TiE-ISB Connect 2006 - IT and ITES Track Summary

IT/ITES, numbers are promising, rewards look even more attractive. With growth of more than 11%, the industry is expected to touch $60bn turnover by 2009. India itself has more than 65% of IT outsourcing and around 45% of ITES share of the world’s market, and the pie seems to only increasing.

The forum will analyze the sustainability of this growth from India’s perspective while analyzing:

• India’s human resource advantage and challenges
• Competitive position w.r.t. China, and other geographies
• Strategy
• Infrastructural, academic and political issues.

Another amazing point touched on human capital was the attrition in growing organizations. The irony of higher attrition when the company and its salary have grown was touched upon to understand why these very employees stay with the company when it is small and cannot give as many monetary and other benefits. There thus must be more than money that a company offers to its employees. This conference touches upon these and many other such issues.

1.       Dr Ajay Kela [Symphony Services]

Dr Ajay spoke on balancing high rates of growth and at the same time maintain performance standards. He began with a history of the IT industry in India. The early 90s was marked by rapid growth in outsourcing of software operations of large multinationals followed by the BPO boom in the early 2000s and then to outsourcing of core revenue bearing software products and critical software processes. But there are challenges which Indian companies have to surmount in order to stay competitive in the coming few years. Dr Ajay, spoke of 3 ways to stay ahead:

a.       The first was the issue of managing human capital. In a software company, employees are the greatest assets. An organization can succeed by being compassionate to employee needs and institute HR policies which harness the potential of every employee. The idea is to bet on people more than strategies. Ultimately an organization succeeds by having talented and content employees who are able to realize their potential.

b.       The second key aspect is to invest in tools and technologies that help employees be more productive. Examples such as Video conference, working from home, the best software development tools were discussed.

c.       The final challenge is to continue innovating in products and processes. It need not be radical, but could be incremental. However it is necessary to keep the flame of innovation burning in the company. Companies which succeed are the ones which differentiate in terms of innovation.

2.       Ashish Gupta [Co-founder www.junglee.com]

Highlighting the VC investing patterns in the services industry Ashish started by stating the limited sources of funding available for ITES companies; with the F-network still meeting the maximum funding requirements of budding and existing entrepreneurs. Ashish spoke about developing a niche for yourself before one can attract investors. This is especially true for companies looking to enter the ITES sector as there are no tangible products to be marketed or presented that will speak for themselves. He emphasized two important points to enable you to stand apart from the crowd:

a.       Domain expertise: You would have to prove your deep understanding of the product/service/market/scalability/client base etc. to ensure that you understand the risks and rewards associated with your plan.

b.       Proven capabilities: A VC would typically look for proven track record of successful past client interactions, projects completed and milestones reached.

He also, emphasized that VCs like investing in Leaders, people who have vision and a passion to drive from the front. Though people skills are imperative, there is little scope for followers. Also, it is critical that the market space highlighted is interesting for investors with respect to growth, accessibility and overall potential.

3.       Kedarnath U. [Polaris]

Kedarnath largely emphasized the importance of driving your process and innovations based on client needs. Using several examples from past acquisitions he has witnessed to His address revolved around:

a.       Client driven innovations; do what client wants rather than what market drives

b.       Importance of educating employees on the financial patterns of a company

c.       Establishing credibility with the employees such that they see a career path within the organisation

IT Services companies need differentiation to succeed in today’s market. They need to be in constant touch with the customer to develop customer focus as their core strength, rather than technology focus. Employees also need to have a perspective of the customer’s business. Polaris focused on developing its core competency in finance domain, by providing its employees external training of the subject matter. Giving a different perspective to software development also helps Polaris in controlling its attrition rates. Polaris also believes in engaging its employees in CSR related work, which helps the employees in appreciating their responsibility towards the greater cause.

In today’s scenario, the customer is not looking for a great sales talk, it wants results. It is interested in building relationships/partnerships with its vendors, for which honesty and transparency is a must on the part of the services companies. They also need to focus towards future growth areas of Integration and Consulting services. Currently, nearly 88% of IT services work done in India is related to custom development and outsourced IT maintenance, but it will be the Integration and consulting services which will form the major chunk of the pie for next generation’s revenues (nearly 44%), clearly making it the center of focus for tomorrow.

4.       Vipin [TCS]

Today’s IT companies need to match the speed of innovation, be it in the field of new technology, new services or new methodology. The companies need to under both the customer dynamics as well as the technology dynamics. Big companies like TCS, who are targeting to hit $10 bn in revenue in coming years have to not only keep pace with the technology frontier, they also need to develop back-up scenarios given the fast-changing nature of the market. They need to create multiple value chains in the company to ensure “Customer value creation” and to engage in regular “tune-up” of their strategy. Move from pure IT services to Consulting is one such move from companies like TCS and Infosys.

5.       Feroze Mohammed [Sierra Atlantic]

S.A. is a company which has seen a growth from 15 people to 1200 people, which has been the industry leader several times, and has lost that coveted place several times. It has seen a complete cycle of Growth to Decline to Growth again. It has been a profitable player is many niche markets, which soon became commodity due to the competition. Here are a few thoughts which Feroze shared regarding his company:

a.       Talent Management is key to any IT company’s success. The companies need to attract the right kind of talent, and it needs extensive market research on their part. Unlike many other countries, in India, the managers carry the responsibility of developing the available talent in the company. They need to recognize the “Stars” in the company and invest in them from a long-term perspective. It also needs to remove the “Bottom Slice” from its workforce to ensure the supply of the fresh blood in the company. In today’s scenario, Project performance and Billability are becoming key factors in determining an employee’s compensation. There is a higher emphasis to increase the variable component of the pay structure and link it to various measures of performance. Thus, it is imperative for the companies to ensure that their employees understand and appreciate the compensation package of the company (and more so of the competitor).

6.       Raghuveer Mendu [Metamor Enterprise Solutions]

Mr. Mendu, like Ashish highlighted VC’s perspective. He stated that the investment or company dynamics largely depend on where the industry is on the growth curve. He thus called for a need for companies to customize their offerings, strategies, and client relationships depending on the state in which the industry is in to ensure success and expected responses from the market.