South Asia
India: Ready for Business
Yesterday I attended a luncheon meeting and speech by Azim Premji, head of Wipro. A man known worldwide, and in India, as one of the leaders of India’s new IT age, his words were a necessary reminder of what is right - and wrong - with India. People look at India and despair. Others’s see long-term business potential because of our multi-lingual and english language skills, or engineering abilities. In the end, however, it comes down to one thing.
Indians - and India - are succeeding, because they are driven to. From the day they are born children are raised to ‘make something’ of themselves. Parents guide children to engineering, medicine, or architecture. Very little can stand in the way of that success. They speak many languages, and are happy to learn more. They speak English. More important they think English, and prefer it to or mix it shamelessly with their mother tongue (as I and many of my peers do). Leaving strong family ties behind, they are mobile and happy to move out. Parents, who are traditionally supported by their children in old age, are equally supportive, if not necessarily happy. In the end, they succeed because they can adapt and change.
Equally, Indians are succeeding because they believe they can and deserve to. People handling outsourcing projects in India don’t worry so much about what happens to the American they replace. It is a meritocray. If the looser is American, too bad.
American’s should like that view. It is what built their country. That and the armies of Germans, Italians, Irish, Chinese, and Japanese that worked on that belief. Curious then, that America is closing down even as the rest of the world - even Europe (IHT, FT) - is opening up.
Discussion
3 comments for “India: Ready for Business”
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Of most business leaders in India, I have a certain low opinion of Azim Premji. Of course, he has done a great deal for Indian IT industry but when you look at his stockholding pattern you realize that he is not much of a believer in sharing his wealth with his employees- no wonder most of his senior management keep leaving Wipro. He holds nearly 80% of his company. Compare this with Bill Gates or Narayana Murthy who hold less than 10% of their company.
I wrote some blogs regarding Indian position in the world business.
Is the world flat?
http://windia.blogspot.com/2006/08/is-world-flat.html
Why Infosys can’t be a product making company
http://windia.blogspot.com/2006/07/why-infosys-cant-be-product-making.html
Sujai
Sujai,
I don’t know Wipro’s structure but even if what you say is right, why should Azim Premji have to share his company’s wealth with his employees? It is, after all, his company and hence, his choice. I guess he doesn’t have to worry about Bill Gates, or your opinion, so long as his current shareholder pattern works for Wipro (and it seems to). And if you prefer examples, private ownership is quite common. Ikea, for instance, is not even publicly listed.
I went through your post on product-making companies in India, and frankly I think your emphasis on product-making is somewhat misplaced. Sure, its sexy to have product making companies, and yes services companies don’t scale as well. However, product companies also have scale limitations (it takes more engineers to make more products).
Most of all, you ignore that the largest companies are, in fact, services companies. Look at IBM, Lucent, Cisco in the tech. sector. They are both product and services companies, and IBM is perhaps the clearest example of a trend towards service orientation (it sold its product-driven PC business to Lenovo). Most major consulting outfits - McKinsey, Deloitte to name a few - are also service businesses. Take telecom as a sector and you only have service companies (Verizon, Vodaphone, Airtel, Orange). So why exactly are product-oriented companies better?
I do think both are important, not because one scales and the other does not, but because they both require innovation of a different kind. It is often service businesses that drive innovation in product development through competitive pressures. So a telecoms business will ask for faster routers, a retail outlet will ask for more efficient lighting, medical services company will ask for better imaging machines - and this in turn will drive innovation in products.
Dear Dweep:
According to me Lucent, Cisco, etc, are not software services company the way our TCS, Satyam, Infosys are modelled. I do emphasize that we need to have companies like Cisco - which drive technology and products.
Services companies like Citibank, Vodafone, etc, serve individual consumers and enterprises. Companies like TCS, Infosys in turn serve customers like Citibank and Vodafone. There is a big difference.
McKinsey, Deloitte, etc, can prevail and sustain in only those geographies and economies where there is need for their services- which happen to be high tech manufacturing, large scale production and technology driving economies.
IBM has the required competency and experience because of its rich background in creation and driving of technology segments. It does not come in the same league of other Indian software services companies.
My emphasis has been on technology driving and product making companies. And I emphasize on creating ecosystems. McKinsey, Charles Schwab, etc, feed on such ecosystems. I believe Indian software companies like Infosys, TCS, etc, do not create such ecosystems. While, Tata, Mahindra, etc, do create such ecosystems. With good policies, Indian Defence and ISRO can create such ecosystems.
In my blog, I gave reasons why a company like Infosys cannot transform itself into creating such an ecosystem.
I don’t think making products is sexy (unless of course they are creating more Aishwarya Rai s ;). Its is nothing to do with glamour either. It is the ability to drive technology and reap its rewards. Who is reaping the rewards for an innovative product like Apple Ipod? Apple or taiwanese manufacturers? [and who is benefiting from trickling revenues?]
Please look at some of the examples I gave in comparing how our Indian software services companies make revenues compared to companies like Microsoft, Google and Nokia (they are all technology drivers).
You said:
“However, product companies also have scale limitations (it takes more engineers to make more products).”
Apple makes $14B with 17,000 employees while Infosys makes approximately $2B with 50,000 employees. Apple can double the sales of Ipods without having to double its employee strength, while Infosys has to become a 100,000 employee company to make $4B. The difference is that for a technology company, growth is not linear.
Coming to Wipro and its shareholding structure. A company can share wealth with its employees without having to go public. For a country like India, to be able to become an economic power, more and more wealth makers have to share their wealth with their employees, unless of course if you want to make a country like Liberia or Russia where there are very few rich people benefiting from diamonds and oil while the whole country fights poverty. A lot of things ’seem to work’ - like, sweat shops, child marriages in India, dowry system and corruption. And untouchability in India worked for two thousand years. All things that ’seem to work’ need not be the best things.
Thank you,
Sujai