Category Archives: Technology Business

IT-ITES Exports: Are the 12th Plan Projections Realistic?

The government finally placed the draft 12th five year plan before the National Development Council meeting held recently in New Delhi. For all practical purpose, it is the final document and as the Planning Commission points out in its website, the word “draft” only means it is still being copy-edited. So, expect no major change in the document in terms of facts and plans.

While going through the draft document on economic sectors, I naturally stopped at the section on information technology (IT). The specific plans and the language reflect the confidence and comfort that the government has come to find in IT to drive economic growth as well as to help in achieving socio-economic objectives.

While there are lots of plans and initiatives, I thought it is not a bad idea to examine, in particular, the projections that the document provides for achievement by the industry, in a table titled Key Targets for the Twelfth Plan for the Electronics and IT-ITeS Industry on page 268. In this post, I am focusing on just one of the segments listed therein, IT-ITES Exports.

I have picked up IT exports, of course, partly because of my interest and experience in analyzing this segment but it is also because unlike the other major segments, electronics hardware and domestic IT market, the IT exports segment is relatively large and mature and the past experience can give some indication of the future. The other two, being comparatively smaller and nascent, will depend a lot on policy decisions, that will significantly influence how they move.

According to the document, the government expects that Indian IT exports will reach $130 billion by FY 2016-17, from the present (FY 2011-12) $69 billion. That is a CAGR of 13.6%. Is that good? Is that bad? Is that just okay?

Before we examine those questions, let us be very clear about the fact that these numbers are not invented by the planning commission. It has taken those numbers from the respective ministries. And it is safe to assume that IT ministry would have consulted the industry players and industry body, NASSCOM before arriving at this figure.

Back to our original question—is a CAGR of 13.6% between 2012-17 realistic?

Let us start with the past data. Betwwen 2002-07, IT exports in India grew by a CAGR of 32.6%. In the next five years, between 2007-12, the IT exports registered a CAGR of 17.2%. Purely going by those number, a 13.6% growth does not seem too unrealistic for the period 2012-17.

But wait a minute. Before we get into present performance and any other environmental factors for the future, it is important to clarify a technical point. While the government has its own five-year plan periods, and all its numbers are synchronized to those blocks of periods, the industries do not necessarily work that way, least of it an exports industry.

Indian IT services exports industry had its distinctive growth periods. The period between 2003-04 to 2007-08, was the high growth period when, on an average, the exports grew 30% year on year, growing by a whopping 37.2% in 2004-05.  Of course, the industry was much smaller.

IT-EXPORTS3

The growth suddenly fell to 16.6% in 2008-09, when the first impacts of the US sub-prime crisis was felt. This was after a year which saw a 29.9% growth in IT exports.  The next year was worse, in the wake of a severe slowdown, and the growth plummeted to 5.6% before bouncing back to 18.7% in the subsequent year, 2010-11. It slowed down a bit in FY 12 to 16.5%.

Going by the IT industry’s growth, a better figure to take as a benchmark for comparison, is hence, the CAGR for the four-year period between 2008-12. This comes out to be 14.2%, thanks to the elimination of the year 2007-8, which, with a 30% growth skewed the entire figure for the five year period between 2007-2012.  The year 2007-08, in short, belonged to another era.

The indications so far suggest that the current year too will register a similar growth, as the last four years. The revenue of top five IT services companies have grown by just 9% in the first half of the year (see table). Though both TCS and Wipro’s revenues do include a smaller but significant domestic revenue, this gives an idea of what to expect this year. It is difficult to believe that the growth will top 12-13% in most optimistic case.

COMPANY H1 FY 13 (Revnue in $million) H1 FY 12 (Revnue in $million) GROWTH (%)
TCS 5581 4937 13
Infosys 3549 3417 4
Wipro 3056 2880 6
HCL 2193 1965 12
Mahindra Satyam 696 662 5
TOTAL 15075 13861 9

The Gartner forecasts for the global the IT-BPO outsourcing in the next few years too do not paint a very rosy picture. According to the firm, the IT-BPO outsourcing will grow on an average of 4.3-4.4% between 2012-2015 (Jan-Dec).

If the first year of the block in consideration by the 12th five year plan itself sees a growth of just about 12-13% with no great expectations about a huge turnaround in the next few months, is it realistic to expect that the exports will grow by 13.6%?

