning; we will have to wait and see where it stops".

-Priya Srinivasan

The Mid-segment Bulge
Manufacturers slash prices to spur sales of mid-sized cars.

It would not take an expert to tell you that the car market in India is booming. With over 700,000 passenger cars sold in 2003, the evidence is clear and present on Indian roads. And even though the bulk of the trade is still dominated by the 'compact', or B, segment, which has over 60 per cent of the market (April-June 2004-05), another segment that has got the manufacturers salivating is the mid-size, or C, segment, and particularly the lower-end of this segment.

As car-makers hit the pedal, blame the smell of burning rubber on Tata Motors and its B-stretched-to-C car, the Indigo. Rolled out in early 2003, the Indigo was aggressively priced below the Rs 5 lakh mark (and soft interest rates meant an EMI of less than Rs 10,000) and today is the highest selling car in the entire segment-in July alone 3,296 Indigos were sold. That has made competitors sit up. In the past three months, Maruti Suzuki, General Motors and Ford Motor have slashed prices of their own cars in the segment. Take a look at the prices of the base models. The new-look Esteem is cheaper by Rs 40,000 at Rs 4.25 lakh (ex-showroom, Delhi). Ford has pushed the price of its Ikon down to Rs 4.49 lakh, a drop of Rs 30,000 and General Motors' Corsa now costs Rs 4.86 lakh, which is Rs 36,000 less than before.

Of course, none of the auto-makers will admit that it's a reaction to Indigo, but they are more than willing to admit that the price cuts are targeted at the million-plus compact car owners in the country. "There are over a million people out there with compact cars over two years old who are looking to upgrade, and even if we can get a tenth of that number to shift this year, we will almost double the segment", says David Friedman, Managing Director, Ford India. The mid-size segment which grew at over 30 per cent last fiscal, has seen sales for the first four months of this fiscal climb by 31 per cent. Ford predicts that the segment will grow to at least 140,000 units for the Calendar Year. Maruti is already gaining. Price cuts have boosted Esteem sales from an average of 1,000 a month to more than 1,700 in July.

However, the optimism is not shared by all. Rajiv Dube, Vice President, passenger car division, Tata Motors, believes that India is yet to acquire a high vehicle turnover rate. "Just because some people in urban areas are upgrading frequently does not make it a nation-wide trend." His rivals will soon find out just how deep the new niche is.

-Kushan Mitra

EXIT
Uneasy in Kathmandu

Tough times ahead: Businesses are tentative in Nepal

Just 15 days ago, dabur Nepal sponsored the Miss Nepal contest. Now, though, officials of the Indian company (one of the 84 in Nepal) are preparing to pack their bags. Greenhouse operations (Dabur Nepal is into food processing) have been suspended for 10 days while the officials watch the moves of Maoist rebels, who've not just taken on Nepal's government headed by Sher Bahadur Deuba, but have issued "notices" to foreign businesses to bankroll their insurgency. "We are very concerned about our employees all of whom are Nepalese," says Sunil Gupta, VP, Coca-Cola, whose Bottlers Nepal has suspended operations due to growing violence. "We have been assured that Indian businesses in Nepal will be protected," says Navtej Sarna, a spokesperson for the Ministry of External Affairs. Incidentally, the largest private sector employer in Nepal is itc's Surya Nepal. Meanwhile, both consumers and companies suffer as prices of consumer products soar.

-Amanpreet Singh

A Market Gone Hyper
The who's who of corporate India is blueprinting forays into hypermarkets.

Retail Rush: This one is a departmental store; wait for the hypermarket

For some time now, the stress has been more on the hype and less on the market. That's beginning to change, what with a clutch of corporate majors evaluating forays into the hypermarkets space. According to the buzz in the market, the Godrej group, the Mittals of the Bharti group, the Singhanias of Raymond, Piramal Enterprises, ITC, the Munjals of the Hero Group, the Tatas through Trent, the Wadias of Bombay Dyeing and the Reliance Group are planning retail ventures, many of them in the hypermarket format. Existing players like RPG Retail and Shopper's Stop, in the meanwhile, are in a frenetic expansion mode. Raghu Pillai, CEO (Retail Sector), RPG Enterprises, proffers one good reason for the corporate rush into hypermarkets. ''Many hypermarkets are able to achieve cash break-even within six to nine months.''

To be sure, many of the corporates blueprinting hypermarket forays have already dabbled in retail in some manner: The Singhanias, for instance, have their Plug-in stores, and a move into larger-format retailing doesn't defy logic. Trent, which currently has a nationwide chain of Westside lifestyle stores, will have at least one hypermarket store towards the end of the year, reveal industry observers. And a Godrej company official lets on that "the group is evaluating the option of getting into retail," but the business model has yet to be frozen.

Similarly, the Munjals of the Hero group plan to set up convenience retail stores on the lines of global chain 7-Eleven. Rahul Munjal, CEO, Easybill, the Munjal group firm that's spearheading the retail thrust, points out that, like 7-Eleven, his company will also tie up with companies and banks.

Arvind Singhal, Chairman, KSA Technopak, a Delhi-based retail consultancy, has little doubt about the huge opportunity up for grabs. The durables industry is worth Rs 45,000-50,000 crore, and growing at 20 per cent conservatively, he says. The food and groceries business is worth upwards of Rs 6,00,000 crore per annum. ''(Against this), the biggest player in food retailing-Foodworld-is no bigger than Rs 400 crore,'' says Singhal.

The landscape will change soon enough. The RPG group, which has four retailing formats, is expanding in a big way. Within the next three years, there will be 150 Foodworlds (up from 92 now), over 330 Music World stores (166), 140 Health and Glow stores (27) and 15 Giant stores (two), which could all move to the Spencer's brand name. RPG Retail's Pillai is hopeful that the Giant hypermarkets will post a turnover of Rs 250 crore this year and within the next three years cross Rs 1,000 crore. ''Retail is a virgin territory," he says. Not for long, Mr Pillai.

-Swati Prasad