Today in Tech: Indian IT Services and the law of large numbers; IITM's Joint PhD

Indian IT Services and the law of large numbers The law of large numbers refers to a theorem that says if you perform an experiment over and over again, the average result will be close to the expected value. For example, if you toss an unbiased coin 10 times, it's even possible to get heads 8 times, but toss it a few 100 times, you will get heads about 50%.

IT services companies however are facing a different law of large numbers. As you get bigger and bigger, the rate at which you grow will come down.

Mint has a report on how TCS and Infosys, are narrowing the revenue growth rate gap with Cognizant. Cognizant has grown faster than its rivals even after getting to a comparable size thanks to reinvesting some of its gross profits on sales in the key markets. The gap is narrowing. "Cognizant’s growth gap with peers Infosys/TCS will likely be at historic lows (<5%) in 2013 in our view,” it quotes a CLSA report as saying.

It's a clear case of the law of large numbers at play. And for evidence turn to infographic that comes with the story. What strikes you most, even more than the narrowing gap, is that the growth rates of all the companies have come down. When you are growing at 60%, you can maintain a gap of close to 20 percentage points against your rival. But when your own growth is 20%? It's only natural that the gap will come down. It's arithmetic.

Here's one takeaway: sometimes looking at revenues only in terms of percentage will not give the complete picture. We might have to use other metrics such as incremental revenue. So, how has Cognizant fared when we look at that number? Watch this space tomorrow.

PhDs from IITs
Swaminathan Aiyar captured a bit of every student's experience when he wrote about Sir CV Raman's contribution to science in his column sometime back: "At school, we were taught that Sir CV Raman won the 1930 Nobel Prize for Physics for discovering the "Raman effect". But when we asked what exactly the Raman Effect was, our science teacher fobbed us off, saying "it's very complicated." Clearly, even he didn't know. Cynical students wondered why a complicated discovery without any obvious use had won the Nobel Prize."

I have heard from my elders that any question on the 'usefulness' of science was enough to set Raman off to angry outbursts. He believed in the pursuit of truth - for its own sake.

For long, IITs were known for a specific kind of usefulness - training students towards a degree in BTech that was admired everywhere. It was not known for world class research programmes. Those with an inclination to do research, pursued their PhDs in universities abroad after leaving IITs. Over the last few years, IITs have been trying to correct the situation.

Economic Times today writes about one such initiative by IIT Madras - a joint PhD programme. "The joint PhD students are to be selected based on their performance in the initial two years of work after beginning their PhD programme. Then they will spend one year in the US university working on a problem - usually complementary to their IITM work - given by the US professor. The student will then return and finish the degree requirements at IITM and be awarded a joint degree with the US university."

This, IIT-M hopes, will attract PhD candidates. May be so. But, will this and other measures help in creating an atmosphere where research scholars can spend their time in pure pursuit of truth. Here's a pointer from Kapil Sibal from a 2011 interaction with students at St Stephen's College.

As a policy prescription, we are now asking higher educational institutions to make the transition from undergraduate forms of education to post-graduate institutions in a much bigger way—we are looking at 40,000 PhDs by 2020 in the IIT system alone. The PhD system is about how ideas are created and translated into goods and services by industry.

Also of interest

• Mining data to find a cure for India’s ailing health sector: Mint
• Twitter Is Said to Be Worth $9 Billion as BlackRock Buys Shares: Bloomberg
• Why the Internet works and how to break it by Vinton G Cerf: ET
• Internet tax, a flawed idea: Business Line

The thoughts and opinions shared here are of the author.