Gulliver’s travels and Indian software

The second part of the book ‘Gulliver’s Travels’ talks of Gulliver’s
experiences when, after escaping from a land of pygmies, he finds himself
suddenly thrust into a kingdom of giants. Today’s domestic software giants are
probably heading for the same experience as they march forward into a world,
which has been forced to sit up and take notice of the Indian offshore
challenge. That’s great news, but it brings with it a set of challenges that
the big four Indian software companies (TCS, WIPRO, Infosys and Satyam) will
have to face if they are to wrest global supremacy from the incumbent giants!

The legitimization of the Indian offshore story, which started with the huge
opportunity, posed by the millenium bug and has today resulted in the
recognition of Indian processes and people to provide support and maintenance
through well-honed dual shore methodologies. The ability to conceptualize,
implement and migrate ERP applications, the demonstration of capabilities in
embedded systems and new product development, and the enhancements and newly
emerging capabilities in technology agnostic solution blueprinting have all
contributed to building the Indian software industry’s high reputation.

“Indian players still compete primarily in SW development, migration and
they need to widen their ambit to stay ahead”


However, Indian players still compete primarily in the software development,
migration and maintenance space. It is only recently that they have entered
areas like systems integration and business process outsourcing (BPO). In the
$400billion IT Services segment, the software writing component accounts for
less than 20% and having even a double digit share of this segment will not give
Indian companies the market share they crave against the likes of CSC, EDS, and
the Big Four. A serious attempt also has to be made to build and demonstrate
competencies in large SI and outsourcing deals, now dominated by players like
Covansys and Keane. The surprising part is that many of our Indian firms are
ignoring these large technology segments and pursuing management consulting and
e-business integration dreams, which could more logically be pursued by niche
second tier firms.

What is it that makes it imperative for Indian firms to chase the big
horizontal technology opportunities instead of ‘climbing up the vertical value
chain’? Size is the only attribute that enables companies like CSC and EDS to
be relatively insulated from economic sinusoidal curves, which are expected to
be the rule rather than the exception in the years to come. Small wonder then
that Wipro has decided to take on government projects and is eyeing new areas.

With a choppy year behind, then IT service providers can be forgiven for
having modest growth goals for the coming year. Indian firms need to engage them
at their own game in their own markets!

There is of course a flip side to this argument in favor of horizontal
service diversification. Today the high price earnings in multiples of forty
plus enjoyed by firms like Infosys and Wipro in the American bourses may slide
to the early teen levels currently prevailing for the large outsourcers and
systems integrators and at some point, managements and shareholders may have to
make the choice between sustained growth and market capitalization. The
configuration of the Indian and Global industry will change substantially with
many more global professionals joining Indian software companies and Indian
companies acquiring more companies.

Will that affect the fortunes of the Indian IT Industry and the directions
that smaller software firms and startups would need to take? Wait and watch.

Ganesh Natarajan is the global CEO of Zensar Technologies, chairman of the
Maharashtra Council of the Confederation of Indian Industry and a member of the
executive council of Nasscom

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