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July 1-15, 1999 My CT Almanac Column |
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IT BUSINESS Getting Our Act Together When one aspires to be a successful player in the global market, one has to unlearn skills honed in an environment pervaded by licence/permit raj, subsidies, pseudo-swadeshi, quotas, entitlements and reservations. P. Venkatram
When one aspires to be a global player in the global market, and wishes to be in the same league as the best in the world, one has to unlearn skills honed in an environment pervaded by licence/permit raj, subsidies, pseudo swadeshi, quotas, entitlements and reservations. Performing to one's full potential calls for a lot more than creative accounting or engineering bull runs on the stock markets. Up the Quality Ladder Becoming world class calls for a relentless urge to excel. The discipline that leadership entails has to be part of the value system deeply ingrained in everyone in an organisation. Empire building, personal fiefdoms, nepotism, personal gain at the expense of the organisation, strutting around like prima donnas-all traits endemic to corporate life in India will have to be eschewed. There are a few organisations in the IT industry in India which have religiously built such a work ethos. These are the ones that have shown the way how it can be done. What's needed is to assimilate and internalise the values that have made them successful. A recent article in the May 29th 1999 issue of Economic and Political Weekly by J.L. Bajaj, analyses the impact of pay revision on the finances of the governments of Uttar Pradesh, Madhya Pradesh and Maharashtra. The choice of these states for analysis is appropriate considering that UP and MP are low income states, while Maharashtra is among the high income states in the country. UP is the largest Indian state, population wise, and therefore has the maximum number of seats in parliament. MP is the largest state in terms of area and is also blessed with rich natural resources. A summary of the picture of state government finances that emerges from Bajaj's article. Since 1991-92, the total expenditure as a proportion of GDP has remained stable, and the level of state activity has not increased very much. However, the share of revenue receipts of states in GDP has declined in this period, while there was not much change in revenue expenditure. Even before the commitments on account of the recent salary revisions, some states were in financial trouble. Since 1991-92, the own tax revenue of states has been about 5.8 percent of Gross State Domestic Product. State of the Nation The states are competing with each other in providing incentives for new investment. MP and UP have adopted the most expensive open-ended sales tax exemption scheme, which violates all criteria of efficiency. Because it is open-ended, it has adverse impact on revenue and causes unintended effects on resource allocation. In all states there is heavy pressure on the allocation of funds for maintenance of capital assets. In theory, capital expenditure should be self-limiting and self-financing, and should create productive assets. In practice, this has not been so and capital expenditure gives rise to more revenue expenditure without any corresponding increase in receipts, thus increasing the fiscal gap. The states are faced with a situation in which the wage bill will substantially increase on account of the pay revisions. The number of state government employees has not significantly decreased in recent years. In view of this, large scale retrenchment of staff is not feasible. Unless there is a regular adjustment in tariff by public utilities, the gap between cost and revenue would keep on increasing. Revision of salaries will have a crippling effect on the finances of all state governments. As the additional expenditure in most states will be between 2.5 and 3 percent of GSDP, a large fiscal correction will be required. However the state governments have not made even a modest beginning to re-prioritise expenditures and improving expenditure control, despite facing a large increase in expenditure. Bajaj's observations in the context of UP are very pertinent: "Even prior to the Pay Commission's recommendations, the activities of the state government largely centred on its employees. The management of their problems has become the primary concern and development issues are low in priority. Political parties have been utilising the state's staff to further their interests, and politicisation of services has become dangerous. Employees perceive the politicians as patrons and tend to ignore the larger public policy objectives. The result is that there is private gain at public cost." From the above analysis it's easy to see that the recommendations of the PM's IT Task Force for a 3 percent allocation for IT out of the total budget for government departments is going to be difficult to fulfil in practice. Therefore it would be unrealistic for the IT industry to expect any significant business from the government sector. The imperative is to work fast in getting our act together, now that a lot of hurdles on the policy front regarding setting our sights on the global market are out of the way. Given the demand-supply gap for good quality software engineers to fuel the growth of those companies that are at the high end of the value chain, be it domain consulting or system integration services, the information technology industry will have to come up with imaginative ways of fulfilling its manpower requirements. The model proposed for the Indian Institute of Information Technology, Bangalore (IIIT-B) is a step in this direction. It combines the academic rigour of a post graduate course on the lines of IITs/IIMs/IISc along with vendor certified accreditation through lab courses in specific software tools and related technologies. The huge market for IT enabled services would need a similar approach to blend usage of tools and technologies with generic education, as also vocational courses dealing with the manufacturing and services industries. One does not require MCAs or engineers to address the needs of this market. The writer is vice president, Siemens Information Systems
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As we near the end of the
millennium, and the turbo charge from the Y2K opportunity to the top and bottom lines of
the Indian IT industry dissipates, the jury is out on how many companies have sound
strategies for the long haul in the global IT market. The market opportunities span the
entire spectrum from IT-enabled services, through outsourced offshore software development
contracts, onsite consulting and system integration services, IPR (Intellectual Property
Rights) through packaged software development, and IPR though re-usable objects devolving
into component architectures for specific applications. 
