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NS Ramnath
NS Ramnath
I write about business and technology

Infosys gave the clearest indication in the last few years that it is putting growth ahead of its obsession with maintaining margins.

The favorite indicator for Infosys watchers is of course the guidance. Infosys has always been conservative about it – almost always trying to outperform the number. Today, it revised its 2014 revenue guidance upwards to 9-10% from 6-10% earlier. The higher end of guidance hasn’t changed. But it’s still important for two reasons. One, markets often guage performance based on the mid point, and the mid point has moved a few notches higher. Two, the lower range indicates management’s confidence. Besides, Q2 revenues beat estimates by analysts and the stock market responded by pushing the stock up by over 5%.

Yet another indicator that Infosys watchers look at is SD Shibulal’s major theme. Shibulal tends to repeat certain words that reflect his own thinking. A few quarter back it was ‘we are running a marathon’, and then it was ‘cautious optimism’. This time it’s probably growth – based on his statements to press so far. (He will be addressing a press conference later in the day).

The third indicator relates to what Infosys says about margins. Infy watchers expected the company’s margins to go up on the back of higher utilisation and weaker currency. Utilisation in fact increased by 130 basis points to 73.7%, and the currency story is well known. However, the margins remained flat quarter on quarter, and actually declined year on year. (In part because of $35 million provision towards visa issues, and in part because of wage hikes.)

This should also be seen in the background of the management commentary. While they continue to talk about growth plus margins, there is a subtle change. The obsession is no longer about quarter on quarter margins, but about margins over time. Which means, Infosys will be willing to let go of margins for a few quarters provided it evens out over several quarters.

While this might seem obvious for growth oriented companies, in case of Infosys it was a huge mindset challenge. The mindset was shaped at a time when the underlying demand momentum gave it the growth, and its obsession with margins gave it a huge premium in the stock market. When the momentum slowed, it looked as if they lost the path, and the managers were unwilling to change the policies – partly because many of them were made and championed by NR Narayana Murthy and also because those gave them huge success in the past.

Now that NR Narayana Murthy is back in the drivers seat, it’s easier for Infosys to change them.

Ashok Vemuri, global head of manufacturing and the Americas at Infosys, has resigned and will be joining iGate Corp. While iGate hasn’t confirmed, Economic Times reports that Vemuri will in fact be moving to the company that hit the headlines after it fired its CEO Phaneesh Murthy in May this year. iGate has been on a hunt for a new chief since then. Its search was widely followed and passionately discussed because of the outsized image Phaneesh had in the industry. In fact, what differentiated iGate from other mid-tier companies was Phaneesh himself – with his supreme confidence and superior salesmanship – and the way he positioned the company around the (less popular) outcome based pricing model. In effect, this meant a new CEO cannot simply take over from where Phaneesh left. He will have to establish himself afresh and create a new identity for the company.

Vemuri is not Phaneesh. But he might just be the right person to head iGate. He was a contender for CEO post at Infy; he was in charge of its biggest market, and doesn’t lack in ambition. On the flip side, the issues that iGate faces are very different from and more challenging than the ones that Infosys does. The broader market is not exactly conducive for mid-sized IT services companies right now, and iGate has its own internal issues including Patni integration. On balance however the consensus is that Vemuri will have a positive impact on iGate.

On the other hand, his move is mostly seen as a negative for Infosys, not just because he held a $2 billion portfolio, but also because his is the third big exit in the last two months – Sudhir Chaturvedi, Infy’s US head of financial services resigned last week and Basab Pradhan, its global head of sales quit last month.

Yet, this should come as no surprise for two reasons. One, ever since Narayana Murthy took over as the IT major’s executive chairman there has been a big shift in Infosys in terms of power. Insiders say while SD Shibulal, Infosys CEO, was happy to give more power to top managers (such as Vemuri and BG Srinivas), under the new chairman decision making is getting more centralized. The chairman’s office never had so much influence as it does today.

Two, leadership change in any organisation results in high profile exits, and Infosys is no exception. It might even do good, as it gives more space for Murthy. (One of the management concepts that influenced Murthy’s thinking as he considered returning to Infosys was ‘transient advantage’, proposed by Rita Gunther McGrath, a Columbia Business School professor. In an article in HBR, she wrote: “In a lot of companies, the more assets and employees you manage, the better. This system promotes hoarding, bureaucracy building, and fierce defense of the status quo; it inhibits experimentation, iterative learning, and risk taking.” McGrath called this empire building trap. Interestingly, it’s a term that Infy an insider used to describe the situation there while I was reporting for a story on its strategy.)

