Warren Buffet is famously quoted as having said, “You only find out who is swimming naked when the tide goes out.”  Satyam’s Chairman Raju has been caught with his pants down after a failed attempt to acquire his son’s realty company! He announced his resignation in a letter to the board admitting fudging the company’s balance sheet in one of India’s biggest and most damaging corporate scandals in what is being dubbed as India’s Enron. It is a mind-boggling turn of events that is threatening the overall health of the India Inc brand.

More Questions Than Answers

Raju’s confession in the letter throws up more questions than answers.  One aspect is the motivation.  What was he trying to achieve in overstating the profits?  How in the world did he think that he would get away with this?  Other angle is the failure of checks and balances.  What happened to the frequent independent audits that certified the financial results?  What did the Board of Directors bring to the table other than their Ivy League reputations? After all, they were supposed to be the torch bearers for the corporate governance.

Maytas Situation Forced His Hand

Eventhough, Raju cited conscience as the reason for coming clean, there obviously were other factors at play.  The plan to acquire Maytas Infra to bridge the gap in the balance sheet spectacularly failed.  I’m sure Raju knew it would be a difficult sell but probably couldn’t have anticipated the kind of shareholder ire that was seen in the light of the event.  Having been battered in the market, he would have known that he would have to open up his books, hence the “confession”.

More Key Players?

While Raju claimed that it was a small gap that grew beyond unmanageable levels and no one else in the company or the board were aware of this fraud, it is hardly credible.   A cover-up of this proportion wouldn’t have gone on without other executives’ complicity.  If they didn’t know about this, they are not worth the money they are paid.

Satyam – R.I.P?

Whats in store for the company’s future is anybody’s guess.  With the avalanche of lawsuits and sullied name, I’d be surprised if any company wants to take over Satyam as is.  In my opinion, only a fire-sale seems to be the most possible outcome.

Far-reaching Effects

This scam is going to have far-reaching impact in Indian industry in general.  Having gone through the first set of reforms, India was getting into a position of becoming a trusted brand.   Over a decade of good work by Indian IT companies is also at risk with one selfish act.  The economy is already undergoing a slow down and this is going to only pile on to the misery.  While most of the IT firms may be clean, they will come under increasing under scrutiny.  Foreign investments are going to be hit – not just in the IT sector but in India in general.

Way Forward

In the time of a crisis, the best thing to do is acknowledge the crisis and fix the problem at hand immediately.  The loopholes have to be closed and checks & balances need to be restored.  Indian companies, even if they are squeaky clean, would do well to reach out to clients to provide additional assurances.  All the better if they can be proactive in sharing more information than usual.

The next part of it is accountability. If there was a time for quick and decisvive legal action, this is it –  before the damage is done permanently.  It is a known fact that Raju is politically-connected.

However, I hope justice prevails swiftly.

Well, the stuff has hit the fan.  Global economy is sputtering.  US economy has officially been declared as being in recession even though it was a foregone conclusion.  Some of the European economies are already in recession.  The job losses in US so far have totaled 2 million and counting.

The Indian IT industry employee who has been pampered over the years is now finding the going tough.   As I heard someone say once, “you are successful despite yourselves!”.   We have ridden the wave of outsourcing but now the tide is turning.  Indian IT companies are now cutting back at all levels.  Bench, which was treated as a temporary respite from the project grind, is now turning into a bed of thorns and the sure step towards the gullitone.

So,what should individuals do to stay off from the chopping block in this situation?  There is plenty of advice going around.  Here is mine.

  • Update Skills – It is all about skills and its relevance!  What has made one survive this long, may not in the next few months.  Time for an upgrade.
  • Stay visible – Not a good time to take that long vacation.   Staying visible also means going the extra mile to become noticeable – beyond your assigned duties.  Standing out is the key.
  • Personal Branding – There has been enough said about creating a personal brand for your sustenance.  Writing a blog, participating in industry workshops or forums.  However, make sure that your blogs and participation in other forums do not violate your company rules.  Employers are only too willing to look for any reason to send you away!
  • Be Flexible – For a while, I was pretty much looking for a role that I thought I deserved (uh, sense of entitlement).  Time to get off the high horse and being flexible in terms of type of work, roles, work location, work times etc.
  • Learn other life skills –  Especially true in Indian context.  We have grown up to be one-dimensional skilled individuals.  Things are changing but we had better pick up some other life skills.  Even if they don’t directly provide employment in IT, they may very well open other doors.