I doubt.

However, there are some possibilities.

One, let us not forget that many of these growth figures are only partially due to IT industry’s performance and actually have to do a lot with exchange rate fluctuations. By the way, the growth in rupee terms this year, may be far better, topping the 20s.

So, if the rupee gets really stronger against the dollar, the 12th Plan targets may still look achievable. But will it? That is not my area and I would not like to do any guess work there.

The other possibility is that the IT industry actually breaks new grounds and manages to tap the new opportunities such as products/engineering services and they grow significantly. But even in that case, it is difficult to believe that the growth will be impacted much in the 12th plan period.

 

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Why Indian Software Product Companies Need More than Ideas and Funding

There has been a lot of discussion around why India, home to some of the world’s largest IT services firms—and often dubbed as an IT superpower—has not been able to produce even one large independent IT product company.  Companies which have built some products have either remained small, closed down, sold themselves off, or have switched to services to sustain themselves.

Some of the reasons that have been offered as explanation are as follows.

Indians are not good at innovation. This is the most superficial explanation that you hear, usually from those outside the IT fraternity, with a limited understanding of this industry. This is flawed because of two reasons.

One, it makes an inherent assumption that building products require innovation while providing business solutions as services companies to enterprises do not require  innovation.

Two, by labeling Indians as not good at innovation, it fails to explian how Indians have built extremely successful product companies in the United States and how they have excelled in product management and other so called innovative functions in large non-Indian technology companies.

Indians are risk-averse. Well, there is some truth in the statement. The services business worldwide, because of various reasons, is  fragmented and that gives a chance to smaller companies to remain small and still make money. Usually, not so with product companies.

After the success of TCS, Infosys, and Wipro, many smaller companies in India positioned themselves along similar lines and started offering services using cheaper manpower. Since the demand was high, they managed to survive, without taking too much of risk. Since the major investment often were done after winning a contract, it was fairly de-risked. The presence of large number of such companies in India has given an impression that Indians do not take risks and and follow something that is tried and tested. But let us not forget that it is because a few companies took the risk initially, others could cash in on the wave.

In any case, while the statement does manage to explain, to some extent, why too many companies have not entered the product business, it still does not explain why those who have, have not been able to succeed much.

There is no ecosystem. Most of those who have tried their hands in creating products believe that India does not offer a supportive ecosystem. They are not exactly off the mark.

India does not offer any major incentive for creating IP. The demand from local market is not very strong, unlike in some other countries. Further, the services branding is so strong that few VCs/investors back a company which wants to play long term in products. If many of them do invest in some product start-ups, it is for quickly selling to large technology companies.  They are always pushing the start-ups for maximizing revenues in a short time, not always a great way to create long term value.

All these factors have created some hurdles for product companies, feel those who want to change this. I think they are right.

But to be sure, it was the same scenario when services business started. Indian government has always been late to step in, if at all. The local demand was absent. And there was little funding. In addition, there was no skilled manpower. But Indian companies started at the low end by tapping the Y2K opportunity and slowly climbed up the value chain.

So, while it is true that a supportive ecosystem would absolutely help the growth of India as a product hub, it is difficult to believe that itself would kickstart the product revolution.

Indians are not good in marketing. Many believe that Indians, in general, lack in marketing capability and products require far more marketing skills than services, which survives on cold calling and sales efforts.

I am not sure whether I agree with this statement.

Some Indian marketing ideas now serve as global case studies. Further, assuming, for a moment, it is true I believe, it is too tactical a thing to offer as a reason for  lack of product success stories from India. Indians are not exactly known for following systems, processes and standards. But Indian IT services companies lead the world in quality, standard practices, and creating systems and processes. Something like this can always be learned.

There have been laudable efforts in recent years such as NASSCOM Product Conclave and the formation of ProductNation. I am sure they cam surely address some of these gaps such as lack of ecosystem, help the companies in marketing and market the idea that India has everything to offer world class products that it has already done in a few areas such as banking. In core banking, for example, a majority of top providers are either Indian or have an Indian genesis.

I have my own reason to offer. Again, I would like to clarify that I offer it as yet another reason and would not claim to be the only/principal reason. I call it lack of user/product centricity.