The issue that Narayana Murthy faces is something different. When he returned to Infosys, Murthy brought in his son Rohan Murty, a PhD in computer science from Harvard, as executive assistant – which went against his stated principle of not letting the children of founders work in the company. He said Rohan was around only to make him more effective as chairman. More recently, it emerged that Rohan would be designated as Vice President, a move that was not looked upon kindly even by those who were forgiving the first time. (What next?) The big risk that Murthy faces today is not that he is letting talented people go, but that he is letting his cherished principles go.

IT and manpower
It’s common knowledge that of the top four companies TCS and Cognizant are doing well, while Infosys and Wipro aren’t. There’s another connection – the degree to which they are concerned about managing a huge manpower. While TCS and Cognizant do speak about non-linear growth, Infosys and Wipro give an impression that they worry more about this issue than their better performing rivals. During a visit to Forbes India’s Mumbai office last year, Infosys CEO Shibulal called the pace of recruitment unsustainable. In interviews to Mint  and Times of India, Wipro CEO TK Kurien makes a similar point. Kurien was always a big fan of automation in services sector, and now as a CEO, he seems to be keen on taking the company in that direction. As you read the following extract, pay attention to his vocabulary:

“Ultimately there are only three stages that you go through in any process…The first question is: why can’t you automate the process completely and remove all humans from it? The second one is: even if you have human intervention, how can you minimize the human intervention to only decision-making roles? And the third is: where will you have people who have got hired where you need higher customer touch? Fundamentally, what we’re doing is moving more people in front of the customer, typically people we call value creators…
On the other end, what we’re doing is downsizing our factory significantly because we believe if you don’t have an efficient factory, you never will be competitive globally.”

One can argue that since Wipro is not doing so well on the growth front, it’s just a way of turning the attention towards margins. And that the language will change once the momentum comes back. May be so. But, in the long run, this is the way companies will have to think by default.

 

Immigrants and Silicon Valley
Here’s an interesting paragraph from a Technology Review story on visa issues in the US

The imbalance between the value of immigrants and the visas available to them has prompted many efforts at talent arbitrage. In 2007, Microsoft opened a software development center in Vancouver, Canada, to stow workers it couldn’t yet bring to its Redmond headquarters. In San Francisco, there’s talk of a “floating Googleplex” that could house startups on a boat in international waters. This year, Canadian officials placed a billboard on Highway 101, the major artery between San Francisco and Silicon Valley, inviting entrepreneurs with immigration problems to “Pivot to Canada” and move their startups north.
More..

 

Chromecast: It’s Google’s attempt 3
Bloomberg points out that Chromecast is Google’s third attempt to get into your living room. The first was Google TV. The next was Nexus Q.

 

Also of interest

  • 9 common startup ideas that haven’t broken through… yet | The Next Web
  • The Physics Of Usain Bolt’s Record-Breaking Sprint | Popular Science
  • The Real Power of Enterprise Social Media Platforms | HBR Blogs

 

Facebook’s mobile ads
When Facebook came up with its IPO last year, one of the biggest concerns among the investors was around its ability to make money as its users shifted to smart phones – one of the points we raised here. By many accounts, there will be 5 billion smart phone users in the world sooner than later, changing the way people interact, do business and live their lives. There was a feeling that Facebook would find it tough to compete against social mobile apps such as Whatsapp or Snapchat. Facebook’s latest quarterly results – its revenues went up by 53% and more importantly mobile revenues grew more than what most analysts expected – suggested that it could do well in the mobile future as well. When Facebook’s mobile ad service was launched, it was widely expected that it will put off users. (I personally think it does.) But, it appears, not enough to make people go away. Not only has its user base gone up, the number of users who access the site daily has increased as well. Its mobile users surged by more than 50% to over 800 million users. No one knows if this trend will continue. But Mark Zuckerberg, facebook’s 29 year old founder, has a reason to smile for now.