This is my two cents.

The recession is now in full swing.   The spectacular growth story of Indian IT companies is under threat.  While they are hoping to ride this out, they are being cautious with their own capital spending.  These already fiscally-conservative  companies are turning more conservative with hiring freezes, pruning of staff, limited/no pay-hikes, restrictions on travel and other misc expenses.

While keeping the existing clients is of paramount importance at this juncture, are there opportunities to find new business in these harsh conditions?  Here are a few common-sense pointers.

Capital-intensive Industries Are Hurt

This is an equal-pain recession in that (unlike the dotcom bust), this is hurting every sector across the board.  Of course some industries are suffering more than others.  In these times of credit crunch, any industry or business that requires a lot of capital is in trouble.  Telcos who are usually very capital-intensive are struggling.  Manufacturing in general and automotive in particular is reeling.  Retail is up in smokes due to people’s aversion to spending. By extension, anyone in their supplier-partner ecosystem is going to get hurt too.

So, the trick is to separate out these industries from the ones that have light-capital requirements and go after them.  It doesn’t matter if you double your salesforce in hard-hit industries – you would still not double your sales.  The key is to reorganize the salesforce into focusing and selling into industries that aren’t capital intensive.

Free/Cheaper Stuff Rules The Day

Another common sense thought is that everybody is looking more bang for the shrunk buck.  Case in point – the number of unbelievably great deals one found this Thanksgiving! Companies looking to use IT services are no different.   They are looking for bargains and deals.  So, provide cheaper options.  A recession like this also provides opportunities to change some pre-conceived notions.   A customer that had earlier rejected a set of services may be receptive to using the same services now.  Some ideas:

  • Pre-configured Solutions – Solutions such as SaaS, Platform-BPO that have subscription models are more relevant in tough times than in better times because of less upfront cost to firms.  Usual concerns about data security may be better overcome now than before.
  • Open Source Stacks – Cheap stuff.  Need I say more?  Again, as long as there is a decent open-source option, customers are more eager to evaluating them now than they were before.  So,  build and sell these skills.
  • Loyalty Opportunities – You may have many friends but the special bonds that you built with people are the ones that stuck by you through lean times.  This is the perfect opportunity to build lasting relationships with existing and potential customers by lending them a hand.  If it means agreeing to delay the invoices or throwing in free services on top of service agreements, do it.  It will all stand you in good stead when the good times roll in.

Poaching from Competitors

Tough times bring a lot of introspection. A lot of companies that may be using your competitors may be in the same situation.  May be they are not happy with the service.  May be there are just looking at a cheaper option.  Whatever the reason may be, you won’t lose anything by just checking in with them about the possibility of a switch.

Ride It Out

Its the first time Indian IT companies are tested at this level.  How they come out of this will show the maturity of these companies.  Just trying to ride out the bad times is one thing.  But I’d be disappointed if they didn’t come out stronger with at least a few new differentiators that they didn’t have before.  Extra-ordinary times provide extra-ordinary opportunities!

My deepest condolences to all the innocent victims of Mumbai Terror attack last week. May you rest in peace!  As somebody who has spent time near the places of attack, it pains me to see the utter failure of Indian government in preventing repeated terrorist attacks.  Without getting into personal rants, I hope that India and its citizens wake up from the slumber and changes for the better after this repulsive attack.    It is heartening to see a new and long-overdue political activism starting to take shape in the aftermath of the attacks.    I also hope that these attacks do not dampen the business climate in India for the country’s economic development is a key factor in addressing some of the root causes for the problems that are facing India.

Good luck, India!

The other day I was chatting with somebody about outsourcing industry. The conversation turned to the term that has been widely been used recently – “reverse outsourcing” – Indian companies opening software development centers overseas. My friend argued that the main driver for this trend was that cheap labor was not available in India anymore due to rupee depreciation and wage increases; hence Indian IT companies are forced to look elsewhere.

Though there is some truth to this argument, I felt that it was simpleton logic. No doubt, Indian companies are encountering a slate of market challenges – maturing landscape, depressing margins, and talent crunch. There are other forces that are outside their control such as currency fluctuations, work visa issues etc. However, cost savings alone is not the driving force behind this.

This discussion got me thinking if the phrase “reverse outsourcing” had an implicit negative connotation. For me, reverse outsourcing by Indian companies is the next logical progression of their global growth strategy. Build global organizations, tap into new markets, get close to the customer’s business and execute better and more intimately. The game has changed from cost savings to providing overall value – no more hiding behind the low-cost model (anybody that is still in the outsourcing business based on cost proposition alone will not last long). This image makeover from world’s cheap back-office to strategic partner has been long due.