If we look at history, we would find that while India was the place that was home to great ideas/abstractions/philosophies/sciences—such as concept of zero, algebra/geometry, astronomy, Ayurveda. Our neighbor China has always been known for inventions and discoveries of tangible things—such as magnet, tea, paper, silk.

Is it just co-incidence? I don’t think so. Our domination in modern days—India in services and China in products—stems from the same differences that existed a few hundred years back.

And you can tell this from your experience. During one of my flights from San Francisco to Seoul (some time around 2005-06), I met the owner of a  small Californian garment manufacturer, who had outsourced to a unit in China. He had come to India once to do preliminary survey but went back a little confused. What he told me can be a pointer to possibly what we do not have. I will not use the word “lack”. It is just a different way of looking at things.

He told me when he went to China and started talking to prospective partners, the discussion steered towards the type of garments he manufacturers, who they are meant for, quantity of manufacturing and so on. He was perfectly comfortable with those  queries.

In India, he was asked questions about how many people he would like to employ, what is the cost of production there, what is the saving that he is expecting, even before they asked him about his users/products. He did not have clear answers about many of those questions and left confused.

When I met him, he did not have any concrete plans for India but he had not given up on the idea. He had hope that he would come back one day. For some reason, he believed, Indians could do it better. The only tangible reason I could gauge from the conversation is this: if they are designing so well for Bollywood, they can do a great job!

I think we all have faced similar situation. If you talk of a new business idea, the discussion here steers more towards business models, funding, marketing challengers. Rarely do we go into things like users and and the actual products!

Frog Design, owned by Aricent, a company with Indian genesis, opened a development center in India, but decided to open its design studio in China. The reason was the same.

This is also what separates an application development for a client and a product development. While the technology and development process are similar, in a typical ADM project, the client briefs the specification. The same is the case with outsourced product development, where Indians have succeeded significantly. In a commercial product, the firm has to do its own user research to decide the features.

One may debate on whether a Steve Jobs of way of deciding for the user or a Nokia/Samsung way of detailed user research is better, but the commonality in both is that the user is foremost in the minds of the designers. Without that, creating a great product may only happen as an accident, once in a while!

Many would argue that B2B product development is different. I would disagree. While B2B means the user research cycle may be a little shorter, it  nevertheless requires the same user centricity that  any B2C product requires. You are finding about the user and designing accordingly. You are not designing to a specification.

The difference is subtle but crucial.

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The Not-so-new Arguments of Protectionists

Politicians everywhere are the same. Many a times they are really ignorant. And many times, they just act ignorant. Then, there are the classic fundamentalists in a debate, who are dogmatic, and no logic would convince them. The most dangerous, however, are those who take help of logic and selective facts to argue their point. In reality, they are as dogmatic, but they use logic to project themselves as liberal rationalists because few know the facts and sources that they quote. They often shift the debate to a completely different point in which they may be on stronger wickets but that is of little relevance to the original debate. Apart from some politicians, many in this category happen to be from my profession: media.

I came across this post in ComputerWorld Blog, called Clueless in White House. The whole piece, taken on its face value, argues that the US Vice president Joe Biden “doesn’t know a thing about H1-B visa” and the president Barack Obama was evasive about a question related to US job loss and probably he is also ignorant. So what? Didn’t Michael Moore write about this long back? But that is not the point. What is it that the author is actually hinting at?

You get the answer to that when you read this other piece of his, Indian IT firms heading for a fall. It starts with the sentence, “Indian IT firms understand software but not America.”

And you know what to expect.

The piece cites a few lawsuits that have been filed against Infosys, TCS and L&T Infotech to argue that these lawsuits are the results of the Indian companies’  lack of understanding of America, American spirit and so on, with a conclusion that they are heading for a fall, which comes right on the headline.

It goes on…

The lawsuits are a problem for each of the companies. But taken together, the cases are a major threat to the Indian IT industry in America.

India’s IT firms are dependent on American businesses for about half of their revenue. They can’t operate in this country without work visas, such as H-1B and L-1 visas.

Indian IT firms are dependent on American business. That is a fact. But it is time to put the other side of the story as well: The American businesses are equally dependent on Indian IT workers.  

Anyone who follows the outsourcing trends knows that the share of US revenue as a percentage of overall revenue is falling for most Indian IT companies. The share of offshoring to India as a percentage of total outsourcing contracts in the US is on the rise year after year. Ten years back, Indian companies would not have survived without American business. Ten years hence, American business would not survive without Indian workers.

