Americans beat Indians at their own game? BW got foot in the mouth!

BusinessWeek carried an article about IBM’s success in India, it’s ramping up of operations in India very quickly to 53,000 employees, and winning big in the IT outsourcing deals in the subcontinent, especially from telecom operators — which is a gratifying read. However, the email from BW in my inbox had a line that completely pissed me off:

IBM once looked like a lumbering giant next to India’s agile tech upstarts. But in scarcely five years, Big Blue has come to dominate the Indian market, with a staff of 53,000 in the country and huge R&D centers in Bangalore and New Delhi. Read this edition of the Asia Insider to learn how the Americans beat the Indians at their own game.

The article never said anything to that effect! My best guess is that some guy in the PR department at BW who was responsible for the uninteresting, mundane and morbidly boring task of sending out spam suddenly suffered from a bout of foot in the mouth.

First of all, I don’t think anybody has beaten anybody in this game of outsourcing. The money has come following the talent, and it’s not just IBM, but Accenture (India’s the second largest Accenture operations), EDS (which acquired Mphasis – here and here) and all other IT biggies are making bit bets on using Indian talent to fight Indian vendors like Infosys, Wipro and TCS who have been snapping at their heels. However, I am not sure if that can be termed a win of Indian talent or of the American business acumen. (Actually, I would not prefer an argument about winning and losing at all — since it is too early to predict anything — the Indian IT vendors who used to be mere outsourcing outfits earlier now want a larger piece of the pie, become consultants, and go after bigger money. For example read this, this, this — I didn’t try to get the best articles in the area, but just some of the recent news).

<!– Digression begins

Another interesting aspect, is the comparison of the Revenues, Profits, Market Capitalization and the Price/Earnings for some of the biggies. [‘b’ indiacates a billion US Dollars and ‘m’ a million US Dollars. Data taken from Google Finance today.]

Company Revenues Profits Market Cap P/E Ratio
Infosys 3.08b 850m 25.8b 27.33
Wipro 3.64b 711m 19.71b 26.67
IBM 91b 9.4b 152.37b 17.19
Accenture 18.22b 973m 30.21b 19.45
EDS 21.26b 470m 11.59b 19.11

It seems obvious that Indian companies are far more profitable than their western counterparts for every penny (or cent perhaps) of revenue that they make — and the markets reward them accordingly. If you look at the MCap column, you would realize why the biggies are unable to try their luck at acquiring some of the larger IT companies in India — because they are bigger than the western counterparts! (IBM of course, has many divisions, and it might be difficult to get data on their software services division). So much for winning and losing.

end digression –>

Until recently, I thought that foot-in-the-mouth was not a very communicable disease and spread only on contact with a creature named George Bush. I have, obviously, been proven wrong. Ronen Sen recently caught it, and now BW! Looks like its spreading faster than I imagined. Is somebody aware of necessary vaccination which I can take?

About kpowerinfinity
I *♥* technology, business, conversations, experiences, books, music, theater, coffee and people. I am an entrepreneur in the city of Bangalore - my company, Capillary, provides customer engagement programs and marketing services to retailers around the world.

10 Responses to Americans beat Indians at their own game? BW got foot in the mouth!

  1. Terry says:

    “Americans beat Indians at their own game?” I don’t think we’ll ever field a cricket squad capable of even holding their own against the Indians.

  2. While it’s true that the BIG money lies with Consulting, I wonder if we have the expertise to actually make a dent in the (IT) Consultancy space! While it would be unfair on my part to comment on the quality of projects with Desi IT Vendors, what I gather is that most of the projects are legacy projects where we (Infosys, TCS, WIpro) handle the support and maintenance activities. A major chunk of the development activity is restricted to Customizing tool-based implementations of ERP / CRM. Consultancy on the other hand is something that I feel would require more expertise and in-house products.

    We keep reading a lot about what Indian IT Companies need to do to differentiate themselves in the Global Space and it stated that the companies spend close to nothing on researching on New Technologies and Emerging Trends. (No wonder then that even after more then a decade of being BIG in the Outsourced Software Solutions business, we continue to be Service Providers). I think in order to be a “sound consultant” the technical know-how is a pre-requisite!

