Not Much Has Changed…

Much has been written about the outsourcing debate.

Americans are becoming more and more outspoken about their disapproval of the idea and there are many groups that question the way visas are being handed out to ‘aliens’, particularly Indian aliens.

The current socio-political context in the US has further exacerbated the issue. Both Hillary and Obama are playing to the gallery and have sent unmistakable anti-outsourcing messages. The US Sub-prime led recessionary symptoms have made demands to protect local jobs even more vociferous.

Indians are also being accused of abusing the visa mechanism.

But parallely there are also several groups that think the opposite. Bill Gates in particular has always been a very open advocate of increasing the H1B visa quota and has been suggesting that the country in fact needs more skilled workers.

Bill Gates has, in many interviews, praised the ability of Indian resources to work hard, think smarter and deliver superior value. Microsoft is one of the two American companies that file the most H1B visa applications.

Well that’s all good.

But sometime back I was reading an article – it was in criticism of the American corporations that invite cheap labour from countries like India. The article compared the eagerness of US corporations to use cheap imported labour to what had happened long back during the slave trade era.  This gave me a different perspective of the whole issue

The parallel though debatable, is certainly not invalid – at least in my opinion. It is true that the Americans want cheap labour and find Indians their best value for money. There is no great compliment here – if you will allow me to point out a fact without emotion. Think about it. What happened to the Africans is now happening with Indians.

Oh yes, today the context is vastly different. There is no physical labour. There is no whipping. There is no abuse. But there are hourly rates, delivery dates, time sheets, and SLAs, Penalty clauses. We may wear ties and eat at the same table. But the equation in the relationship is not too different.

Debatable. Yes.

The truth is that even after a decade or perhaps more since we got on the IT wave, our dependence on labour arbitrage is still quite significant. We are allowing ourselves to remain at the lower end of the value chain where the risks are low, profits are reasonably high (thanks to the big gap between the rupee and the dollar) and costs are low.

If you are from the IT industry, can you deny that at-least one of your sales guys in the US is still selling ‘3 java resources and 2 SAP MM consultants’?

That’s the point. And our reluctance to let go of that pitch, our fear of failing with a new pitch, our low risk-taking apetite is all rather sad.

Is it safer to be a super-performing slave than a performing peer and equal?

I started to write this because the following excerpt disturbed me. Why I am not sure. This piece is from a two month old Gartner news analysis –

“To paraphrase Nobel prize-winning economist Robert Solow, concerns about how a potential U.S. recession in 2008 will negatively affect IT seem to appear in many places, except in the economic data. Therefore, while a recession may still hit the U.S., we as yet see no evidence that IT spending — especially new IT capital spending — will experience negative growth in 2008.”

– Gartner, February 1, 2008 : “IT and the Economy Update: No IT Recession in U.S.

Yet, The document summary is worded thus:

“Despite troubling economic times, Gartner’s preliminary view finds no signs yet that enterprise IT spending in the U.S. is experiencing negative growth.”

However, under the recommendations, Gartner does propose two action points to buyers –

  • Create a team that will be responsible for cutting IT costs in 2008.
  • Be ready to deploy a cost-cutting team/plan on the same day that senior executives issue a cost-cutting directive.

The same day?!!

This drove home a point to me. Not sure how you see it. But let me present my view to you and you could share your reactions with me.

The Y2K was fine. The labour arbitrage was OK too. All good as an entry point. The need to move up the value chain has been discussed to death from the first day. It made sense because it made business sense. It made sense because it meant better billing rates. It made sense because it looked good in Annual Reports.

To be fair, we have managed to move up the value chain a little bit. Infosys, Satyam, Wipro and the likes have established consulting arms to provide high end – or shall we say higher end from where we stand – services. There are more Indian product companies today and they are making profits too.

But there is one thing that hasn’t really changed.
Our attitude towards the customer. Our approach to business. After a decade of phenomenal show of capability and performance, we still look up to the customer with eagerness. We want to be told what to do.We still feel small. We still ask for what needs to be done. We still wait for directions. We still take calls at 6 am because that’s the time ‘the customer’ is in his office.

Think of all the cultural clamour in the US, the slave trade parallel and the anti-India sentiment.

What we really need now is a huge shift in our thinking and in our attitude towards customer, business and our business models. C.K. Prahalad and M.S.Krishnan in their new book “New Age of Innovation” mention how Indian companies haven’t adapted their business models to keep ahead of changes in economies, markets, technology etc. They point out that Indian Tech companies are still stuck on arbitrage model. It is a flaw to continue linking growth in revenue to the number of resources hired.

We now need to change gears and do business in such a way that we can talk down to customers. I don’t mean in a condescending disrespectful way, but down from a position of greater strength. For, you can’t anymore look up to the customer for commands when you want to wear the consulting hat and show him direction. You can’t provide direction when you want to be led.  If you are wearing the consulting hat, you need to step on a higher altar and be worthy of it.

We have to enter into engagements not with the objectives of doing well as we are told, but with the objective of seeing how we can make a difference.

When we do that, we will have assumed a position that would accelerate our movement up the value chain more rapidly. We will be surpised that we can take calls during our working hours. That our weekends and Indian holidays are respected too.

And the answer is all in our minds. A change in attitude. And innovation. Lots of it.

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3 Comments, Comment or Ping

  1. meena

    1

    that may be true for some other countries too. Foreign software experts are attractive to U.S./uk-based companies, because they can be paid lower salaries. but then, as long as there is demand there will certainly be supply. so it is a cycle that is not likely to break easily

    [Reply]

  2. Om

    2

    Its an “unwinnable” debate. What I have seen on the ground – Innovation and change in the way we service sounds good.

    If you consider the cultural heap that we have transcend through to make us heard, its pretty unmanageable. You need to start somewhere and to start from the bottom is the easiest, risk free evolution. Obviously if the top stack is there for the taking take it.

    I have seen opportunities having lost with a mindset of innovation and the way we provide solutions. I was recently in Germany for a big chemical comp, who were pretty nasty about their observation on Indian companies but had a corporate mandate to adopt offshoring. Considering the cultural blockade, had to adopt an evolutionary way of first partnering with them at some point and eventually scale up the value chain.

    But for sure we are being heard even in closed cultural domain we are making inroads. I would look at the situation more optimistically and treat the resistance as manageable since its visible. The more noises you hear the more apparent is the way forward.

    Easy money on the table, some one has to take it. If we dont some one will. Art of business ??

    [Reply]

  3. Jaisundar

    3

    @Om: In fact that is a very interesting thing you have pointed out – we have been in the business for over 20 years as an industry and we are more or less now veterans, what with Indians providing the Know-how to other up coming outsourcing destinations. The longer we remain at the same rung, the harder it will be to break perception that we can only do T&M work and this is probably what you experienced in Germany!

    The move up the value chain has always been expected to be gradual. I think a simple way to speeden that is to aim at a % of business that would come out of such business and keep that % growing – sounds too simplistic, but when our top companies start putting numbers, percentages and announcing those to the market, it will also be seen by investors as qualitative growth. And when investors demand that growth, then it would become a worthy drive. Whats more, a me-too effect may benefit the whole industry.

    Someone has to take that hard call and gather the guts and will to pull it off and slap those numbers to hard targets!

    But then, at the end of it all, as Meena says above, it’s all a matter of supply and demand.

    [Reply]

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