As Tom Friedman put it so well in his 2005 book, The World is Flat: America must choose the future and not the past.

But let us even forget all that for a moment. Let us go back to the original debate. What is it about? Is it about H1-B visas and L-1 visas? Well, that may the most immediate issue, but the actual debate is whether you need people from outside America to do some of the IT work more efficiently or not?

And let us, for sake of argument, assume that the US government decides it does not need foreign workers. In that case, it must say so rather than creating hurdles in the visa process.

And who is saying that? It is not just Infosys, TCS and L&T Infotech but Accenture, eBay, Microsoft, and GE as well. The letter that the industry sent to the president on this issue is signed by more American companies than Indian companies.

Protectionism is not about politics. It is about fear. America is still the most open society, the most innovative among large nations, and of course, still the biggest economic and military power globally. It may get concerned about employment levels but there is no reason to panic.

 

 

 

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Infosys: Its Real Contribution

Recently, Fortune magazine listed Infosys founder N R Narayana Murthy among the The 12 Greatest Entrepreneurs of Our Times. The list, dominated by Americans, has only two people outside the US. Interestingly, both of them happen to be from the subcontinent, Muhammed Yunus of Grameen Bank, Bangladesh being the other.

The piece on Narayana Murthy—like most of the other profiles—does not substantiate  too well why he is in the list. This is what the magazine says

He proved that India could compete with the world by taking on the software development work that had long been the province of the West. As one of six co-founders of Infosys and the CEO for 21 years, Murthy helped spark the outsourcing revolution that has brought billions of dollars in wealth into the Indian economy and transformed his country into the world’s back office.

Well, with all respect to Fortune and Murthy, I do not think this can actually be the reason bestowing the honor  on him. For Murthy was neither a pioneer nor an innovator as far as offshoring per se goes. Nor is Infosys, the company he co-founded, the largest among the lot. So, while he/Infosys could still be acknowledged  as one of the major forces that shaped this phenomenon, it is unfair on others to single him out for this.

The West, though, has always seen Infosys as the most important symbol of offshoring phenomenon. In his 2005 book, The World is Flat, Thomas Friedman wrote that the two biggest challenges to America were Infosys, which was “taking away” the American jobs and Al Qaeda, which wanted to destroy America. He portrayed Infosys as the symbol of the pro-globalization forces.

In fact, if anything, that is a lasting contribution of Infosys to Corporate India. It taught Indians how to market globally. Just when the world was waking up to the “The Rise of  PR” wave, Infosys taught the world in general and B2B companies in India in particular how to use PR effectively.

But again, the idea of the piece is not to suggest that it is PR that has made it what it is. For that matter, that is not the greatest contribution of Infosys to India, Indian business and the society in general, which is what I want to discuss here.

But before that, I would like to bust some of the myths that exist about Infosys.  I would like to reiterate that

