Steering India's services juggernaut in a Chevy Volt at 108 mpg

May 09, 2012 | Phil Fersht

Co-authors and offshore evangelists Basab Pradhan and Gaurav Rastogi (click to view their new book)

One of the most influential and popular figures in the development of India's services business over the last couple of decades is Basab Pradhan.  I personally got to know Basab when he became part of the esteemed blogging syndicate "Enterprise Irregulars" last year, where I was impressed by his pragmatic and visionary approach to global sourcing, as he was finalizing his new book "Offshore:  India’s Services Juggernaut".

Basab made his name in the industry by climbing the ranks at Infosys during its hyper-growth years, where he led the global sales and marketing function until 2005.  This year, Infy managed to persuade him to rejoin the firm to be instrumental in helping position the firm for this new phase of the industry.

So we managed to convince Basab to park his Chevy Volt electric car for  few minutes, which he passionately drives around the Bay area, and claims to have recently clocked 108 miles per gallon.  We were also joined by his colleague, co-scribe and Kindle-fanatic, Gaurav Rastogi, who's spent the last nine years leading global sales effectiveness and learning for Infosys.

Phil Fersht (HfS):  How is the Chevy Volt doing?  If it blew up tomorrow, would you get another one?

Basab Pradhan: It's doing great! I am up to 108 mpg. The news of it blowing up in tests were highly exaggerated. No such worries here.

Phil: So…tell us about your recently published, co-authored book, Offshore: India’s Services Juggernaut.

Gaurav Rastogi: The premise is very simple. While many books have been written about India and offshoring, very little has been said about how the Indian offshoring industry came to be, what it means for a company to be Indian, what impact this industry has had on the Indian economy, how it works, where it’s at right now, and what makes it successful. And the headlines you read about offshoring are the equivalent of bumper sticker stories. So we set out to characterize, demystify and explain the Indian offshoring industry.

Basab: We talk a lot about how the industry is changing, and the shifts are quite perceptible if you observe the industry. For example, at the early part of the 21st century, it was all about the new offshore or global delivery model (GDM), and the cost savings, flexibility and other advantages it could bring to buyers, But it’s no longer about the GDM. In fact, buyers today, especially in the U.S. and U.K., assume a GDM is built into their solutions, and they don’t select service providers based on those they feel can safely take them across the GDM chasm. Now, they’re buying on the capabilities they used to before GDM came along – what’s the value, does the service provider understand my business, does it understand the particular solution, does it have the right people to lead the project, etc.

Phil: Where do you think India is going to go next with its development in the global sourcing industry? Which areas do you think are going to be most successful for the country, and where do you think we may be in a bubble?

Basab: There are quite a few interesting things coming along, such as offshoring of marketing processes in the life sciences industry and technical support offered directly to consumers. But while there are great opportunities in these types of emerging, non-hanging-fruit areas, you can’t just throw people at them. You need specialized skills and a delivery model solution that can address the advanced needs and requirements.

Phil: We’ve seen an increasing number of Indian providers open facilities across the U.S., in Massachusetts, in Michigan, and even your new center in Atlanta. How is this impacting the sourcing business for India?

The Chevvy Volt hybrid: lease one for the cost of 10 developer-hours per month

Basab: One of the chapters in our book, called India Versus Rest of the World, looks at your question from several different aspects. First, we believe that hiring in our clients’ markets will only go one way – up – because of many reasons. With the kind of work we do with clients, it’s getting to the point where the sophistication of the solution is such that you need people with industry skills, not just technical skills, and the sophistication of the industry and how it works in advanced markets is ahead of that in developing markets like India. Of course proximity matters and you want to be closer to your clients, and so you have to hire more in the markets. In-market hiring also reduces risk, and it’s just good business. In fact, we see that hiring in the markets is going to keep going up at a higher proportion compared to the growth of the company.

Gaurav: Another way we look at this question is the blurring of boundaries, how the company of the future is likely to have a global workforce, a global management structure and global ownership...none of it is Indian. We believe that the definition of what makes a company Indian is weak, that it will continue to weaken, and that it will be increasingly difficult to tell which companies are Indian and which are not.

Basab: Earlier this year you had a post on your blog about Indian companies being the New Phoenicians…and there’s a lot of truth in that. These firms, whether they’re headquartered in India or not, whether they’re largely Indian management or not, they are the new trans-nationals. They are companies that belong nowhere but are comfortable everywhere. That’s where I think a lot of this is headed.

Gaurav: A term we use in our book is “Frankenfirm”. A company with headquarters in one country, a CEO from another, the largest market in yet another, and the workforce in a fourth. That’s what companies that started out in India or have a big base in India are soon going to look like that.

Phil: In our view, the IT services industry has pretty much been ceded to India. While Western providers are trying to come in and undercut the Indian providers’ prices, the buyers are saying, “Look, these guys were smart, they got in 10 years ago, they have institutional knowledge of our processes, we like working with them, there’s an energy about them, and a ‘forgiveness factor’ has developed over time.” Do you think it’s going to be as easy for Indian firms in emerging BPO areas like those you mentioned earlier – such as marketing processes for life sciences companies – or will it be a challenge down the road?

