Non-linearity: Have IT companies started making some headway?
For long in IT/BPO sector in India, the growth in headcount kept pace with the growth in revenues. While it might have been good for the employment – and for those who were training engineers and helping them to get jobs – it’s not good for the IT sector itself. For one, it’s difficult to manage a large workforce beyond a point. And it limits the way a company can cut costs. This is why almost every CEO has been talking about non-linear growth.
Now, there were two interesting graphs in Nasscom’s projections for FY 2013 yesterday. While the revenues are expected to grow at 12-14%, the headcount will grow at only 7%.
Does this mean that IT companies have been making some headway in breaking the linearity. I don’t have the numbers behind Nasscom’s estimates yet. But to assume that it has got less to do with non-linearity and more to do with the slow growth the past few years wouldn’t be too off the mark. Many companies have enough in the bench to take care of a good part of the growth next year.
Business Standard asks if Nasscom needs a reboot. The story has views of analysts, consultants, industry players and Nasscom officials.
Some key points from the story:
- Go beyond merely lobbying with the government
- Pay more attention to segments such as business process outsourcing and software products
- Help companies move from ‘being tech’ driven to ‘sales driven’
- Be more inclusive – and serve smaller companies
- Help raise the profile of Indian companies
All these are good. If you talk to Nasscom officials they will say all these are already in their agenda and point to initiatives aimed at addressing these issues. The point is there will always be arguments on how much resources should Nasscom put behind these, and irrespective of what it does, one constituency or the other will be pissed off. IT services and large IT players will be accused of garnering too much attention and having too much say. Which could even be true.
A deeper problem, in my view, is with the way Nasscom is structured. It functions as a single organisations even after IT sector has matured – with segments within it becoming sectors in their own right. BPO, engineering services, software products – all these are in many ways very different from core IT services. Nasscom of course sees all these as different segments, its ability to allocate resources is suspect.
One way to look at it is through the framework of Innovator’s Dilemma. Nasscom has seen huge success with IT Services that in spite of all its good intentions it’s unable to do justice to other opportunities that came eventually. What should it do. The solution also comes from Clayton Christensen: create new organisations, give them the resources and the freedom to grow. In case of Nasscom, it’s a bit more complicated. For example, many of its members operate in multiple segments – IT Services, BPO, engineering, products and platforms.
It will be interesting to see the recommendations of the panel headed by NR Narayana Murthy. We will have to wait for a couple of more months.
The importance of being humble
Last year we wrote about Cognizant CEO Francisco D’Souza’s decision to focus on the future drivers of growth, letting his lieutenants manage the core and emerging businesses. When we did the story, we asked a lot of people why, and you will find some of the answers in the story. However, we couldn’t speak to chairman John Klein then, even though we wanted to. Mint spoke to him recently, and his answer was pretty interesting.
How did it happen so naturally, because we find a lot of CEOs are stuck with operations?
Maybe it is because of the no-ego stance*. It came naturally for us to say Gordon will handle H1 and H2, and Frank will be perfect for handling H3. It was not a difficult decision for the board, or Frank. And it is working extraordinarily well.
* In our company, we don’t tolerate egos very well. The board gets involved in the ground level by meeting with employees and customers. We involve the customers in board meetings and strategy sessions where we understand their top issues, and work with them on it. We also spend a lot of time on strategy. Every year we spend three days with outside experts to tell us about the marketplace, technology, the competitive landscape and then we play that against what the customers tell us, and marry those things to fine-tune our strategy. – he says earlier in the interview.
I guess non-ego stance means humility. During our leadership awards night, head of McKinsey India explained why it’s an important asset to have.