 

Google’s Chromecast
In media business, there’s a truism that companies compete not so much for your wallet as it’s for your time. That applies not just to television channels, news papers and magazines, but also to companies such as Google and Apple. When they launch a new product or a service, in effect, they are trying to capture more of your time. A case in point is Google’s latest product Chromecast. By launching it, as this Reuters report points out, it’s definitely getting deeper into hardware. But, getting into hardware is only incidental. It’s really trying to get into your drawing room, and see how you can spend more time with it. Today, it will have to be a conscious decision for you – you have to buy a dongle. Tomorrow, it might not be.

 

Working from home
Teresa Amabile and Steve Kramer write in HBR blog

For several weeks earlier this year, we collected daily electronic diaries from the employees of the HR department in a New York bank. Although we weren’t looking for it, one particularly interesting pattern popped out of the data: strongly positive comments from employees on the occasional days that they worked from home. Again and again, we saw people writing about how refreshing it was to be freed from office distractions and to have the opportunity to catch up on work.

More..

 

Also of interest

  • CEO sweetens Dell offer to $24.6 billion with vote change | Bloomberg
  • Is your organization ready for total digitization? | HBR
  • Software Makes Internet Up To Three Times Faster | Discovery
  • How Uncle Sam is helping U.S. tech companies win security deals | Bloomberg

 

IT demand seems to be picking up slowly, but…
Last year when journalists asked Azim Premji about his outlook for IT sector, he said he expected things to turn better during the second half of 2013. He might have been right. IT executives speak with more confidence about the demand – not least because US economy appears to be gaining momentum. The volumes last quarter picked up for both Infosys and TCS. But it wouldn’t mean more jobs. Like we have argued earlier, companies have low utilisation rates, and the bigger demand won’t reflect in fresh hiring till that picks up. Last quarter, net hiring by Infosys and TCS was the lowest in four years, according to Business Line.  The biggest losers will be the freshers. Mint reports  Nasscom president Som Mittal as saying, “With the hiring pattern changed, we would have only about 40% of hiring from campuses and the rest will be lateral hires and just-in-time hiring so that we can forecast the attrition and business better.. The business is so uncertain that we don’t want to give a large number of offers and extend their stay.”

 

Bigger is better, but…
While reporting for a story on Polaris, one recurring theme I heard from industry executives and experts was around the ability of mid tier firms to bag big deals. Polaris itself had a large customer in Citi. But that came through its acquisition of Orbitech which used to be an IT arm of Citigroup. The big question was whether mid-tier firms have it in them to attract talent that would open boardroom doors and help them bag 100 million dollar accounts, if not more. The underlying assumption is that to succeed in IT you have to bag mega accounts. A recent report from JP Morgan questions that assumption – saying beyond a point the returns aren’t that high. The authors write: The message is that Indian IT firms must find the right balance between (a) cultivating mega accounts, (b) farming the “bulge” or mid-tier accounts (typically, the USD 20-50 million per year accounts) and (c) “hunting” (new business or scaling up sub-scale accounts)

 

The online advantage moves offline… through your mobile
“…even though retailers seem to know more than ever about how shoppers behave, even though their efforts at intelligence-gathering have rarely seemed more intrusive and more formidable, the retail business remains in crisis. The reason is that shoppers are a moving target. They are becoming more and more complicated, and retailers need to know more and more about them simply to keep pace.” Thus Malcolm Gladwell in his 1996 essay The Science of Shopping. Now, the retailers have another weapon to aim at these moving targets – mobile phones. New York Times has an interesting story on companies that take the advantages that online retailers such as Amazon had to brick and mortar companies.

 
Also of interest

  • Douglas Engelbart’s Unfinished Revolution – Computing pioneer Doug Engelbart’s inventions transformed computing, but he intended them to transform humans. | Technology Review
  • Tech Giants Want to Win Same-Day Delivery — Even if It Never Makes Money | Wired
  • Apple’s Results Boost Asian Suppliers | WSJ
  • Is Flipboard a partner or a competitor for publishers and content creators? | Gigaom
  • Who Honestly Wants Bill Gates To Come Back And Run Microsoft? | Techcrunch

 

Infosys: Does HR Matter?
Just before the financial crisis, the top management in Infosys was busy designing a system that would address several issues related to how it managed employees. It was called ‘Infosys Role and Career Enhancement’, a boring corporate term that shortened to a more exciting ‘iRace’. The idea behind iRace was to make sure its employees got a good grounding in technical skills – no one was to get a people management role before putting in eight years of technical work; it was to empower its employees – the ratio among technical leads, technical analysts and engineers expanded to 1:3:9 from 1:2:4 or 5 earlier; and more importantly the idea was to reward its best performers better by narrowing the circle of high performers. When it was launched the managers were happy, and some observers thought it would be a game changer for Infosys.