Basab: Before the Indian IT industry made any headway into package implementation – SAP, Oracle, etc. – we had the same type of question. Could we have the same success with it as we did with ADM? But companies were doing 10’s of millions of dollars worth of implementation at the same client for a year, and lowering the cost of delivery by a tenth was just waiting to happen. So we had to build and hire the skills to be able to do it, we also did things our own way, e.g., establishing our own academies for training, and we built a thriving business out of it. So going back to the notion of blurred boundaries and what is an Indian firm… what differentiates a company is its ability to understand the business problem, create solutions and put value at a lower cost on the table for the client. It’s going to happen in emerging BPO areas as well.

Phil: Going back to our philosophy about the New Phoenicians, with which you agreed…we’ve seen over the last 50 years or more many nations, like Singapore and Japan and more recently China, rise in the industrial world with big economic growth spurts, largely due to development of a culture of hard work, effort and innovation. But many of these countries have become complacent, and are now struggling to find new growth. Do you think India runs the same risk of reaching a level of complacency, or do you think the culture, make-up and DNA is different?

Basab: I think it’s very important to recognize India’s success in offshore services has come about without the government’s support. Which means that it’s due almost entirely to alignment of demographics and market forces. That said, can India become complacent? Absolutely. But at this point the demographics are in the right direction, there are large companies now operating in India so the management culture you talk about has become prevalent, and there are hundreds of thousands of people working in and feeding this industry. So in that sense, the dynamo is beginning to roll and it will take time before it winds down.

Phil: We’ve spoken privately about the fascinating race going on between the big SWITCH* providers. How do you see this playing out? Infosys is one of the big growth success stories of the last decade, but you’re running into fierce competition from the likes of TCS and Cognizant, as well as Accenture from a Western standpoint. How can Infosys keep its edge and differentiate itself from the rest of the pack?

Basab: You’re very right that this industry has become much more competitive. In the early days, it was like there was this gold rush where there weren’t yet any stakes in the ground. But suddenly all the ground – or most of it – was seemingly taken, and what is left is harder to mine for gold. That’s kind of the situation we’re in. There’s hand to hand combat going on in every account, and we have to figure out ways to keep increasing the value we provide to our clients, and focusing on the right things such as the people in the company, how we organize our efforts in the market, how we continue to focus on quality and embedded IP. At the end of the day you won’t hear stories about quality. But that’s why clients give you business. If you fail at delivering something, no matter how fancy it was, you’re not going to get more business, because there are hungry competitors in the account waiting to take it up. So we are going keep our focus on quality AND a shift to business outcomes.

Phil: In terms of the next wave of growth for the big Indian firms, we’re seeing much greater willingness to invest in large clients, particularly in areas where there are significant domain requirements and business process needs. And in many ways it makes sense because you can take on a big client, make a profit and gain a lot of the domain skills you need to grow. It almost seems like the days of acquiring other providers are numbered. Do you think we’ll see big acquisitions come back into this space, or will growth come more organically from clients?

Gaurav: I think it will differ from company to company, based on their individual appetite for growth and what they want to do from a stock market and shareholder standpoint. Infosys has a lot of cash in the bank, so if we were to acquire more companies it would be to gain capabilities, skills and geographical coverage…not for growth.

Phil: Would you write another book?

Guarav: That is, if people are still reading books in the future. My guess is that people will have the patience to read essays in the form of Kindle Singles, but would not dare to consume too much non-fiction in one setting. Would want to write a series of inter-connected essays? Absolutely!

Phil: If you had to bet your mortgage on it, what will the outsourcing industry really look like in 10 years?

Basab: Big. Lots of technology mixed in. Much less hub-and-spokey compared to today.

Gaurav: The industry will be dramatically different from how it is today. Companies that are now beginning to look alike will separate once again into leaders and laggards. The blowback against globalization will become stronger initially, but will abate in the longer term. An economic boom or two would help with that. Meanwhile, the software industry is already changing dramatically, and that will have serious consequences for the IT outsourcing industry as well. India may still lead as a destination, but major companies will have a global footprint, which includes serious local hiring in major markets.

What I can't resolve in my mind is how the companies will continue to manage an intelligent workforce of 200k-1 million people without resorting to an efficient bureaucracy (an oxymoron) or to a dictatorial style (and how long that can last). What may happen is that the larger companies may find their size untenable and, bacteria-like, choose to undergo binary fission into more manageable enterprises. Or, all of us may finally figure out how to make money from ideas instead of people's time. We talk about this in the book in our chapter on hiring. Needless to say, these are purely my views, and do not represent the views of my employer, or to our clients.

Phil: Gents – it’s been a pleasure chatting with you both and I look forward to having our HfS readers load up your new book on their Kindle apps!

The book "Offshore: India’s Services Juggernaut", is available in book stores and on amazon.com.

Click here for more information

Basab Pradhan (pictured top-left) is Senior Vice President, Head of Global Sales, Marketing and Alliances at Infosys - click here for bio.

Gaurav Rastogi (pictured top-right) is Head of Learning Services at Infosys - click here for bio.

*SWITCH refers to Satyam, Wipro, Infosys, TCS, Cognizant and HCL

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesOutsourcing Heros

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