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Saturday, April 16, 2011

Will Indian IT firms ever achieve the holy grail of non linearity?

Pick up the annual report/conference call transcript etc of any top Indian IT services provider, and a phrase jumps out at you 'non linearity'. Simply put, it means how do we grow without adding people in the same proportion. To understand this theme better, lets breakdown the businesses of these firms into labour intensive(support, development, BPO etc) and IPR intensive(licensing platforms, patents, products like SAP). Consulting is a curious hybrid of the two. Naturally, the latter(IPR intensive) is what carries the maximum bottomline boost, and it is this that companies aim to achieve. For this however, they need to invest in R&D and hire the right people. In this context, the Chief HR officer(and former CFO) of Infosys Mohandas Pai had some interesting comments in a Dec-10 investor presentation(http://www.infosys.com/investors/news-events/events/Documents/HR-trends.pdf). He said that they mainly needed three types of skillsets
  1. Platform creators:-people with an integrated enterprise view(architects, designers, product engineers)
  2. Operational:- People who could master a given system and become very productive at that
  3. Domain experts: Mainly former consultants who can use their domain knowledge to enrich the platform by building in non linearity
At the factory level(operational), we can use BPO talent while we do have many domain experts.But it is at the platform level that the strategy may collapse. With the creme de la going for MS in USA or MBA in India, IT cos find it hard to retain talent in the industry long enough for them to develop that integrated enterprise view. And that may prove their Achilles heel. While some companies have managed sector specific non linear growth(such as Polaris in banking), there is still a long way to go. And given the rapid emergence of East Asian countries(like Philippines) in BPO and East European countries in value added services, the competition is becoming tougher. While cos are aware of this at the strategic level, the infrastructure and talent crunch may prove the last nail in the coffin

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