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The likes of Infosys, he believes, “should have gone and acquired large-sized product companies in the US”. Meet Arun K. Maheshwari, Managing Director and CEO of CSC India, the subsidiary of the $11.3-billion Computer Sciences Corporation (CSC). What Indian software firms need, he says, is domain knowledge--before they can dream of becoming product powerhouses. The best way to do this is to acquire PRODUCT (NOT PACKAGE) companies in the US or UK. Excerpts from an interview with BT Online’s Sahad P.V. Q. Outsourcing constitutes more than 50 per cent of CSC's global revenues (its contribution has gone up from $1.6 billion in 1996 to $6 billion in 2003). How will this trend impact your Indian operations? A. Increasingly, whether it's outsourcing, consulting or product development, there is tremendous cost pressure in the US. It has become very critical for every company to use India, or else they will be at a competitive disadvantage. So it's important that some of the work we take up in the US migrates to India to provide a cost-effective solutions to our customers. Outsourcing is a big part of our business, and India will play a key role in that. Q. There is a lot of ruckus these days about outsourcing work to India... A. They (the protests) are just a blip. Once the US economy turns around, I don't think anybody is going to talk about it. The US had gone through this several times. For instance, 20 years ago when the Japanese started selling cars successfully in the US, there were similar protests from the unions and the domestic automobile industry. But nothing happened, and now everybody is selling cars in the US. Remember, Americans are not doing a favour to India by sending work there. They are doing a favour to themselves. Because they are reducing their costs, which means they are able to provide goods and services to their population at a lower cost. This means everybody's standard of living is improving. So it's in America's self interest to continue reducing their costs. Q. With the margins getting squeezed, how do you see the future of Indian IT? A. The margins are getting squeezed. But from the country's macro-economic perspective, it doesn't matter. Infosys and TCS would be earning 18 per cent now versus 26 per cent in the past, but it doesn't matter. They are still generating employment and it's a source of foreign exchange. Q. In software product space, India hasn't made much headway. Why is that so? A. Our performance on the products side has been dismal. Even smaller countries like Israel and Singapore are doing much better than India on products. That's because Indian companies focused on money-spinners like body-shopping and remote software work rather than getting into products--which is a long-gestation business. It also requires a lot of investment and risk appetite. So companies felt why go through all the hassles when there is an easy way to make money. Q. Can India be a product powerhouse? A. Some big companies have the resources and management ability to do product development. But it's not very easy to do. It requires not technical skills--that we have plenty here. What is needed is domain knowledge--which is not available locally. For this, they need to go and acquire companies in the US, UK or Australia. We need to think big. Companies like Wipro, Infosys and Satyam (all have ADRs, which is good currency) could have easily gone and acquired $300-$500 million companies in the US or UK--which none of them did. Now the valuations have come down, so it may be difficult. But it needs to be done, and it must be done.
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