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Ramalinga Raju,
Chairman, Satyam Computer Services
; Nandan Nilekani,
CEO, Infosys;
Bob Welch,
Group VP and General Manager, Worldwide Services Research,
IDC;
Vineet Nayar,
President, HCL Technologies and
Kiran Karnik,
President, NASSCOM
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Two
of the more recurring themes at NASSCOM 2007, the annual congregation
of the Indian it services sector, were innovation and talent-both
essential ingredients in the recipe for the industry's leap into
the next growth phase. Not inappropriately, the theme for the
Business Today-NASSCOM panel discussion was Indian it: The Opportunities
and Challenges Ahead. Debating the subject were Kiran Karnik,
President, NASSCOM; Nandan Nilekani, CEO, Infosys; Vineet Nayar,
President, HCL Technologies; Ramalinga Raju, Chairman, Satyam
Computer Services; and Bob Welch, Group VP and General Manager,
Worldwide Services Research, IDC. The discussion was moderated
by Brian Carvalho, Executive Editor, Business Today.
BT: It's interesting to think that what was considered
an opportunity or a competitive advantage five-six years ago may
not be one any more for Indian IT services companies. For example,
till not too long ago India's vast pool of talent was considered
a great competitive advantage. Yet, two years ago, NASSCOM predicted
a shortfall-a talent shortage of 500,000 by 2010. What was an
opportunity yesterday could well be a challenge today. Mr Karnik,
how has the industry been gearing up to tackle the talent crunch?
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"We need
major reforms in the educational system. Our system is what
the British left us with 60 years ago"
Kiran Karnik
President, NASSCOM |
KARNIK: The 2005 NASSCOM-McKinsey
study very clearly said that if we do nothing, we could have a shortfall
of 500,000 by 2010 for this sector alone. But fortunately over the
past two years, we have not sat on our backsides. We have initiated
a number of actions. We are fairly optimistic that given what we
are doing now, we should be able to take care of that shortage.
But I must tell you that what we have done are short-term actions...rubber
band solutions but in the long-term there are serious issues that
need to be addressed. We need to get the quality aspect of talent
right. It's not the numbers that are the issue. We already turn
out 4,00,000 plus engineers a year. This year's admission in engineering
schools is 5,69,000. It's the skill sets that they come out with,
as a result of which they are not employable, that's the issue.
Bigger companies are able to provide 3-6 months of training but
not all companies have the wherewithal to do that. But even that's
a medium-term problem that can be fixed by curriculum changes, faculty
training and improving linkages between industry and academia. The
long-term problem, however, has two dimensions to it. One, where
is the faculty of the future going to come from? Two, the academic
system by and large is not delivering. That's happening because
the academic system is not market-responsive as a result of which
people coming out of the system are unemployable. To change that,
we need major reforms in the educational system. Our system is what
the British left us with 60 years ago.
BT: I want to quickly run through
what each company would do on their own to fix this talent shortage
and probably also reign in that wage bill. Mr Nayar, if we could
begin with HCL's game plan on this front?
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"The Accentures
of the world have achieved what they set out to do, which
is to lower costs and attract people-intensive projects"
BOB WELCH
Group VP and General Manager, Worldwide Services Research,
IDC |
NAYAR: Before
we get alarmed about the talent problem, it's good to remember the
fact that we can draw the future by looking at history. If we can
go back and look at 2002-03, did we imagine that we could produce
as many high quality people as there are today? The answer is no.
Did we have a clear idea about how this would happen? The answer
is no. It is good for industry and HCL to be alarmed about this
issue, but at the same time this alarm should not turn to disorientation
and panic. The second issue is that, five years ago, Indian it companies
were thinking only India. Today, Indian it companies have several
options-there are Chinese, Vietnamese, Polish, and all kinds of
people we can recruit. Because domain capabilities, competence,
knowledge of verticals are the drivers of businesses. For the last
five years, our ability to hire and deploy was the big driver and
continues to be a big factor. But in the next five years that may
not be the only factor.
BT: Mr Nilekani, as Indian companies
become more multicultural, is there a challenge of managing growth?
NILEKANI: I think certainly
managing multicultural forms have some degree of complexity that
companies have to be clear about especially when growth comes through
acquisitions. Because in acquisitions, companies can acquire several
thousands of employees in several countries and cultures. That's
food for thought. But I personally think that over past 4-5 years,
there has been a dramatic improvement in ability to manage a global
workforce. I think companies are beginning to understand what is
it about a company that is of universal value, what is it that is
of local value and how to merge the two. On the talent issue, things
are happening at several levels. First, at Infosys at the firm level,
we take training very seriously. We have invested $300 million into
building the world's largest corporate university in Mysore. At
a slightly broader level, we have a programme called Campus Connect
where we are working with 300 colleges of India. We are trying to
explore ways in which quality of teaching in these colleges can
be improved, how to make courses better. I think in engineering
and business management, the quantity issue is getting addressed.
There has been a blossoming of engineering colleges and business
schools in India. We have more business schools than the us has.
