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Faqir Chand Kohli in not someone who can be easily ruffled. The
octogenarian, fondly referred to as the father of the Indian IT Industry, has a
very benevolent and benign stance towards things in life-right from the way
the government is trying to enforce reservation on meritorious institutions to
the way his created entity (TCS) is performing, or even how Indian politicians
are not progressively inclined and just a bunch of nincompoops.
But one thing surely gets his goat, literally. Call India an IT
super power and suddenly one can catch sight of a stirring in his pupils. Kohli
perks up and speaks in a voice that hardly seems to come from the grand old man
of Indian IT.
"India is not an IT super power, how can you even call it
so, we account for a few percent points in the total global IT pie. Look around
you in India, the benefits of computerization have yet to really percolate to
the commonest of the common. It is a fallacy to call ourselves an IT power
house," he virtually thumps the table.
Peering into his graying pupils one can discern a tinge of
sadness. After the outburst, Kohli seems to calm down, accepting the
inevitability of things and returning back to his calm and serene self.
"Services alone will not make us a super power. We need to make our own
hardware, our own software, our own applications," he says unequivocally.
And that is the truth, the bitter pill.
The Story So Far
For the past decade or so, we have been toasting the success of Indian IT;
the flattening of the world or the emergence of Bangalore tigers. Year after
year, Dataquest keeps coming out with the Top 20 volumes talking about how
Indian IT super heroes, namely, TCS, Wipro, Infosys and others are faring. The
most celebrated IT body, Nasscom too compiles an annual report that talks about
the growth of the export market and many such statistics. The robust annual
growth of the IT industry, some 30-40% year-on-year seems to have had a lulling
effect.
Everyone hopes that the good times will continue to be and the
million dollar contracts will continue to flow. It will, before the law of
probability catches up or some other low-cost populous destination comes up, or
a shattering innovation replaces the countless number of individuals employed in
India. It is not an IT Armageddon, but a course of life. Many analysts and
industry watchers have warned of the same, time and again. So what needs to be
done?
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Talking Services
For over a decade now, i-Flex has been famous across the globe for a
single thing, a core-banking product known as Flexcube. The product,
developed in the early nineties, has blazed a trail like none other. Even
today, though the company has a variety of successful brands and products,
Flexcube continues to be a dominant force. And one of the chief reasons,
according to Deepak Ghaisas, CEO (India Operations) and CFO, i-Flex
Solutions, has been its adaptability to different cultures and market
dynamics.
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Deepak Ghaisas, CEO
(India Operations)
and CFO, i-Flex Solutions |
"We have been able to
do so through the service support that we provide to the customer. We do
not sell a product but sell a solution," he says. And all the while
his cash registers keep ringing. Services today reportedly account for
around 50% of the company's revenues. Not small considering that i-Flex's
revenues is estimated to be in the range of $330 mn annually.
"Services is crucial to
us, not only from the revenues perspective but a lot other ways as well.
We have found that services can often act as an incubator for the product,
nurturing it in the initial phase. It can also be a very good employee
retention tool as the turn-around cycles in a product company can be quite
long," adds Ghaisas.
As part of the initial strategy the
company had deliberately avoided going all out in the advanced economies,
instead it went to developing economies in Asia and Africa. Now, i-Flex is
taking another step to ensure its continuous success. The service profile
of the company is improving with each passing day, as it ramps up for the
next level of growth. With Oracle's (as it holds around 83% share in the
company) marketing and servicing might behind it, i-Flex can truly change
the way Indian product companies have fared till date. |
The answer has always been there, as Kohli said earlier, Indian
companies need to look at creating IP, creating hardware products and, more
significantly, making use of our intellectual capital, creating world class
software products.
Consider this. India's largest IT company, TCS, which is into
consulting, services and business-process outsourcing, started its operations in
the year 1968. Meanwhile, Microsoft was setup by a bunch of college dropouts in
1975, purportedly to sell software for the highly popular Altair 8800. This
year, TCS crossed $4 billion in revenues and employs some 89,000 people
globally. While, the Giant at Redmond (Microsoft) reported revenues of around
$44 bn in 2006 and some 70,000 employees worldwide. This is how India's
largest IT company and the largest American (global, to be more precise) company
compare.
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"Services alone will
not make us a super power. We need to make our own hardware, our own
software, our own applications" |
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-Faqir Chand Kohli, fondly
referred to as the father of the Indian IT Industry |
And therein lies the answer. Indian IT companies have been
primarily focused on application software development and implementation unlike
global biggies like Microsoft, Oracle, SAP and their likes. Creating world-class
products is the key to success. The good news is, India, and more importantly
Indian companies, are discovering the benefits of pumping money into R&D of
new products.
Changing Gears
Mumbai-based i-Flex solutions is a classical success story. It was in 1991
that Rajesh Hukku convinced Citigroup, where he used to work, to invest close to
$400,000 in a software venture of a different kind. Rather than create
application or software for foreign clients, he would make a product. After
years at it his company, i-Flex, launched a solution for the banking industry,
namely Flexcube. The product was a resounding success and found customers across
the globe. It became so hot that Oracle decided to buy a 44% stake in 2005. A
year and more later, Oracle has increased its share and is now the majority
stockholder in the company with close to 83% stake.
There are more such stories emerging out of Indian shores, like
3i Infotech, Subex Azure, Cranes Software, Polaris, Ramco and others.
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Going Glocal
Ambition is a good trait, but like
any overdose, can be quite hazardous at times. There have been quite a few
cases in the recent past wherein a company that was cash rich expanded
rapidly and burnt itself out rapidly as well. As Alexander Pope had once
said, the same ambition can destroy or save.
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| Amar Chintopanth,
executive director & CFO, 3i Infotech |
3i Infotech believes in
taking steady but firm steps and part of its strategy is to go glocal.
With around 80% of its revenue coming from overseas it is pretty obvious
that 3i Infotech needs to have a presence in all the countries that it
works in. But it can be a costly and risky affair. Opening an office in a
foreign country means investing precious capital that could have been
otherwise used. 3i Infotech has taken care of that problem by going global
through the local way, ie, through appointed local partners.
"As we have around
300-400 customers and most of them based overseas, it naturally makes
sense for us to expand overseas. Thus we have adopted a partner strategy.
For instance, before venturing into any country, we conduct a thorough
research on the market and its potential. Once convinced, we appoint a
partner in that geography and operate through him or her. As the business
expands we add on a few partners more, and after a critical stage, we
ourselves enter the country," says Amar Chintopanth, executive
director & CFO, 3i Infotech.
Currently, 3i Infotech has a partner
network in more than 10 countries of the total 50 that it operates in. By
using a partner, the company saves a lot on the cost of capital that would
otherwise need to be invested. "And this capital we plough back into
R&D," adds Chintopanth. For product companies in India that are
short of cash, going glocal is the best possible option. |
"While last year was a great year from product companies'
perspective (product revenues touched $481 mn), and the winners were really the
big firms such as 3i infotech, IBS, Ramco, etc. But the heartening part is that
unlike the biggies, higher market growth came from players such as Tejas
Networks, Ittiam, Tekriti Systems, Newgen, Nucleus, Skelta, and Axcend
Automation, Aftek, and other companies that are often labeled as small
players," says TR Madan Mohan, director (Consulting, ICT Practice), Frost
& Sullivan. Page(s) 1 2 3
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