Things didn’t exactly turn out that way. In a culture (not just within Infosys, but in the industry as a whole) where career growth means ‘becoming a manager’ (unlike in US, where engineers could grow in technical stream close to the top) many employees felt they were being held back by the eight year rule; the new, flatter organisation left more employees unhappy with their ‘demotions’ than the employees who were happy with their wider span of control; and narrowing the circle of high performers got pretty much the same response as Indian government’s attempt to narrow down the number of poor people.

Some Industry insiders I spoke to at that time considered iRace a failure, and they pointed out to a rise in attrition rates following its implementation. But, a couple of them said in calling iRace a failure, we might be confusing correlation with causation. iRace simply happened at a time when Infosys was going through a rough patch. Employee dissatisfaction and attrition were a result of its poor performance in the IT services market, and not a result of iRace. (In fact, the causation, according to some studies run the other way – poor organisational performance leads to unhappy employees.) We will never know.

These explanations are worth keeping in mind while we read today’s story in ET which talks about Infosys rewarding its top performers further than it used to earlier. It’s important because it underlines the limitations of HR initiatives – even when it involves something as tangible as money – when the overall performance is sluggish. Even if this works well, it will be a stretch to tie this to Infy’s topline growth (which is its core problem).

In other words, we have to look for initiatives that address the core problem of Infosys – the performance of its ‘business operations’ segment (which includes application development & maintenance, infrastructure management services, testing and BPO). That’s the crucial part, and is probably tougher than rewarding top performers with more money.

 

 

Tech Mahindra – Mahindra Satyam is now Tech Mahindra: Welcome to the TWITCH
Five years back, the names of the top five IT Services companies lent themselves to an acronym (for which IT executives seem to have a fascination for. Refer to iRace above). Satyam, Wipro, Infosys, TCS, Cognizant and HCL Technologies were collectively called Switch companies. After Ramalinga Raju made his infamous confession and it became clear that Satyam’s numbers were inflated, there were jokes that Switch has now become witch. Today, Tech Mahindra announced that it has formally amalgamated Mahindra Satyam with itself. It will be called Tech Mahindra. The combined entity – with $ 2.7 billion in revenues and 84,000 employees – is large enough to break into top five. I am not too sure if the IT players will relish calling themselves Twitch. After all, they can do well without ‘short, sudden jerking or convulsive movements’.

 

 

Also of interest
The Big Fight: Details emerge on $5.2 billion loan for Icahn’s Dell bid | Reuters
The Age of Frenemies: Microsoft Joins Oracle in Cloud-Computing, Rivalry Thaws | Bloomberg
It’s closer than you think: Spate of Cyberattacks Points to Inside India | WSJ

.. and certainly bad for Indian IT companies.

As US senate debates the H1B visa regulations, there’s a big question its members will have to face: some of the proposals are good for its big tech firms, but are they good for American engineers?

If you look at IBM, one of its most iconic brands and a company that Warren Buffett, who after years of resisting technology investments, recently placed his bets on, the answer is ‘probably no’.

Before we go into the reasons, here’s a quick background.

It’s no secret that IBM has been competing with Indian IT Services firms for several years now. It started at a time when Indian IT companies such as TCS, Infosys and Wipro seemed even more threatening to global IT services giants (such as Accenture and EDS, besides IBM) than they do in the post-financial crisis era. A lesser company would have seen only the threats, but IBM saw a big opportunity. It put its full force behind its India strategy. Today, not only does it have a huge presence in India, it made its local rivals kick themselves by discovering the domestic IT services opportunity ahead of them.