  3. Manish says:

    Years back when India started in the IT industry, the world thought that it was just a passing phase. Today nobody can dare avoid these Indian IT players (IIPs).
    But what will need to happen is the IIPs will have to start recruiting the global talent more and more (which is expensive) and then start thinking of ways to create that knowledge cheaper. We already know that to reduce cost, business processes from tier 1 cities are being outsourced to tier 2 / 3 cities which should save cost for these IIPs.
    This is always going to be a knowledge oriented field and the smaller the players, the faster the speed to adapt to the changing environment. I think TCS is doing an amazing job. Read about TCSs’ COIN fundaa.
    Has anyone even thought what happens if a few of these IIPs merge together. The sky is the limit. I hope all of us dont forget what Manmohan Singh said on this IDay – few years back ppl were coming to live where work was, now is the time to take work where ppl live.

  4. @amit: Yes, it is true that currently, most projects are tier-2 outsourcing jobs. In fact, Indian vendors probably make a lot of money because the bigger companies are subcontracting work out to them. However, I am sure people are learning something on the way and building expertise. Or, at least I hope they are! I don’t expect them to dethrone the leaders, but they can come pretty close.

    Besides, the high valuation is one of the biggest advantages of the Indian vendors – they can snap up nifty niche consultancy companies very easily by leveraging their balance sheets, which some of the larger companies can not do – a perfectly legitimate way to building up technical know-how.

    @manish: Exactly that is another big opportunity – making software development process driven. Compared to the so called ‘product’ companies who rely on human expertise to provide solutions, Indian IT companies have the unique position to build process based solutions where people can come in and start contributing very quickly. I should read about the COIN funda.

    I am not sure if I would like the idea of a merger. I think each of them is very well position to grow by themselves at the moment, and don’t see much of a consolidation amongst the bigger Indian vendors at the moment. They are too big and there will be a lot of duplication and redundancy – not the perfect recipes of a great merger. Of course, buying up more niche companies to build up domain-specific expertise is never ruled out.

  5. Sunny says:

    Yep… that vaccine is called ‘Editor’… and not the Wordpad type [:P]

    I can see a ‘trust you to say that’ coming up again! [:D]

  6. @sunny: Ok. Will you agree to be the vaccine on my blog? I can run everything through you ;)

  7. shuz says:

    i am this technically challenged person, and it kinda scares me to comment on such issues.

    i rem a similar argument that took place some time ago, and i too never understood the whole concept. wt best i can relate to is the media around us. some are good in coverage, some mktg, some reporters..etc. but that never gives one a lead over the other. its just pure fighting to survive in this society.

    (wondering if iv made a fool out of myself)

    nways…
    see ya around:)

  8. Manish says:

    India needs ppl who specialise in something and are really good at it. Till date India has always had ppl who had breadth not depth – this logic will not make India a leader.

    Going ahead, the system (gov, education) should concentrate on specialisation, expertise rather than trying to cover more bandwidth. No use if our students are going to learn Java, VB, .net and Cobol if they are going to work on SAP – there is a fine balance that needs to be brought.

    The IIPs will also get into this mode. If Wipro will excel in FS and energy & utilities, Infy will gain on the Retail front and so on.
    Shuz – the media will be playing a big role in shaping India. I still rem the WTC, NY incident. I was below the WTC the day before and the next day, it was blown. The way the media covered the matter is amazing – it was like ppl were there, reporting issues, ppl, the incident, the effects and getting the audience for ideas, help. They played the role of the perfect postman – our media needs to come a logn way. I was initially impressed with NDTV, but there are more ads and less content nowadays.

  9. @shuz: I agree with you. Everyone of them has to develop a market where they can be the best. My guess is that the companies will gradually gravitate towards what they do best and carve out niches.

    And yes, as Manish points out, media does have a role in educating the masses… there is very little we know about our IT industry frankly!

    @manish: I do agree. Core-competency is important, but I would not rule out overlapping or multiple competencies. And yes, more vocational knowledge is also required. I have read in papers that the larger IT companies are trying to influence curriculum and hopefully they add some courses which teach more industry relevant stuff.

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