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GUEST COLUMN
The Silver Lining
Indian IT firms are best placed to offer quality
software services at lowest prices
By Azim Premji
 The
media is full of news about a slowdown in the US economy after several
years of robust growth and its effect on Indian software services businesses.
I find the discussion to be a bit misinformed. Let me capture how Indian
brands like Wipro are uniquely positioned to weather such downturns and,
in fact, to turn them into an opportunity.
The slowdown in the US economy does not mean
that there will be negative growth, but only slowing down of the growth
rate. NASSCOM recently revised its growth rate projection for 2001-02
from 52 per cent to 40-45 per cent, which is a growth rate many sectors
of the economy would be envious of.
We derive a little over 60 per cent of our software
services revenue from the US market, which means that there is another
40 per cent where the past growth rates will be maintained. These geographies,
which comprise largely Europe and Japan, still have a smaller base of
IT infrastructure and are growing faster than the US. For instance while
we grew our business last year by over 50 per cent in the US, we grew
it by more than 100 per cent in Europe and Japan.
 Wipro
has a unique advantage as more than 50 per cent of its revenue is generated
by technology software services (as compared to enterprise software services)
where our customers are the chief technology officers and not chief information
officers. Expenditure on technology is less sensitive to spending cut
in economic slowdowns, and to that extent the impact on Wipro will be
less.
Our domestic IT business has helped us hone
our skills on the Indian market and leverage them for our global customers.
For instance, our global support business started as a domestic business
for Indian corporates.
Lastly, at Wipro we have witnessed several downturns
in our over 20 years of domestic IT business, and in each year we have
remained profitable. The mantra for facing such downturns is simple: run
a tight ship, evaluate every expense-capital or otherwise-carefully, raise
productivity of year after year and do not lose sight of the customer.
The current downturn will have its own silver
lining. I will mention two of them. One, the outsourcing of IT services
by companies in the developed world would increase as the cost-takeouts
become a priority for them. Indian companies are best placed to offer
the price-quality benchmark.
Two, I believe that the body shopper model is
on its back and that while quality software companies in India will continue
to have opportunities, there will be fewer opportunities for free lancers.
This is good because it will mean a more stable career path for employees
and a more stable employee base for companies.
The other part of the misinformed discussion
is the possibility of layoffs by Indian software companies. If the industry
is expected to grow by 40-45 per cent next year, where is the question
of layoffs? The software industry as a whole will be recruiting more professionals
if this performance has to be achieved. At Wipro, we have appraisal processes
to manage the bottom performers every year to improve the talent pool
of the organisation. Otherwise, we have not faced any layoff situations.
Let me emphasise here that the demand for talented professionals would
always exceed the supply.
Wipro is a global IT services company. We serve
customers in a large part of the globe, and our software factories are
located currently in India because it happens to provide the best price-quality
equation at the moment. We will develop software at locations, which are
the most cost-effective. If tomorrow this happens to be China, we would
not hesitate to start operations there. However, for the next couple of
years, I do not see China overtaking India on cost effectiveness.
Finally, Indian companies are still far off
from charging their customers US prices for comparable quality of work.
Our effort is to build our brand and value equation so that customers
see more value in working with us.
(The author is the chairman
of Wipro Corporation.)
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