Now, of course, its local rivals have a new reason to worry about. In the last few months, save the tale of two Murthy’s – one was shunted out of a company he transformed and the other was pulled back into the company he founded – no other issue dominated the discussions among tech executives as much as the new visa proposals by Gang of Eight.
It’s clear that at least in the short run, Indian IT companies will be the losers. Among other things, it will increase the visa expenses by three to five times (based on H1B dependence) from around $2500 per person at present; companies might have to pay more for the H1B visa employees; and over time employ at least one local for every H1B visa holder. Kotak Securities reckons that the new regulations would hit the margins by at least 1.85% in five years on account of local hiring and another 1.5%-2% on account of onsite utilization rates. In all, it could have an impact of 3-4% impact spread over five years.
In the short run, it’s also a zero sum game, and one person’s loss is someone else’s gain. That gainer would be big companies like IBM rather than the engineers in US. For three reasons.

One, even as IBM has been increasing its headcount in India, it has actually been cutting down its headcount in US. Here are two graphs with numbers courtesy media reports and Alliance, an IBM employees union.

chart_1 (20)

 

 

chart_2 (5)

Two, this trend is likely to continue because IBM has been struggling to increase its revenues but in vain, and the only way it can make the investors happy is by increasing its profit margins. And getting more things done out of India is a good way to shore up the margins.

chart_3 (1)

 

Three, it’s not clear if curbs on H1B visas for IT companies will address the unemployment problem in the US, or impact wages. The unemployment rate among software engineers is at 2.2% against overall unemployment of 7.6%, points out Som Mittal, president of Nasscom. It’s even lower than natural rate of unemployment of 5-6% . Besides, H1B Visa holders get paid more than locally hired employees, according to a Brookings Institute analysis.

Warren Buffett, who recently invested in IBM, often uses the metaphor of Castle and Moat. “I don’t want an easy business for competitors. I want a business with a moat around it. I want a very valuable castle in the middle and then I want a duke who is in charge of that castle to be very honest and hardworking and able. Then I want a moat around that castle. The moat can be various things: The moat around our auto insurance business, GEICO, is low cost.” If these proposals become a legislation, it will definitely be a big moat around its business. But, it’s not clear if it will do anything to increase employment in the US.

 

Infosys Technologies Ltd. Leadership Succession Plan

The right question is what exactly can we expect NR Narayana Murthy to do in his new role?
(Photo: Getty Images)

Infosys often talks about, and even prides itself on its sustainability, profitability and predictability. Yet, few observers would have predicted that Infosys will make an announcement early Saturday, saying NR Narayana Murthy would be back in an executive position at the company he founded 32 years ago. (Even Narayana Murthy said in a press conference later that he did not imagine in his wildest dreams that this would happen).

This was supposed not to happen for many reasons. The foremost among them is that Narayana Murthy himself had set a rule that no founder would hold an executive position past 60 years of age and would step down from non-executive positions after 65. Mr Murthy is the kind of person who would say such things as a matter of principle, and people would believe him. (When Satyam scandal broke out and IT companies were looking to buy its assets at a cheap price, Mr Murthy called it a tainted company and that Infosys wouldn’t touch it. It never participated in the bids, even to get competitive information, a tactic that some of its rivals indulged in.)

Yet, that surprise vanished soon because everybody in the trade knows that Infosys is in a bad shape these days. Its revenues have been sagging, its margins are getting squeezed, its attrition rates are high and its employees’ mood is low. Analysts are flogging the firm, stock market has been giving the company its thumbs down for sometime now. All these its bigger rivals are doing better and getting even bigger. It lost its IT bellwether tag to TCS, and the second rank in the market to Cognizant in the last one year. The only excitement in the market these days is around the speculation on who the next CEO will be, as if nothing good can be expected from the current set of leaders.

KV Kamath, non-executive chairman of Infosys, told in a hastily convened press conference today that the board took feedback both within and outside the company before it approached Narayana Murthy in early May to ask him if he would take up the role of executive chairman. Murthy replied he was always a soldier of Infosys and that he would accept the offer. Murthy is set to take on the role formally next Thursday. He would set up a small team for himself and that team would include his son Rohan Murty, a PhD in computer sciences from Harvard University. Rohan would be his executive assistant. And in doing this, Mr Murthy broke yet another long standing, and often articulated principle – that the children of Infosys founders would never take up jobs at the company. Murthy said, Rohan would be taking a salary of just Re 1. But that is unlikely to silence the critics.