  • Infosys is not the pioneer in offshoring per se
  • Infosys has not even pioneered any particular trend within offshoring industry (such as moving up the value chain by doing different things, globalizing delivery, movement to smaller locations, targeting newer markets, service lines etc)
  • Infosys is not particularly more innovative or disruptive than its peers
  • Infosys is driven by a good set of values but it is not among India’s top few companies when it comes to social responsibility
  • Infosys is no more one of the preferred employers among IT employees, as many best employer surveys show
  • Infosys, as the company is not hesitant to admit, is not particularly risk taking
On the other hand, Infosys’ contribution to Indian IT, Indian business, Indian economy, and Indian collective psyche are much more than these business parameters. Here is what I feel Infosys brought to us/changed in us.
  • The belief that middle class Indian values can be successful business mantras globally.  I think this is the single biggest contribution of Infosys and Murthy. In my college days (88-92), we had one of our batchmates who came from a business family. He always silenced us by saying that you cannot succeed in business by following the so-called ethics. Though he did grudgingly admit that Tatas and a few others are exceptions, he always pointed out that the formative years of all those companies were much older. In independent India, it was not possible. Most of us fumed but had no answer for him. Infosys single-handedly changed that perception. By doing so, it gave hope to millions of middle class youth that you could still stick to a set of values and be successful in business. What is more, you do not need to come from a “business background”.
  •  Transparency in business. Ethics and transparency are related but they are not the same. Transparency requires a proactive approach of sharing information with stakeholders, be in clients, investors, employees or partners. One of the classic statements of Murthy is, “When in doubt, declare.” That has been the guiding principles of its investor strategy. And many newer second generation companies have tried to follow that approach.
  • Setting new benchmarks in employee care.  As is rightly believed, Infosys created new standards with its approach to employee care. Its employee care strategy looked beyond the traditional HR parameters of pay, job satisfaction, growth etc to actually proactively make  the lives of its employees smoother so that their minds are not pre-occupied with too many issues. What Infosys did became the standards for the entire IT industry. Be it IBM or Acccenture or Indian companies, whoever wanted to be a player in the Indian offshore industry, had to play by the HR rules created by Infosys. Though it has been criticized—I myself have done that—for not changing with the time when the IT labor market became more like any other labor market anywhere else, with employees turning to more professional parameters than feel-good parameters, it had already raised the bar for ever. The feel-good HR may not be a differentiator for anyone anymore, but it is a filter, a bare minimum that you cannot ignore.
  • Sharing of wealth with employees. While Dhirubhai is credited with popularizing the stock market phenomenon in India, it is Infosys which can be credited for pioneering the concept of sharing wealth with a large set of employees through its ESOP. Though this is not really a pure innovation—it is the norm in many places—in India, Infosys can surely take the credit for this practice.
  • Making traditional Indian parents proud about their chilldren’s work and organization. One of the things that Infosys understood that parents and elders in India are actively involved in decisions about their children’s job choices. And it knew that the “secure” government job and a few in the private sector such as “Tatas” are always the first choice, it actively wooed the parents with proactively communicating what it stood for. Its great concern for employees, its sprawling campus (to which many parents come to see as if it is a pilgrimage spot), active communication of values that it stands for (which would appeal to any traditional parent in India) were all targeted at the parents. It did it for itself but that became a benchmark for most of the new companies that entered IT business.
  • Beating Americans at their own game. When Friedman wrote Infosys stands for the pro-globalization forces, he meant Infosys as a symbol of the offshoring wave. But Infosys is much more than that. While Tatas and Wipro are often hyphenated with Infosys, none of them comes anywhere close to Infosys when it comes to marketing and PR. HCL too is seen as too aggressive and sales-driven. While Wipro and TCS traditionally would not mind their sales people doing cold calling, Infosys ensures that the name itself does the trick in most cases. Whether it is Friedman or Fortune, the first name that they turn to is Infosys/Murthy. That is not a mean achievement for a company with headquarters in India, that too South India, where talking about oneself positively is often frowned upon. Unless of course, you know how to do it without sounding arrogant or verbose. Infosys has mastered that art. That too is a lesson for corporate India.

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Indians Call Centres Selling Britons’ Personal Data: See Who is Buying the Story

“Indian call centres selling Briton’s personal data”—the headline was everywhere in the websites of Indian media throughout Sunday. While some put the sentence in a quote, implying that someone else was saying it, some others attributed it to a report, without naming if that report was by a reporter in a newspaper or was based on a study by some research agency. And no, none of those which I opened—I did open five of them, belonging to leading media brands—had any quote from any Indian company or NASSCOM.

What was the news? In a story, headlined in second person: Indian call centres selling YOUR credit card details and medical records for just 2p  (that all caps YOUR is not mine; it is the original headline), the Daily Mail UK reported that confidential personal data on hundreds of thousands of Britons “is being touted by corrupt Indian call centre workers”. The paper further said that “credit card information, medical and financial records are being offered for sale to criminals and marketing firms for as little as 2p.”

It said that two ‘consultants’, claiming to be IT workers at several call centres, met undercover reporters from The Sunday Times and boasted of having 45 different sets of personal information on nearly 500,000 Britons.

Now, that is explosive news. In an economy where job loss is constantly staring at you—and shifting of call centre jobs is a particularly sensitive issue—it immediately fuels resentment. And those opposing offshoring have a shot in the arms.

Am I sounding too dismissive? Maybe, I am. But here is a question that I would like to pose.

