Is Indian IT about to go to hell in a hand-basket? The answer is very Indian – let’s wait and see!
The current brouhaha around the H1-B visa in particular and outsourcing in general is sending all sorts of shivers down the collective spine of Indian IT to such an extent that NASSCOM will not be making any industry projections this year.
And the man blowing the whirlwind is of course President Donald J Trump.
The obvious temptation is to brand the recently-anointed US Head of State as a party-pooper dead set on bursting Indian IT’s growth balloon. But let’s consider the following:
- Over the years past US presidents had made similar campaign promises (Trump happens to be the first who may or will actually do something about it)
- Did we really think that cost arbitrage and H1B visas can be the two infinitely sustainable growth drivers of Indian IT?
The simple fact is that the sooner we exit the mind-set that business growth equals linear manpower growth the better. Because future business sustainability will depend on the quality and originality of work done rather than the cost and quantity. And don’t just take a nobody-like-me’s word for it, talk to any major global Indian IT luminary and they will tell you the same.
I also think that there is inadequate awareness and appreciation of IT India’s global journey from body-shopper and coding grunt worker to application developer and solution provider in software to managing global enterprise IT & Communication Infrastructure and providing highly complex business services such as analytics, accounting and actuarial. But of course volume manpower resides at the bottom-of-the-pyramid processes and skill-sets. But equally of course it is at this level that labour cost arbitrage is the prime value differentiator and sooner rather than later a large chunk of this particular lunch thali will be rapidly eaten up by automation, robotics and AI.
From 2011 to 2014 I lived and worked in Rochester (NY), home of Bausch & Lomb, Kodak and Xerox as well as Rochester University, Rochester Institute of Technology and world-class hospitals. In the early 1980’s I used to visit Rochester quite frequently. The wealth and prosperity of the city was apparent anywhere you went. Thirty years later the picture is starkly different: Kodak is a memory; Xerox is a pale shadow and Bausch & Lomb sold out. The once dazzling and vibrant city centre is a virtual ghost town. But the most telling indicator of the decline was the frequency with which I came across Americans who either knew or were related to someone who was either jobless or homeless or both. The toxic cocktail of credit culture and sub-prime mortgages had shattered the sense of entitlement that most Americans of the baby-boomer generation considered as their birth right.
Why am I telling you this? What’s Rochester got to do with the future of Indian IT? Well this loss of their perceived birth right is the sentiment that Trump exploited and leveraged ruthlessly and brilliantly. And the fact that he won is a reflection of how widely and deeply that sentiment is seared in to the American psyche.
In days of old (and in Pakistan of today) the simplest way even the most despotic of rulers united the people was to create the bogeyman of an external enemy. So Trump’s external bogeymen for the economic decline were outsourcing and immigration and the internal finger was pointed at ‘stupid’ Obama policies – mostly related outsourcing, immigration and global relationships.
Many people infinitely wiser than me have assured me that sooner or later Trump will discover that the world is too far gone in the process of globalization and interdependence for the waves to be rolled back. I presume that means that sooner or later it will be Business As Usual.
But what if it is ‘later’ than ‘sooner’? I mean already the US and European stock markets are adrenalized by the Trump potion. Already Fortune 500 companies are lining up to pay obeisance and announcing mega job creation initiatives. The fact is that whatever happens or doesn’t happen it will never again be Business As Usual as we knew it.
Is that good or bad? Or is that the most obviously stupid question you ever heard?
OF COURSE THAT’S BAD! Right? Well not necessarily.
The fact is that over the past 25 years as IT India moved up the IT value chain it improved customer stickiness and business profitability. We are now at an inflection point (albeit by being trumped –sorry…just couldn’t resist the temptation!) where we have to take a leap of faith into either or both directions:
- Become a truly global rather than international business (the difference between the two is that a global business is not primarily country-of-birth focused for population, production or management. It is more market-of-business focused for all three factors)
- Full court press focus on Innovation and Originality – meaning IP and ‘Products’ (This is the only way to break the linearity between business and manpower growth. Obviously the risk and mortality rate in the IP/Product business are high, but by now at least the Top 5 global Indian IT players have adequate technical expertise, market knowledge and financial muscle to mitigate a significant proportion of that risk)
Recently Mukesh Ambani, speaking at the NASSCOM Leadership Forum opined that “Trump will be a blessing in disguise. He will make Indian talent focus on India and find solutions for India”. Stirring words indeed, but the challenge most IT companies face is the mind-set and readiness of the Indian market – both Business and Government – in terms of the speed and rate of adoption and commercial and contractual stringencies (especially in Government).
In 1964 the novelist VS Naipaul had one of his characters in ‘An Area of Darkness’ constantly use the phrase “craze for foreign” to signify her love of foreign made products. Although the novel was published over fifty years ago we still have the “craze for foreign” mentality.
In the Indian IT market “craze for foreign” means that virtually all products (Hardware, Software & Networking) are ‘foreign’. Indigenous hardware manufacturers exited unable to compete with global brands because of their economies of scale, financial muscle and brand power. In software (with a pitifully few notable exceptions) Indian made products are few and far in between. But it is not as if the industry didn’t try. In the early days of Indian IT multiple companies had a range of in-house developed packaged software that were sold along with the hardware. I recall that in the early 1980’s HCL had more R&D engineers working on developing a relational database than Oracle!
And today, when you look at the Indian start-up ecosystem and sift the wheat from the e-com chaff you will reap a rich harvest of products based on AI, Cloud, M-2-M, Robotics and more. Some of them are specific industry or micro-niche focused others are more horizontal. While investment arms of major IT companies are investing into this ecosystem I am not sure whether they do it with the same degree of rigour and precision as companies like Apple, Google and Microsoft.
According to industry analysts HfS by 2020 the global B2B digital expenditure is estimated to be $7 Trillion. Of this US likely to account for $2 Trillion –i.e. less than 30%. This is a significant shift from the traditional 50% share of global IT spend that came from the US. This means that IT India’s geo-focus net has to widen significantly.
A second critical consideration is the increasing impact and traction of the 2 As – Automation and Analytics. While most global Indian IT companies profess to practice a ‘business-aligned IT’ model, it primarily relates to the traditional BAU (Business As Usual) rather than the rapidly emerging BAU (Business As Unusual).
In a survey conducted by HfS of enterprise outsourcing leaders to the common question “ How would you improve the quality and outcomes from your current service relationship” 45% answered “Roll out an automation strategy in tandem with our service provider(s)” and 28% responded “ Letting go and giving up more higher value work to our service providers”. Both responses reflect the fact that the focus of digital expenditure and investments is directly related to business and profitability growth rather than cost and efficiency, which are now nothing more than table stakes.
So is Indian IT about to go to hell in a handbasket?
It might if “wait and see” means that that’s all we do. .
Is Trump a threat? Probably, but then at the turn of the last century the threat of the millennium bug exponentially accelerated the global growth of IT India.
To re-quote Mukesh Ambani let’s turn the Trump-threat into a blessing in disguise.
Because great opportunities are often disguised as major threats.