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Is It Ugly to be Big? Not Anymore!

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DQI Bureau
New Update

That is it about Indian society that makes us eye all

industry giants with suspicion and actually gloat when their Achilles’ heel

get exposed and shot at? A few years ago, it was the mighty public sector

undertakings that fell victim to their own largeness, overshadowed by nimbler

smaller companies in every industry sector. Success stories like Tisco in steel

and Gujarat Ambuja in cement became abject lessons for all size-haters. It

almost became fashionable to be small. Today, it is the turn of the software

giants to be accused of large benchings and eroding profits–the target of

cynicism, the butt of all predictions of doom!

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There is something in our history and culture that makes us

love the underdog. The cheering that a Subhash Chandra receives when he takes on

and gets the better of a Murdoch, albeit for a short time, the case studies that

are written about Nirma when it catches the marketing satraps of Levers napping–all

these are the stuff that warms our hearts. The IT industry has been no

exception, with more young Indians supporting Sun and Netscape than Microsoft.

Hasn’t Infosys been the undisputed darling number one of the stock market all

the way through the nineties with its ability to outwit the Old Economy?!

In recent times, however, we have learnt our lesson. GE has

shown the country what it means to set up a successful IT-enabled business and

TCS and Wipro, in their own inimitable fashion, have powered their way to global

recognition and a renewed endorsement of the ‘Big is Beautiful’ axiom. When

you hear in April 2002 that TCS and Wipro were the only software exporters to

grow 50%-plus, remember two points–you read it in this column first, and in

tough times, it is good to be big.

The virtues of IT bigness

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There are three simple reasons why the big will grow bigger

and small players run the risk of being wiped out of the competitive space:

Size seeks size: Which American or European CIO would

want to risk her mission critical applications–for development, implementation

or maintenance–to a small unknown player who might well shut shop tomorrow if

the boom doesn’t return? In the heyday of the Y2K business boom, the joke was–"Our

American clients first want to know who they can sue if things go wrong!"

And while this may have been said in jest, there is no disputing the seriousness

with which companies consider size–of the engagement team, the organization

and indeed the business groups or funding partners behind the company they may

choose to keep as their software partners.

The time is not one of risk-taking: There used to be a

cliché that went–"No IS head ever got fired for buying from IBM."

Bad times inevitably make organizations and their CIOs averse to risk and the

tendency is always to stick to tried and tested partners, even if their work has

proven a little shoddy at times.

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Expectation of empathy: The CIO’s job is often a

lonely one and never more so than the process of designing new technology

architectures for new business applications or company ventures. In such times,

with pressure from the board goading the CIO towards action, and a fear of

unknown technologies and applications holding that same CIO back, a familiar

face from a known organization is what every CIO wants. One who understands the

business and technological issues and develops a value-for-money proposition–that’s

what every CIO wants to avoid losing sleep and missing project deadlines or

budgets.

But if all this sounds like great news for the management and

staff of the ‘Top 5’ IT companies in India, there are a few potential

problems too…

Challenges of being big

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Nobody would have missed the total panic on the face of the lookout from the

bridge of Titanic when the iceberg was sighted for the first time. When you are

at the helm of a major software organization and see the dreaded ‘R’ word–recession,

or at the very least a prolonged slowdown looming large in front of your biggest

market, the feeling can’t be much different. That’s because the organization

would have already committed itself to new hiring, increments and promotions and

enlarged infrastructure on the supply side, only to see the bottom falling out

of the demand side. And with wary financial analysts and the sensation-seeking

press breathing down their necks, very little room is left for maneuver before

the ship is almost slam-dunking the iceberg!

This is no doubt compounded by the fact that for many young marketers and

project managers in the software industry, the prospect of failure is an

altogether unknown phenomenon. The nineties have seen an unprecedented four

waves of opportunity–starting with the transition from mainframe to client

server and network-centric computing, then the the great ERP boom and the Y2K

bug to the great dot-com phenomenon… In such a situation, the Midas Touch

seemed more the exception than the rule for the chairman of every reputed

software company, with markets yielding a continuous flow of business and joint

ventures and strategic alliances bearing fruit as planned. For people used to

such a predictable decade of success, the game has always been theirs to lose…to

be suddenly faced with a playing field that is diminishing in size and luster in

front of their eyes is clearly a little more than they had bargained for.

Tomorrow’s landscape…

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It would be easy and somewhat pessimistic to predict that the landscape will

be littered with the corpses of many software exporter wannabes, unless the

global economies stage a miraculous recovery in the near future. However, as an

optimist, I will have to predict that a few large and small firms will take the

opportunity of the slowdown to refocus their organizations on new markets, new

methods and new capability development to return to their high-growth profiles

in Year 2002 and beyond.

Sure, there will be an inevitable change in the nature of business that the

more successful companies will pursue in the coming year. The cliché end-to-end

solutions will become a reality, with visionary large- and medium-sized firms

providing services from business process optimization and on to knowledge

enablement to intelligent e-commerce and m-commerce solutions. New tricks will

be mastered to move higher up the value chain and the traditional offshore

development and maintenance activity will be supplemented by customer support

and business process outsourcing initiatives.

An indifferent market will also force firms to finally move into the

development of intellectual property and reusable components, all of which may

result in lower revenue and profit growth in the short term, but significantly

improve both capabilities and performances in the medium term. The year ahead

will prove who the real giants are, as also the pretenders…that will be the

fallout in this war for global marketshare.

Ganesh Natarajan

is deputy chairman and managing director of Zensar  Technologies and the global CEO of Zensar in the US,

Europe, Japan, Australia, Africa and Asia

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