This kind of revelation is not new. In fact, this is very, very old. As long back as in 2005—that is seven years back—the same Daily Mail reported a very similar story, citing similar undercover reporting. “An undercover reporter was sold information on a thousand accounts and the numbers of passports and credits cards for £4.25 each, according to the Sun newspaper,” it reported then.

So, nothing has changed in India in these seven years. Corrupt call centre guys still keep selling personal data of Britons! And companies from there—a lot of them banks—continue to offshore to India!

And how many of their customers have lost millions because of these credit card and bank account data that is being bought from Indian call centres? I guess that number must at least be in thousands, if not in millions!

Time to grow up, for sure!

This is not to say that one is denial of such cases. Not to say that all Indians are saints. Not to say that Indian system is fool-proof.

But that also does not mean that “Indian call centres are selling personal data of Britons”.

It is like saying in the aftermath of Pamela Bordes scandal that Britain’s democracy and press are hostage to escorts and call girls.

It hurts.  Right? And as a citizen in a democracy that has borrowed a lot from Britain’s, I will be pained if someone says something like that.

And so am I now, when some undercover reporter manages to lure a couple of guys and a country gets a label like this.

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BPO: Losing Its Identity

Last week, Mahindra Satyam, one of the largest global IT companies in India bought the offshore business—that is in effect, most of the company—of vCustomer, one of the earliest BPO start-ups in India. It is probably not a coincidence that the man running the combined BPO business of Mahindra Satyam and Tech Mahindra—Sujit Baksi—once ran the India operations of vCustomer—during 2003-04.

The assimilation of vCustomer to the Mahindra group company will eventually happen, though the announcement is silent on the time of integration. In any case, it is too small a company compared to Mahindra Satyam for the integration to be anything complex. And most likely, with that, vCustomer will lose its identity.

Promoted by Sanjay Kumar, an ex-Microsoft techie in 1999, vCustomer will just be the latest in a series of BPO companies started by professionals in the early boom phase of offshore BPO—1999-2000—that have lost their original identities, due to acquisition.

The trend is interesting and ironic at the same time. Between 1999-2000 to today, this segment grew up from nowhere to become a $15-16 billion industry, employing more than a million people. During the same period, almost all the pioneer companies who started this wave have systematically lost their identities.

I give here a quick round up of all those pioneering, entrepreneurial start-ups, set up by professionals, during the years 1999-2000 and what happened to them. For the record, I also mention (separately) other significant companies that started BPO during that time but were not really entrepreneurial.

  • Exl Service. One of the few companies in this list that still retains its name. Starting in April 1999, with its center at Noida, Exl began with a focus on back-office—the only company in that era to do so, when the opportunity was called “contact center” and not BPO. Exl was one of the first BPO companies to be acquired in 2001 by insurance company Conseco, but soon became independent again as the latter applied for bankruptcy. And did a smart comeback. Now a listed company, the promoters—Vikram Talwar and Rohit Kapoor—are still associated with Exl.
  • FirstRing. Few would remember this contact center company, started in May 1999, with its first center in ITPL, Bangalore because it was never very high profile and was acquired in 2003 by ICICI Onesource (now Firstsource).
  • Transworks. Set up in May 1999 by Rizwan Koita—an ex McKinsey consultant with friend Jagdish Moorjani—it was funded by the enfant terrible of VC investment those days, ChrysCapital (that time called Chrysalis Capital) and started operating in Mumbai. It was acquired by Aditya Birla group company, India Rayon in 2003, which later acquired Canadian company Minacs and renamed the whole entity, Aditya Birla Minacs.
  • vCustomer. Started by Sanjay Kumar, an ex Microsoft techie, out of Delhi and Mumbai, around June 1999, this was one of the longest standing independent BPOs before falling to Mahindra Satyam last week. It was a tech-led company, with high on employee satisfaction (winner of Dataquest BPO ESAT award for five years), but was too experimentative to get out of start-up mode and get growing.
  • Tracmail. Another 1999 start-up from Mumbai, set up by ex-Tata Infotech executive, Adi Cooper, Tracmail started with email support. In October 2003, it merged with Webhelp and Spheronemics to form TWS Holding, which was acquired by HOV Services in December 2006.
  • iSeva. Started in late 1999 in Bangalore, by young entrepreneurs—Gagan Sharma, Arun Santhebennur, Vaibhav Tewari, Sridhar Turaga and Vijay Narasapur, iSeva began operations around March 2000. e4e acquired it in June 2004.
  • Daksh. Daksh was started by Sanjeev Aggarwaal, a veteran in India IT industry, along with Pavan Vaish and M J Arvind—soon joined by another entrepreneur, Venkat Tadanki—in January 2000. It was one of the most high profile acquisitions of IBM in India, when it bought the company in April 2004. For long, it operated under the name, IBM Daksh, before finally losing its identity completely about two years back.
  • Infowavz. Started by ex banker Zia Sheikh, his brother and ex-McKinsey consultant Wasim Sheikh, and Vineet Mittal, in February 2000, this began operating in Mumbai. Stream acquired it in July 2004.
  • Spectramind. The most high profile BPO start-up set up by Raman Roy, the person who started the offshoring phenomenon when he was in Amex and who set up, for GE, their India offshore facilities, which in turn, made the world sit and take notice of what could be done out of India, began operations in March 2000. In 2002, it was acquired by Wipro and renamed Wipro Spectramind, before ultimately losing the Spectramind identity.
  • 24/7 Customer.com. One of the three BPO start-up pf that era, which has its identity intact, it was started by PV Kannan and S Nagarajan, both of who are still associated with the company, it did a small change in its nomenclature along the journey. Its original name was 24/7 Customer.com. It dropped the “.com” somewhere around 2002.
  • CustomerAsset.com Started by K Ganesh and Meena Ganesh in April 2000, it was acquired by ICICI Onesource in 2002. In fact, it is by acquiring the email support company that ICICI Onesource was launched.
  • Motif. Ahmedabad-based Motif, started by Kaushal and Parul Mehta in August 2000, has not grown that much in this period. But to it goes the credit of being one of the two BPO start-ups of the 1999-2000 era that has remained independent throughout.

