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Indian Tech Firms are Rewriting the Rules of Competition

The rekindling of Western economies, combined with the relentless drive by corporations to improve their efficiency means, India is in the right place at the right time with the right portfolio of services.

NEW YORK – In "Bangalore Tiger", author Steve Hamm examines the rise of India as a destabilizing force in the USD 600 billion worldwide tech services industry.

Hamm says, Wipro and other Indian tech companies are forcefully rewriting the rules of global competition. The winning, Indian tech formula he says is: Internet + Brains – High Costs = Huge Business Opportunity.

Hamm tells Uttara Choudhury that firms like Wipro are also helping global innovation by striking major, product development partnerships. “As the world's largest provider of engineering for hire, Wipro, each year, helps more than 100 clients take products from concept to the marketplace. Traditionally, this has been a pay-for-labor type of business. But Wipro is now experimenting with new business models… It’s willing to share the risk with clients by taking lower fees, up front, in exchange for a share of the profits once a product enters the market.”

“Bangalore Tiger” underlines that Wipro and other Indian firms are also boosting efficiency with factory-like business processes. Hamm says Wipro has taken a page from Toyota’s playbook and succeeded in making business processes as “simple, smooth and replicable” as Corollas slipping off the Bangalore assembly line, every 5.3 minutes.

Here are excerpts from their discussion.

Why did you chronicle India’s tech industry through the microcosm of one company, Wipro which is smaller than Infosys and Tata Consultancy Services?

“I finally decided on Wipro for a variety of reasons. One of the main hooks was that Wipro chairman, Azim Premji’s own story was very compelling -- the way he had taken over the company under such difficult circumstances and learned how to run it.”

I worked with my publisher on the approach of telling the story primarily through one Indian company that would be representative of all of them. The three that we talked about was Infosys, TCS and Wipro. I finally decided on Wipro for a variety of reasons. One of the main hooks was that Wipro chairman, Azim Premji’s own story was very compelling -- the way he had taken over the company under such difficult circumstances and learned how to run it. And, then the way he had been able to change and morph his company into different things as the world changed. Premji built Wipro from a small, failing vegetable oil company into one of the top three tech companies in India and a fierce global competitor.

With salaries for software programmers rising about 15 percent every year will the tech industry salary inflation in India be a problem -- both for India's competitiveness with other low-cost countries and for firms in Bangalore that are fighting it out on the ground for talent?

“…the top firms like Infosys, TCS, Wipro, Satyam, Cognizant and MindTree are really well-managed, have lots of experience and mature processes. They deliver a very consistent, high quality.”

Absolutely -- it already is a problem. As salary rates go up, companies look for other places where they can employ people at lower rates. Both Indian tech companies and the global tech services companies clearly have sought other places to employ people that have the talent, at low rates. But if the talent isn’t there the rate doesn’t matter.

My checks with data sources suggest that the wage differential between the US and India will remain substantial for a long time. India, China, the Philippines, Poland, Brazil, Romania, Russia, Egypt -- these are countries where IT and IT-related outsourcing will stay. I think the Indian companies will succeed over the long-term for their ability to employ people everywhere in the world.

With firms like Infosys and Wipro creating oases of functionality in an environment of controlled chaos, does anything have to change in India regarding infrastructure?

“Premji saw that by providing an engineering lab for hire to the world, India and Wipro could rewrite the rules of global competition in the tech services business.”

I think the inadequate roads, congested airports and power blackout are a drain on them. When a company has to do what Infosys does, where it spends nearly USD 5 million a year, to transport its employees in Bangalore to and from Electronics City, it is a massive overhead cost. And, the employees spend on average three hours in transit because of traffic jams -- that is tough on the workers and an incredible cost to the company.

Unless India’s infrastructure improves dramatically, it will impact the tech industry’s ability to grow. I think it has a bigger impact on retailing, and manufacturing but it still has an impact on the tech industry.

In spite of wage inflation and infrastructure bottlenecks does India remain the most attractive location in the world for offshoring IT and Business Process Outsourcing work?

I think it does right now because the industry is so well organized and it has the in-demand engineering skills.

Are Indian tech services companies delivering high-quality brainwork for large American corporations?

I wouldn’t say that all of India is one quality level. I would say that the top firms like Infosys, TCS, Wipro, Satyam, Cognizant and MindTree are really well-managed, have lots of experience and mature processes. They deliver a very consistent high quality.  

In the book you have described Wipro’s Azim Premji as a thought leader like Microsoft's Bill Gates. What struck you as singular about your protagonist?

“One of the impressive practices I discovered at Wipro was Premji's insistence on "zero politics." He requires his executives to be transparent and fully collaborative with one another. He doesn't tolerate Machiavellian stuff…”

Both Gates and Premji are pioneers in business model innovation. Gates saw that by providing the operating system for the PC, he could control an industry. Premji saw that by providing an engineering lab for hire to the world, India and Wipro could rewrite the rules of global competition in the tech services business.

Some of his management ideas are really inspired. One of the impressive practices I discovered at Wipro was Premji's insistence on "zero politics." He requires his executives to be transparent and fully collaborative with one another. He doesn't tolerate Machiavellian stuff -- the destructive office politics and self-dealing that is so prevalent in American companies.

My sense is that Premji wants people to be open with each other, disagree even, but very politely. He is a very polite man. I don’t think you see some of the ugly stuff that you see at GE or Intel where people really rip into each other. It can be awful for people involved in some of these tough discussions. My sense is that there is much more gentility in Wipro.

How have Wipro and other Indian tech companies been a destabilizing force in the worldwide tech services industry?

“They (Indian tech companies) have shown the world that all sorts of work can be done anywhere in the world where the talent can be found at the right cost. That is the profound, profound change in the history of the world economy.”

They are one of the first, very powerful examples of the Internet going globally and changing the way work is done. They use the Internet to transfer work from where it has been done to somewhere else. They have proved that knowledge work can be done anywhere in the world. Think about how profound that is. They have shown the world that all sorts of work can be done anywhere in the world where the talent can be found at the right cost. That is the profound, profound change in the history of the world economy. I think it has the potential of changing the world economy by bringing wealth to all sorts of people and all sorts of places where it was missing.

Obviously, there are winners and losers. The countries the work was done in before are in some ways, losers. They lose the jobs now but they get the benefit of cheaper services.

The superiority of the Indian business model is clear when you compare the operating margins of large tech services firms. Infosys is about 30%; TCS and Wipro are in the mid-20s. And, then you look at the Western giants -- Accenture’s has a roughly 12.5% operating margin. The Indian companies take advantage of the lower costs but they are obviously very well managed.

Can you share some key insights about "The Wipro Way" with specific instances on this?

The Wipro Way takes all of the inputs Wipro picked up over the years from the best practices of some of the world's best corporations and then adds its own secret sauce.

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