What would silence the critics is Infy’s performance going forward. And nothing short of Infy getting past Cognizant and breathing on the neck of TCS. Will that happen? That’s an important question, but not exactly the right one at this point.

The right question is: what, exactly, can we expect NR Narayana Murthy to do in his new role?

During the press conference and later during the interviews to television channels, Narayana Murthy resisted answering any question about his diagnosis of Infy’s problems or the solutions he may have. For the first, he said he was away from Infosys during the last few years and out of executive role even longer. For the second, he said humility demanded that he spent time to understand what exactly was happening before coming up with any idea.

He defined his role as ‘adding value to Shibulal and Infosys’. Adding value, he explained, would come ‘in terms of ideas in discussion and debates in arriving at optimal decision; in helping the CEO implement those decisions with a sense of alacrity’; and generally ‘in enhancing excellence’.

That’s a broad definition of adding value. We believe he would add value in three ways.

Articulate and tweak Infosys 3.0 strategy:
While Infosys has designed a good strategy in Infosys 3.0, the big problem was in communicating the strategy across the layers of the company. While reporting on a recent Forbes India story on this, we found that several people both within and outside Infosys had only a vague or a partial understanding of what exactly Infosys 3.0 was. The most common misperception was that Infosys 3.0 was all about products and platforms business.

Narayana Murthy’s big contribution would be in articulating this vision better. While there are leaders who are good at communication and even persuasion, Murthy’s talent goes beyond salesmanship. His strength is in articulating a vision in such a way that makes people realize that it’s enormous and achievable at the same time.

But, Infosys 3.0 also needs some tweaking. It’s not a simple strategy. And the way it was structured led the second level leadership to drop the ball on the core 65% of Infosys business – of application development & maintenance, software testing, infrastructure management, business process outsourcing – and focus too much on transformational business. One can bet on Narayana Murthy to cut down the complexity and make it easier. (He sometimes forces journalists to repeat a long-winded question in a more simple fashion – and the resulting clarity can often be revealing. Simplicity is an important tool in board rooms)

Turn the mood upbeat
It’s no secret that morale within Infosys is bad, not because there were drastic changes in HR policies. There were some, but the primary cause of unhappiness is financial under-performance. Studies point out that it’s good financial performance that leads to happy employees and not the other way down. In case of IT companies, low growth directly results in bigger bench. Infy’s growth is slower than the industry growth and those of its peers and it is getting beaten by analysts and stock market. This reflects on the way employees look at the leadership. According to Glassdoor survey, Shibulal’s approval rating is the lowest among its peers.

Even so, a charismatic leader can turn the mood upbeat – by changing the lens people use to see the events. Given Narayana Murthy’s reputation, he might just be able to do that.

Give back growth focus to Infosys
The clearest sign that Infosys was falling behind came when Cognizant overtook Infosys. And the clearest sign of Infosys getting its mojo back will happen when Infosys overtakes Cognizant. Right now, Infosys is growing slower than the industry. Even if it equals industry growth, it cannot beat Cognizant, because Cognizant is growing faster on a bigger base. The only way Infosys can beat Cognizant in the short run is through inorganic route – that is, by making acquisitions. While KV Kamath would have done a great job here, Narayana Murthy comes in with two badges that Kamath never had – that of a founder, and more importantly, the position as executive chairman.

Murthy could well be at the helm of the next big acquisition that Infosys does. (At a recent analysts’ meet, Infosys said it is willing to make acquisitions to the extent of 10% of topline). If Murthy pushes the right levers for growth, on the top of a couple of acquisitions, how stakeholders within and outside perceive Infosys would have changed before anyone realizes.

A former journalist remembers Murthy telling a young Infosys executive several years ago that ‘perception is as important as reality’. “That kind of defined Murthy for me,” he told me.

It’s not perception from a public relations angle. It’s perception as Luc de Brabandere defines it. In an interview to Economic Times in 2009, de Brabandere said, “We believe that to really make change happen, changing the reality is of course necessary – this involves developing novel ideas for change, and the implementation of those ideas via project management and measurement, templates and the like. But changing reality is not sufficient – we must also change peoples’ perceptions .

This happens on much more of an individual basis; each stakeholder’s needs and biases must be taken into account. This can only be done through careful preparation and communication . So to really make change happen, we must change twice – reality and perception.