I think the quality issue now needs to be addressed. At the same
time, the industry is working with AICTE, the regulator of all engineering
and business schools, to improve the relevance of courses. Finally,
the Knowledge Commission that I am a part of has come up with recommendations
for higher education reforms. One of the recommendations is that
India should dramatically increase spending on education to 6 per
cent of GDP, which is one point the left and the right seem to agree
on.
BT: Mr Raju, would you want
to add to that?
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"The dearth of
talent is becoming more pronounced at the top 2-3 percentile
levels of companies "
RAMALINGA RAJU
Chairman, Satyam Computer Services |
RAJU: The talent gap we talk
about exists at several levels. Normally, when we talk about a talent
gap we refer to a talent gap in the junior or entry level. That's
a serious problem we cannot run away from especially when we are
using 15-20 per cent of people graduating from colleges. I would
like to compare the situation to having raw diamonds in plenty and
not having capacity enough to polish them. All you have to do is
spend 3-6 months with them to ensure that they are up to global
standards. We have established Gram it centres in villages and we
found that people come up to mark rather quickly. It proves that
it doesn't take years but only months or quarters to prepare them.
Our experience over the last 5-6 years shows that the issue of talent
is more pronounced at middle and higher levels. The dearth of talent
is becoming more pronounced at the top 2-3 percentile levels of
companies. That's where we find pressure for finding talent is at
the highest.
BT: Mr Welch, if one were to compare
the productivity levels of Indian companies with the Accentures
and IBMs of the world, is there a noticeable difference?
WELCH: If you look at the efforts
that companies like Accenture have made to build the base of labour
in India, they have recognised that they had a productivity issue
they had to address. In general, the Accentures of the world would
tell you they have achieved in what they set out to do, which
is to lower costs and attract people-intensive projects that they
were having trouble doing. I think they have made a good start.
BT: If one had to go beyond just
ramping up headcount, what are the options in front of Indian
companies today?
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"Today, Indian
IT companies have several options-there are Chinese, Vietnamese,
Polish, all kinds of people we can recruit"
VINEET NAYAR
President, HCL Technologies |
NAYAR: I believe there are various
business models that will emerge. Each major global and Indian company
will emerge by leading one particular business model, which will
be a successful business model. From HCL's point of view, we see
three key events happening in the market space. One of them is the
commoditisation of services-if any industry has lasted for a particular
period of time delivering high quality at low costs, commoditisation
is bound to happen. So, you need to have a strategy against commoditisation.
Two, our industry is based on effort-based pricing and customers
are seeking higher value all the time. Our ability to jump from
efforts to outcome is going to be the second-biggest challenge.
Thirdly, we are an extremely efficient, backward-integrated, operationally-efficient
industry, with companies that have a strong emphasis on supply chain.
We have to move away from that emphasis to innovation. To address
these changes, we have transformed ourselves as a new generation
company over the past two years. We have changed our business model
from unique services to multi-service offerings. We have changed
our pricing model from effort-based to transaction-based pricing.
BT: Infosys is one of the few
Indian global companies in a sense but acquisitions haven't been
one of the drivers to take it global. Mr Nilekani, do you think
Infosys can be truly a global company without making acquisitions?
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"We have invested
$300 million into building the world's largest corporate
university in Mysore"
NANDAN NILEKANI
CEO, Infosys |
NILEKANI: First of all, I think
acquisitions are a means to an end and not an end in itself. Acquisitions
make sense when you have a strategic intent and for a variety of
reasons that strategic intent is not achieved organically. Our fundamental
strength comes from the fact that we have created a new business
model, which is innovative. It's a model that creates value for
customers faster, better and cheaper. It's a model that's disruptive
to incumbents. Therefore, when the entire strength of your model
comes from the momentum you have in the marketplace, which is driving
profitability, it's not a great idea to contaminate the business
model unless there is a sound strategic reason to do that. Now,
what is the potential sound strategic reason we need to embellish
the business model? Clearly, it can't be an acquisition which upsets
the economics of this business model. However, given that our intent
is to create what is the next generation it services and consulting
firm, there are acquisitions that could make sense if we want to
expedite the pace at which we enter new geographies, and develop
domain skills. It could be because there could be a business model
out there which, we think, we need to have but can't do organically.
BT: Mr Welch, any specific threats
that the Indian outsourcing industry has to face up to?
WELCH: One emerging threat is
the convergence of the software and services markets. It's getting
harder and harder to define what the services market is anymore.
When you look at emerging delivery models like on-demand services,
and software as a service, it impacts directly the way in which
these companies plan their future. It takes a lot of the labour
out, and substitutes it with technology. It's not a problem faced
by Indian companies alone but it is a problem faced by IBM, EDs
and Accenture... I think there are a number of countries which
are very active trying to be sources of labour ranging from the
Philippines, which has competitive BPO capabilities, to Latin
American countries like Brazil, which is good in finance and accounting.
(But) one of the things that I fear for them is that they are
building capabilities for a battle that is beginning to be over.
When they get really good to supply labour-based services into
the global supply chain, the supply chain will be looking for
something else. We can argue about how quickly that is going to
happen.
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