Why TCS, Infy are yesterday’s heroes

Tata Consultancy Services, Infosys, Wipro – they are the hallowed names that established the Indian IT industry. They brought about a revolution in India’s image abroad and in the process, earned the country a lot of valuable foreign exchange. Although they trace their roots back to several decades, they came into their own and established themselves as world beaters only since 1995 or so. This was the era of the internet and the Y2K bug, which they exploited to the hilt. The world suddenly realized that they could get a lot of things done very cheaply using these service providers. These companies (along with many others) saw an opportunity when it presented itself and positioned themselves for it. Storied personalities such as Mr. Murthy, Mr. Nilekani, Mr. Ramadorai, Mr. Premji and several others guided these companies during their growing phases to get where they have reached now. They have built a $50 billion industry that today competes with Accenture, IBM and others – the best in the world in this sphere. So, what is there to worry about, right? Well plenty, for India.

Having tasted income and revenue growth of 30% year-over-year for a decade or more, these companies have grown so big in size that they can no longer be steered any better than the Titanic. Their business models have relied on the tried and tested service models where the scramble is to garner bigger and bigger slices of the contracts given out by large companies in the US and Europe. This model is a low-risk one where your brand and past performance gets you in the door and the pricing determines who gets the deal. Thus, these companies’ focus solely rests on operational efficiency and innovative sales models. For a country, this is alright if this is a piece of a bigger pie, but not if this in itself is the pie. The Indian IT industry is turning into a one-trick pony of service companies. It is time we built more tricks for ourselves for the future.

The one trick that Indian IT companies have yet to master is that of building and selling products. The reason is that it is a high gestation high risk-reward model that none of our companies are used to. Product companies start off as small organizations with a lot of investment using small dedicated teams that spends a lot of time researching and selling their big ideas. The big Indian companies do not have R&D as a component in their DNA, so it is not possible for them to turn on a dime to move into such projects. R&D projects are often hit-or-miss games where rewards are huge if the idea succeeds and so are the losses if it fails. It is interesting to note that while many of the older generation large companies of today – IBM, Intel, HP etc – started off as small operations that took several decades to scale up, the newer generation companies scale up in a fraction of the time – e.g Google, Facebook. The time period from initiation to success has moved into internet time and is the greatest opportunity that companies in India have, if only they could identify their niche.

One big problem Indian product companies face is the lack of a viable domestic market. For product companies to grow, it is necessary to have a market that they understand nooks and crannies of. Today the biggest markets are not in India but elsewhere. Since there are lot of companies who understand their own domestic markets, it is doubly difficult for Indian companies to build products, compete and sell them there. Thus it is crucial for India to develop a market within the country for sophisticated products. This is one area where the government can lend a helping hand. Rather than provide cheap land and tax incentives, if only the government could be more inventive by actively participating in promoting massive computerization of its offices, procurement of solutions that are specific to our country’s problems and give preferences to Indian products, the path can be cleared a little bit. When done on a large scale, an ecosystem could begin to get built around it. There are opportunities in mobile, banking and various other spaces where India-centric products are needed. Today, we retrofit US-made products to India to solve our problems. We need to take a leaf out of the examples of DARPA, NASA etc and adapt it to modern times.

The development of a product based IT industry is vital to the country’s future as it is a goldmine of opportunity. Now that we have established credibility across the world with TCS, Infosys and others as far as our IT service prowess is concerned, it is time to move onto the next level. And it is not going to be yesterday’s heroes who will do it for us. We need new champions. Products like Notion Ink Adam, the Simputer and many other such attempts are the beginning. The energy is out there. Let us hope that we can build products for India and the market demands such products so that there is every incentive to build them. Beating our chests about TCS and Infosys is only going to turn our chests blue. It is time we looked for alternatives.

Advertisement