Out of the 12 listed above, only two24/7 Customer and Motif—have remained independent all this while, whereas Exl has regained its independence, after losing  it briefly. The rest nine have lost their original identities. 

Of course, there were others that started during that period but they never grew beyond a threshold to make any impact. Also, I have not included the non-entrepreneurial BPO companies who started out during that period. That includes Intelenet—started as a 50-50 JV of TCS and HDFC—and GTL, an existing telecom equipment company. Both were in Mumbai. Both are no longer with their promoters but Intelenet, even though it has changed hands several times, somehow retains its name and its original CEO. Another start-up of that era, started by the Hiranandani group, Zenta, has gone through a lot of transformation and ownership changes before Accenture acquired it in late 2011. 

A few others had started even earlier, when there was no term called BPO,  doing vertical specific outsourcing. Significant among them are Vision Healthsource, which started in 1997 in Chennai to provide medical billing services, and was later acquired by Perot Systems in 2003. Another company—Techbooks—started even earlier, in late 80s, doing publishing back-office work in Delhi. The company still remains independent but sports a different name, Aptara.

Interestingly IT companies saw the opportunity and during 2000-2002, most of them jumped to the BPO bandwagon. But the identity change story applies equally to them as well. Most of them, realizing that BPO is a very different kind of work requiring different kind of employees, started with a different name but along the way, they too dropped those special names and today, almost all of them are known as XXX BPO, XXX being the parent company. Here is a quick overview of these companies.

  • Mphasis. Mphasis was one of the first to see the opportunity and started its BPO business under the name Msource. It ultimately became Mphasis BPO.
  • HCL. Another early entrant to BPO, HCL started this business in 2001, under the name E Serve Technologies, which became HCL E Serve, before finally becoming HCL BPO.
  • Infosys. Phaneesh Murthy, then in Infoys, was instrumental in setting up Progeon, Infosys’ BPO business. And why, it even got 20% equity investment from Citicorp. Today, it is called Infosys BPO.
  • Wipro. Wipro got into the business through acquisition of Spectramind. After running as Wipro Spectramind for some time, it became Wipro BPO.
  • TCS. TCS was one of the first companies to get into BPO business way back in 80s. But its distinctt identity in BPO were Intelenet, a JV with HDFC from which it got out and AFS—its JV with SwissAir, where it bought out the Airline’s stakes. Today, its BPO business is called TCS BPO.
  • Satyam. Satyam too started BPO business under a new name, Nipuna. Keeping with the trend, it too became Satyam BPO.
  • NIIT Technologies. NIIT Technologies started its BPO as NIIT Smartserve but is called NIIT BPO these days.

