Tuesday, August 12, 2008

Time to Rewrite the code !

After appreciating rupee and slow down in worlds biggest economy the Indian IT companies are facing toughest time to keep up their growth rate , profit margins etc.After depending about more than 80% work on one country now they tends to move towards APAC , European , African countries.

Depending too much on US hurts them now once it was considered to be the safest place. Those magic 40% YoY growth tends to be come down.And Their quarters results hardly excites the markets now.

Is market is really saturated or our IT companies not able to handle the situation well? Since the size of the industry is so big i meant the man power the revenue should also be high right?.Is how they evaluate their revenues. Making more people working ie technically billing via liable to a customer is a key to get more revenues.

But it's no where working now ! How ? I have some interesting data's Based on Revenue per Employee and being an insider i tried to analyze what they can do at least now.

Revenue Per Employee What it is?
Revenue per employee measures the average revenue generated by each employee of a company. It can be calculated by dividing a firm's revenues by its total number of workers.

Revenues
---------------------
Number of Employees

So taking the members of "SWITCH" the RPE is


Satyam 49,200 2.1 bn$ 42682$
Wipro 79,832 5.0 bn$ 62631$
Infy 94,379 4.0 bn$ 42382$
TCS 116,308 5.7 bn$ 49007$
CTS 59,201 2.1 bn$ 36080$
HCL 52,000 1.7 bn$ 32692$
in the order of company, total number of workforce , revenue , revenue per employee

Where as the Global giants have this as ,

Big Blue 391719 47.4 bn$ 1,21,005$
Accenture 178,000 22.39 bn$ 1,25,786$
EDS 136,000 22.1 bn$ 1,62,500$
in the order of company ,total number of workforce , revenue , revenue per employee



All the data's are took from Wiki. Why wiki ? since i believed open collaboration is more powerful.If any of this data is wrong don't blame either me or wiki. Its your fault of not fixing it.

I think this comparison of revenue per employee is generally most meaningful among companies within the same industry.So its a fair one.

The average RPE of Indian IT companies is around 47227$ (CTS not included in this average)

Where as the Global giants is around 136430$ which almost 3 times greater than what the "SWITCH" generating!

How does they able to generate more revenues than "SWITCH"?

  • Well what they are doing are more than the ADM (Application Development Maintenance).
  • They are actually doing High End Services , including consulting when compared with the Indian IT Companies.
  • They are good in End - End Delivery
  • Deep Domain Expertise
  • Good Global Delivery Network How ? They able to beat Indian companies even in domestic deals.Idea, Airtel Reliance are very good examples.Everything went to Big blue.Its combined value close to 2bn dollars. They dont have offshore model as like "SWITCH"
  • They are learning fast , keeps innovating themselves.
  • They able to attract talents.

For the past 6 months ,I couldn't able to think of Indian IT companies signing a big deal which they call as a "transformational deal" or "multi million dollar deal" .Those deals are valued more than 50mn$.

What SWITCH can think of at least now ?

Think of Values and say no more to Volumes

Enough hype have achieved over the growth of the IT companies in India.They are now at better position from the past.Plain old garage startups are now sky touching glass buildings.Its time to gear up to make some real values.Get out of driving the growth by speculation.Its no where needed if company X is hiring then you should do the same thing. Still with this man power you can do wonders.When Google yahoo adobe sun and most of the MNCs taking the values form Indian youngsters why not you ? They have learned well really well from the younger peers like you ,which made them to keep on setting more offshore centers in India.

Big Blue has its largest development center outside US, most of the MNCs have R&D outside US only here in INDIA.This does means Indians can actually deliver value at low cost and can capable of doing more in computing.This is not the question of whether they are capable of doing it or not so SWITCH needs to understand this.

Lets Chicken hatch eggs and not Elephants.

Having a cohesive unit of knowledge is what all the major vendors lags.They tend to target on specific clients instead of targeting on specific domain and build knowledge.

To be more elaborate on this ,Suppose two clients from different sector having a common task , say a banking giant and telecoms giant want to do user management apart from their core business.Now currently it works in this way the telecom team will be asked to do this for telecom client and banking team will asked to take care of banking client.The same things repeats over again for different customer thus they keep reinventing wheels always missing the concept of re usability.Theres another possibility since Telecom team may not have knowledge in developing such application they tend to hire.Thus making unwanted hires.

Instead of this let the banking and telecoms be more cohesive.Let them do one thing yes one thing really well.If a banking client needs some telecoms work handle them to the experts to do it.By this way reusable components can be made easily.

By this way large amount of duplicates hires , reinventing wheels again and again can be stopped.

Eat your own Dog Food !
Yes eat your own dog food.Its one of the way to build quality and control over the services you deliver.Its the one way to build confidence in the market.It never failed.Its one way to learn your mistakes. so Eat your own dog food whenever you get a chance of eating.

Computing,Services means more Not just ADM !

Remember this INDIA is not destined to be a place for low end works! Ramp up to deliver high end works.Indian IT can be divided into two eras pre Y2K and post Y2K. During pre y2k the Indian IT companies filled the shortage of workforce in US to fix the bug. This is the time they tried to 'impress' , tried to build 'trust' with them. Post Y2K is all about the establishment of trust. Sadly the trust established is all because of the cost advantage. The result the work asked to do was ADM.(Application, Development ,Maintenance). Though the Indian companies seems to be delivering value to them in this space the revenues they able to generate by providing this kind of services is too low.

The trust is made.But now is the time to rethink and start to establish a trust with their employees.Only by having this trust they can move to deliver high end work.And create more values rather than being depend on volumes.

To deliver high end works including consulting and high end designing they keeps to follow inorganic growth.Which is nothing but buying a specialized company in particular domain say for example consulting.The problem is the adaption to this route is too slow to catch up with growth of the giants.Even after acquisitions of such companies they tend to be slower to adapt or learn the core values of the domain.They need to learn fast, they need to learn quickly about the domains.

What Google has done is just a service or a solution to search problem.What Facebook has done is a solution to social collaboration.Its not a rule that you should neaver follow this path.How fast you adapt to learn is the key here.

Though India is Fourth in purchasing power theres is no concentration of Indian vendors on domestic markets.Its where you can deliver your high end services before implementing to the rest of the world.

Let the R&D be real R&D
Invest heavily in R&D not just the damn R&D which targets a specific customer , but target on specific problem.Try to get a solution learn the art of doing patents.Hire best talents and encourage people to focus on innovation.Its not about the wage hikes or cost cutting affects the profits margin.Its about the efficient way in doing things which cuts cost.so stop the innovation in cost cutting.Start innovation and investment in R&D.


Our Finance minister said once "IBM is Legacy , Infosys is Future".The problem is we are not there yet.To make it happen the "SWITCH" needs to think, that they need to seriously rewrite the code.

4 comments:

Peerlessdeepak said...

When did u move to management from being a developer da

Ashok said...

Learning Anti patterns da .. so that we wont repeat it again in cjava.net :)

Peerlessdeepak said...

Its really a great article , Man you have amassed a huge amount of knowledge sitting with the computers.

You rock like a rock star :)

Unknown said...

Tremendous adheration of ongoing facts in the IT arena...
n ur blog worth some good US dollars...Great da... Keep charging...