Over the years, outsourcing has become synonymous with “stealing local jobs and shipping off to India”. Though this perception has been changing, it is still looked down upon by general public. I understand media outside India using this phrase but I cringe whenever I see Indian media uses this phrase. Whenever a TCS or Wipro or Infosys opens an overseas development center, reverse outsourcing is generously used to report it. I’m not sure if it is a deliberate attempt by Indian media to get political mileage out of “creating local jobs” in US or Europe.🙂

I may be nitpicking but I would rather use the phrase “global expansion” instead of “reverse outsourcing”. Thank you very much.

The results of 2008 Black Book Survey are out and its overwhelming theme is that “customer” is back again. News flash to Indian IT service companies – Customer Service IS still a strategic differentiator.

A big so-called surprise in the survey results? The free fall of Infosys. The wheels seem to have come off at Infosys which has been pounded by customers– it slipped from a top ten placing last year to an ignominious 59th position this year. It goes to show that past achievements can carry your marketing message only so far.

No one can dispute the fact that Infosys has worked very hard to create a global Indian brand. Unfortunately, they may be the victims of their own success. My personal opinion, although unsubstantiated, is that Infosys has been focusing more on “marketing a message” than on “creating the right message”. They have squeezed every last ounce of life from the “World is Flat” phrase. If I had a penny for every time a top Infosys executive used this phrase so far, I would have given Warren Buffet a run for his money🙂

What Customer Service?

However, I think this malaise is not limited to just Infosys. Some other Indian IT companies may have been placed near the top in this survey but they are still a long way from being classified as truly customer-oriented. Being services companies, you would imagine customer service would be at the forefront of their growth strategy. Yet, it is surprising that for companies with revenues $3B or $4B, “customer service” is an after-thought for the most part. Sure, there are customer satisfaction surveys that are sent out periodically. Sure, the executives meet with customers on a regular basis. Sure, the sales/marketing teams reach out and treat the prospective customers royally. However, this responsibility is peanut-buttered across multiple units making it difficult to have a holistic and strategic focus. At fault is the this new culture of quarter-to-quarter focus that blinds them to what is good for customer and nickel-and-diming that encourages shortcuts.

Customer service is strategic.

The past decade has been very forgiving for Indian IT companies because of the availability of cheap labor and an early-mover advantage. I once heard somebody say that Indian IT companies are successful “despite themselves” – they have been riding the outsourcing wave at its peak and competition at its weakest. Now that outsourcing process has been commoditized wth fierce competition, most of the companies are ending up with similar service offerings. While moving up the value chain, building new revenue streams etc are critical to organizations survival so is customer service.  A unique and top-class customer service could be the key to breaking this homogeneity and differentiate from the crowd.

Indian IT companies could start addressing the problem of fragmented customer service responsibility by making customer service, a strategic business unit, to own the overall responsibility of customer experience.

They also have to “engage” the customers as opposed just communicating with them. While the rest of the world is moving to next level of service through various web 2.0 tools, most of the Indian IT companies are still stuck in the old way of doing things.

Should there be a Chief Customer Officer in Indian IT companies any time soon?

Going Green is probably the most fashionable thing to do – right after owning the latest gaming gizmo. There is universal support for green causes these days (tree-hugger isn’t an anathema anymore) and no demographic is more vocal on these issues than the younger generation.

A new study by Australian consumer agency, Choice may prick the conscience of Generation 2.0. The study rates most of the electronic devices and household appliances in their energy use. It has found that a Sony PS3 console when left running, will consume five times more energy than your average refrigerator! Other energy hogs were Xbox 360, Plasma TV sets, Desktop PCs. The study draws a debatable comparison between Apple iMac and a monitor-less PC saying that iMac uses only two-thirds of energy compared to a PC. The report also advocates a series of energy saving tips. The full report is available here.

As is in any developing market, the first few years are spent on getting things in working order. Efficiency kicks in when the industry has matured and every bit of productivity makes a difference to the bottom line. I hope reports like this create more consumer awareness and eventually force these companies to adopt much greener products.

On the other side, we are always outraged by our higher energy costs and almost always put the blame on anybody but us. We all need to go on a different kind of diet! Can we all watch our energy consumption like single-minded focus we bring to watching our weight? Turning off all electronic items when not in use may be the first step.