Murthy’s most important contribution to Infosys will come from doing that.

Gmail’s new inbox
Google says its mail service’s new inbox (which is rolling out gradually) will organize your emails better. In my view, Gmail is already better than its rivals in filtering out spam. Sometime back, it offered to sort mails based on its importance, which was not great, but an improvement over the earlier version.

And now this: “the new inbox groups your mail into categories which appear as different tabs. You simply choose which categories you want and voilà! Your inbox is organized in a way that lets you see what’s new at a glance and decide which emails you want to read when.

One can argue that it’s responding to market needs. The hype around iPhone app Mailbox clearly showed that email is not just about the size of inbox, it’s also about productivity. This seems to be one step towards that.

These improvements also raises an interesting issue: the same algorithm behind this feature is also behind the-sometimes-useful but always-intrusive ads. How we balance these two will be a big question we need to answer in the coming years.

 

Ten trends from McKinsey
McKinsey talks about ‘Ten IT-enabled business trends for the decade ahead‘. Here’s the list.

  1. Joining the social matrix
  2. Competing with ‘big data’ and advanced analytics
  3. Deploying the Internet of All Things
  4. Offering anything as a service
  5. Automating knowledge work
  6. Engaging the next three billion digital citizens
  7. Charting experiences where digital meets physical
  8. ‘Freeing’ your business model through Internet-inspired personalization and simplification
  9. Buying and selling as digital commerce leaps ahead
  10. Transforming government, health care, and education

In journalism, I know many reporters who look down upon ‘trend stories’, partly because they are rarely as exciting as a ‘breaking news’ (in other words, there’s always a suspicion everyone’s aware of it in one way or the other) and also because many of these trends lose steam half way. (‘Three is a trend’ is a journalistic dictum; but what if it never grows beyond three?).

For business leaders, the challenge is different. One executive I spoke to said, the first challenge is in choosing from among the many options, and the second is in managing the risks involved, for it’s mostly about the future. McKinsey doesn’t always get it right. (Its completely off the mark estimates of mobile phones is widely known). Yet, businesses go to McKinsey not so much for their final recommendations, as they do for the arguments and reasoning. It’s for the same reason the piece is worth reading.

 

More thoughts on Phaneesh Murthy affair
The big lesson I learned from listening to people talking about Phaneesh Murthy affair is that there are as many reasons (to criticize or support) as there are people. These reasons touched on issues as varied as personal morality and corporate governance, lifestyles of modern executives and deeply entrenched ideas of social norms. One common strand was the question of consent given that both were adults. And quite a few framed the problem as if they were discussing a fair exchange in a free market. It’s not. It was also about the power structure.

It’s often easy to appreciate issues better by considering extreme examples. Here’s one from a lecture Michael Sandel gave at Oxford.

“It (argument from coercion) points to the injustice that can arise when people buy and sell things under conditions of severe inequality or dire economic necessity. According to this objection, market exchanges are not necessarily as voluntary as market enthusiasts suggest. A peasant may agree to sell his kidney or cornea in order to feed his starving family, but his agreement is not truly voluntary. He is coerced, in effect, by the necessities of his situation…..

 

 

The argument from coercion draws on the ideal of consent, or more precisely, the ideal of consent carried out under fair background conditions. It is not, strictly speaking, an objection to markets, only to markets that operate against a background of inequality severe enough to create coercive bargaining conditions. The argument from coercion
offers no grounds for objecting to the commodification of goods in a society whose background conditions are fair.”

The example, of course, has very little in common with what happened at iGate, but the same principle applies.

Also of interest

  • Google Challenges Apple With ‘Hero’ Phone | FT
  • Apple TV’s market share | Fortune
  • Open University: Coursera partners with 10 major state schools | Fast Company
  • Mary Meeker’s presentation | KPCB

 

Indian IT in a bigger canvas
The most interesting thing about a table that Gartner published yesterday is not that Indian IT sector growth slowed down (in fact, the new normal is no longer called the new normal); it’s certainly not that Cognizant has replaced Infosys as number 2 in terms of revenues (that inevitability happened early last year), but it’s in two sets of figures that place IT in the global context.