Maybe, the growing importance of BPO to the IT industry, became its nemesis when it comes to retaining its unique identity. Today, the erstwhile captives such as Genpact and WNS lead the independent third party BPO companies. But their numbers are limited.

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Why Information Technology is a Misnomer

It may sound blasphemous to many. But the more I think about it, the more I get uncomfortable with the phrase information technology. The fact that it has taken me more than two decades (that is from my first year engineering to now) to muster up enough courage to put it straight should not be held against the argument that I am making. And that is: information technology—for all its seemingly magical prowess and overwhelming impact on our lives—is a misnomer. Technology, it is; information technology, it is not.

One can go back to the classical distinction between “information” and “data” to appreciate what I am saying. As any student is taught when he is introduced to computers, data (actually the plural of datum) is pieces of facts. When, it is processed, organized, structured and interpreted, so that it becomes meaningful, it is called information. Today’s technology does a great job of processing, organizing, and structuring data. But interpreting to make it meaningful? Despite all the craze about BI and analytics of late, technology still lacks the ability to add the value of context and hence interpret it meaningfully. So, while sometimes based on matching strings of alphabets and mapping that to a predefined “meaning”, it tries to present the result as meaningful interpretation, we all know that it is not. Much of the current buzzwords such as analytics and BI are examples of this kind of exprimentation. That is clearly not “understanding the context.”

However, very recently, context has generated a lot of interest among the businesses, thanks to the surging popularity of social media, that is generating huge amount of content, much of which is available publicly.

While scores of boutique social media tracking firms have mushroomed and have been helping consumer companies “understand” the customers thinking, they too are working with basic technology that relies on the above mentioned technique. But that itself is a great leap and marketers are lapping that up. Interestingly, in most businesses, they have been working with the marketing and customer service teams, with little or no interaction with the enterprise IT departments.

I am not sure if and when the twain will meet. That anyway is not of too much consequence to this discussion. I return to my basic point that information technology really is not.

But I must point out that it was not really this way always. One of the major areas of interest within theoretical computer science in the 70s and 80s—and to some extent in early 90s—was artificial intelligence. Artificial Intelligence actually wanted to cross this frontier by trying to make computer systems intelligent enough to “understand” natural language, learn by experience and so on. So hot was the area that between 1969 and 1994, it won four Turing awards, arguably the biggest recognition in computer science. In my college days (late 80s-early 90s), AI was the buzzword and we were completely enticed by it, so much so that I remember having fought with my professor for not allowing us to opt for AI as an elective in the final year—citing lack of teachers as the reason—and forcing on us “computer networks”!

While AI still continues in some high-end labs, it faded from mainstream focus of technology industry in the mid 90s, often facing criticism, among others, that it was too philosophical a concept. And this is also when, I would like to argue, information technology lost its way.

It fell to the temptation of impressing the businesses with immediate, tangible results by automating a lot of business processes. It was a Godsend for businesses—American primarily but Western European and Japanese to some extent—that were already witnessing sluggish growth and were badly in need for something that would boost bottomline by cutting cost. The technology—what we call IT today—could do that fairly well and businesses started seeing it as the next big value creator. Soon the entire focus of technology shifted to creating newer ways and means of enhancing business efficiency. ERP and outsourcing were two major milestones in that journey. All of it was internal focused.

These low hanging fruits made the technology industry almost abandon areas that requires longer term commitment (such as AI), and technology reached where it is today. Information technology was happy playing the role of automation technology and data technology. And that is what it absolutely became.

However, what makes me hopeful are two developments. One, the Internet has emerged as a big social platform and there is an opportunity to really understand the customer. Businesses would have to now differentiate themselves on this plane, as efficiency has been done to death. Two, and this is equally important, emerging economies are now becoming the focus of most large global corporations. In these new markets—often with very different social and economic structures than the West—reaching out and reaching out effectively through whatever means possible would become key. Topline will again drive businesses and that would require knowledge of customer as a differentiator. Some businesses have already seen the danger of trying to do business in the new markets with business models of the mature markets!

Whether that will result in a serious effort by technology fraternity to make the customer instead of internal processes their core focus is something that remains to be seen.

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