At the recent National HRD Summit in Pune, the global chief of Wipro Technologies’ HR department spoke about the company’s mission to be the numero uno Indian IT firm and to be counted among the top 10 firms in the world as well. At a time when the Dataquest Giants are being named and the trumpets are being polished to proclaim this year’s Top 20, it is a good time to reflect on how far the Indian industry has come and how much more ground has to be covered before Indian companies rank among the global majors.
A recent Morgan Stanley survey of the North American computer services and IT consulting industry throws some interesting light on the characteristics of the industry at the highest level. The report points out that all the majors are facing a threat from offshore companies, thereby leading to the real risk of “negative labor arbitrage” where global majors will be forced to charge lower “offshore” rates to their customers even while they continue to pay higher “onsite” compensation. And with all trends pointing to continuing sluggishness in global economies with consequent effects on the rate of recovery of IT spending, the spending on offshore IT services, which reached $9 billion in 2002, is expected to grow to over $12 billion in 2004.
The implications are simple. Either we will see the major global firms finally getting their offshore acts in place, or we will have another 18-24 months in which the top 20 Indian software exporters can grow to a global scale. Both scenarios are possible given the fact that at least three of the majors are showing signs of substantial scaling, with Accenture having tripled its offshore headcount to over 3,000, EDS boasting of over 10,000 people in low-cost locations and IBM employing over 4,500 people in India.
The opportunity for Indian offshore companies comes from a proven model of custom application development and maintenance, application outsourcing and BPO, with new methodologies emerging for package software implementation and migration from offshore. And recent trends–like the award of a seven-year framework agreement by a global utility to TCS, Zensar and Wipro–show that most of the evolved CIOs have made the Indian industry a vital part of their future plans. The Morgan Stanley report suggests that even today, the average onsite and offshore billing rates for large Indian firms trail by 50% to 80% the blended rates of their global competitors. Add to that the demonstrable capabilities and qualities of most of the Indian SEI CMM Level 5 firms and you have a potent formula for growth.
But becoming a global giant needs more than just an organic growth strategy and several breakthrough initiatives will have to be pursued and mastered. Amidst all the brouhaha generated by the acquisition chase over the last three or four years, only Wipro has shown a consistent success rate in acquiring and integrating Indian as well as global companies. Similarly, only Wipro has shown any significant appetite for large systems integration deals. In the areas of strategy and domain consulting, and infrastructure outsourcing, the offshore penetration is still very low. Compare that to the 35% to 45% of revenues which EDS and CSC garner from this area and the challenges in the path to global leadership become apparent.
What else does it take to become a global giant? A global vision, for sure, which most mature Indian software companies have in abundance, a willingness to attract and integrate global talent, which is an initiative that is still in infancy and deep pockets. The software industry, in the next 10 years or so, will have to discover scores of Azims and Murthys and hundreds of Ramdorais, Pauls and Nilekanis to make a $100 billion plus industry a reality and the IT industry will have to position itself as the partner of choice for global corporations to make the tryst with our global destiny a reality.
The author is deputy chairman and MD of Zensar Technologies and chairman
of Nasscom’s SME Forum for Western India