WORKFORCE DEVELOPMENT: Looking for an HR Model

On the face of it, the phenomenon seems almost sudden. Software developers

and companies in India are today clearly confronting emerging and worrying

problems on crucial areas of their business directly impacting bottom lines.

Issues like measuring software projects, laying grounds for continuous

improvement in software processes and preventing defects are being scrutinized.

Why this sudden spurt in attention and concern in the area of software and

engineering processes?

Once you start looking, the answers are not really hard to

find, though on the face of it the exterior business picture is deceptive. The

rosy side, of course, is that today there are over 1,300 software exporters in

India generating an estimated business volume of Rs 15,000-odd crore. Business

grew by 49% in the last fiscal. The Indian software industry’s strength lies

in its deep understanding of technology and delivering quality services through

the projects it undertakes. But analysts and industry observers are of the view

that there is still considerable scope for improvement. Especially when it comes

to laying the ground for future markets and capabilities. There is also the

question of managing a workforce of over three lakh. This raises questions of

skills, which will be necessary in the coming years. Also on the positive side,

the Indian software industry has a global delivery model, a high-quality spread

of clients and a good mixture of onsite and offshore projects. Sixteen of the

thirty-two software companies with SEI CMM level 5 quality certification are

Indian.

So what does the future hold in this scenario for Indian

software companies? Among the key activities that Indian companies have to

involve themselves with are addressing hardcore customer-oriented issues, which

boils down to the management of the software and engineering processes. These

are also inextricably linked with issues of time, quality and money and profits

management. Companies like QAI have been set up specifically to manage software

and engineering process issues. Navyug Mohnot, executive director, QAI India,

says, "Today, particularly for software development companies, the three

critical parameters for success in the market are speed, innovation and the

seizing of opportunities." Simply put, this translates into effective

knowledge management, management of people and the handling of business

processes through tools like the Six Sigma process.

PROMOTERS’ BACKGROUND:

In the absence of a track record, this is the key area that a VC investor looks

at. The background should provide the educational and professional history of

the promoters. It should highlight the contribution and strength of the

promoters and their commitment to the venture.

BUSINESS PLAN:

The plan section should indicate projections of income for the next three to

five years, ratio analysis and the proposed investment plan. It should also

provide an industry analysis, the different participants, a study of theÂ

competitors and the proposed promotion and marketing strategy.

EXIT FOR THE VC:

The final aspect that VCs look at is how they can exit from the investment. The

exit section should highlight the possible exit options for the VC, whether it

can be through a strategic sale, or through an IPO.

Choosing the right VC

Once the

homework is done, the next stage is to identify a suitable VC investor to

fund the project. While deciding on the source of capital, remember that VCs

bring more than just funds to the table. This concept of bringing along a bundle

of capabilities along with funding is called ‘smart’ money. The VC can

contribute in any of the following areas:

MANAGEMENT CAPABILITIES:

VCs can bring in management expertise, which the technocrat entrepreneur may

lack. Angel investors and other VCs can play a prominent role in taking the

start-up from conception through operation till expansion in the market. VCs can

nominate senior people on the board to provide direction or they can themselves

be involved in day to day operations–an approach called hand-holding. They can

also help investee companies to identify proper people for key positions in the

organization. Therefore, depending on the expertise required, the entrepreneur

can look for angel investors, seed capital investors or institutional investors.

MARKET ACCESS:

VCs, by their extensive networks in the industry, can help start-ups get their

initial business. Providing such initial breakthroughs can be critical for the

start-up in its struggle to gain credibility and a foothold in the market.

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DURING IPO OR SALE:

Before deciding on the VC

investor, the entrepreneur should also decide on the nature of funding required

for the venture, whether it is seed capital, start-up capital or later-stage

funding. Seed capital is the initial funding required to validate the idea and

finance the initial feasibility studies. Start-up funding is required for

product development and initial marketing. Later-stage funding is required for

working capital finance and business expansion. As different business stages

would demand different business capabilities, the nature of the VC investment

would depend on the type of funding sought. While seed capital and start-up

funding can be obtained from angel investors, incubators and start up venture

capital funds, later stage funding can be obtained from institutional venture

funds and mutual funds.

The future is now

Several new

initiatives have been started like the India Venture 2000 and the e-mahamillionaire

project of NIIT to nurture and guide prospective entrepreneurs to obtain VC

funding. Notwithstanding the recent developments, the VC industry is in a

nascent stage in India today. With the prospect of more growth in the IT

sector, a lot more activity can be expected in the VC industry with the

availability of more investible funds. Some of the recently launched technology

mutual funds have earmarked a portion of their funds in unlisted companies,

which make them more like VC funds. All this is happy news for the entrepreneur.

Venture funds have been an engine for economic growth for over a decade in

countries like USA, Israel and Taiwan. The situation is now ripe to be

replicated in India.

Dr Thillai Rajan