Indian IT Services : the top 5

One, the top five Indian IT companies account for just 3.7% of IT services market. And even 13% growth against the industry growth rate of 2% has increased its share by a mere 2 basis points. It grew from 3.5% to 3.7%.

Two, it’s tougher at the top (as in any running race). HCL Tech which grew at 18.1% moved up 6 places in the global ranking, and Cognizant, which grew faster at 20.1 on a much higher base, moved up 5 places.

Three, despite the negative perception, the ranking of Infosys has actually improved, and it retains its global market share. For HCL Tech, which has been impressing the market like none of its rivals could, that share hasn’t changed. For answers, you should not look at growth numbers, but at incremental revenues. In terms of incremental revenues, HCL Tech made $ 188 million more than Infosys.

 

 

How Infosys 3.0 is different from Cognizant’s H3
My story on Infosys in the recent issue of Forbes India (Did Infosys get it wrong with 3.0 strategy?) argues that the reason for the company’s difficult times these days doesn’t lie so much in its lack of hunger for acquisition or the salesmanship of its CEO, as it’s on the the nature of its new strategy. Implementing 3.0 took the attention away from scaling itself up and towards building tomorrow’s enterprise for client. The one uniform question I was asked during the discussions that followed the publication of the story is this: Aren’t others getting into products / platforms? Aren’t TCS and Cognizant, which were also restructured, doing well?

Infosys Cognizant

A good way to think about the difference is this. Congnizant H1, H2, H3 is structural. Infosys 3.0 is chronological. (So, at Infosys, contrary to what many people believe product and platform is not Infosys 3.0, it’s only one part (and presently a very small part) of Infosys 3.0. The image in the left represents the key difference.

The promise of this strategy was that it will make Infosys both revenue and margin leader – without having to compromise on pricing, without having to make risky acquisitions. But, it’s also more complex than what others did. In fact, one would argue, TCS and Cognizant simplified the structure, while Infosys tried to align it with a much more complex reality. Check out the story, and let me know what you think.

 

Steve Wozniak on Apple
Over the weekend, I read this in an Engadget interview with Steve Wozniak

Which company does the most to push the industry?
You have to be kidding. Apple leads the way. A bunch of companies could be like an ocean of products with waves and ripples. But Apple is an Everest. The day Apple introduces a new product you know it’s not the same as before and you know it’s the future for everyone. More…

And, today Reuters reports:
Apple Inc Chief Executive Tim Cook said on Tuesday he expects the iPhone and iPad maker would be responsible for “several more gamechangers” and that wearable computers could be the next big thing. More…

 

 

Also of interest

  • Many users are realizing that everyday computing, such as accessing the Web, connecting to social media, sending emails, as well as using a variety of apps, doesn’t require a lot of computing power or local storage. Instead, they are putting a premium on access from a variety of smaller devices with longer battery life, an instant-on function, and intuitive touch-centric interfaces. These users have not necessarily given up on PCs as a platform for computing when a more robust environment is needed, but this takes a smaller share of computing time, and users are making do with older systems. ~ IDC
  • A leading Nordic beverage company, Olvi, just reported an 85% increase in soft drink sales and its impressive growth is attributed almost entirely to the new range of Angry Birds sodas. ~ BGR
  • An engineer’s revolutionary new chip, inspired by how our own brains work, could turn computing on its head. ~ Discover

 

 
 
NS Ramnath
I have been with Forbes India since August 2008. I like writing about ideas, events and people at the intersection of business, society and technology. Prior, I was with Economic Times. I am based in Bangalore. Email: ns.ramnath@gmail.com
 
 
 
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November 24, 2014 12:43 pm by Abhishek mallya
what about IBM daksh
November 19, 2014 17:49 pm by How Cognizant overtook Infosys | Participant Connect
[...] Link: How Cognizant overtook Infosys [...]
June 18, 2014 19:11 pm by Raghav
Brilliant article! As many have mentioned here, Cognizant had been a tremendous employer in the past, however there's no room for youngsters to grow now as the management ideas are saturated and they are never okay to test anything new! Run on the mill is the approach as of date, any organization wh...
April 15, 2014 15:15 pm by gleensmith
thanks for posting a good article on indian IT growth
April 09, 2014 21:55 pm by bhala Joshi
A good insights . Looking for similar one in the near future
 
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