Indian companies are moving up slowly. The fact is that customers actually want you to move up the value chain and a few companies like Infosys have already made the transition. Most Indian software companies are still largely providing high quality but low end work.
Reeling under the burden of the US economy, which is seemingly headed for recession, the hassled country’s tech firms are preparing for tougher times. Dr Michael Cusumano, the Sloan Management Review Distinguished Professor at the MIT’s Sloan School of Management, throws light on the effect of the slowdown on Indian software industry and how companies must gear up for the future. Dr Cusumano, a consultant and author of several books. Ramanujam Sridhar on behalf of Deccan Herald caught up with Dr Cusumano, who was at SDM_IMD, a management institute at Mysore recently to deliver a lecture on leadership. Here is an excerpt from the interview:
Deccan Herald: Can you tell us about the impact of US recession on the Indian software industry?
Michael Cusumano: Yes, there is a strong likelihood of a recession but it is largely consumer oriented and will have a limited impact on the software industry that will probably be short term in nature. But the long term threats to the software industry are more serious and they are arising from the rising wages and the shortage of skilled manpower. A significant threat too is the fact that a variety of countries and regions like the Caribbean, Eastern Europe, China and Latin America are realising the value of outsourcing as a business opportunity and staking strong claims.
DH: Do you see a change in the business dynamics of software business?
DH: Do you see a change in the business dynamics of software business?
MC: The divisions between product and service are blurring. Earlier the software product companies like Oracle and SAP were selling the products and Indian services companies had taken up the implementation, maintenance and customisation of these products. With the wage rise that has recently hit the industry, it must be ahead of the curve and pay more attention to services R&D if it wishes to retain its position of eminence. Smart companies like Infosys and IBM have recognised this and are gearing themselves for the future. However, companies cannot afford to forget the fact that products are the main engines that drive the demand for services. There is a need to invest in R&D spending.
DH: Are Indian companies at the low end or the high end of the value chain?
MC: Indian companies are moving up slowly. The fact is that customers actually want you to move up the value chain and a few companies like Infosys have already made the transition. Most Indian software companies are still largely providing high quality but low end work. My advice to them is simple “Shape up or ship out!” There is a need for companies to get into the consultant mindset first. There is a constraint here though as Indian software companies have an overwhelming majority of their people as engineers. They would be well advised to look at management graduates in larger numbers to get a better business perspective of the software business and client needs.
DH: What is the way forward for Indian software business?
MC: Traditionally, software has meant different things to different nations, simply because they have a different cultural orientation. Let me explain. In Europe software is seen as a “science” dictated by formal methods and object-oriented design. In Japan software is seen as “production” given the pre-occupation with zero defects. In India software is seen as a “service” and there has been the rapid emergence and evolution of firms like Infosys, TCS, Wipro and Satyam to name a few. In the US software is seen as a “business” with global products like Windows, Microsoft office, navigator and global services being provided by companies like IBM, Accenture, EDS etc. The way forward for the software business in India is the realisation that future leaders will lead in basic research. The software industry in India must realise that the services business is presently labour-intensive and India will be hard pressed to keep up the growth rates as the rising cost of wages is already a pressure point.
The writer is the CEO of brand-comm and author of ‘One land,one billion minds’
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