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In many countries around the world, they say that an evil eye can drown the fortunes of the individual or company. In India there is a huge industry manufacturing products to help ward off the evil eye too. If one were to give a cursory look at the Indian IT Companies over the last couple of years, you could almost conclude that the bad eye did indeed befall the entire industry. Worldwide the India success story in information technology was appreciated, envied and copied by many other countries. While we could not do what China had done in manufacturing, we were able chalk an aggressive growth path in IT Services. So, what is going wrong today? Why did Satyam collapse? Why did Wipro CEOs get fired? Why did Mohandas Pai quit Infosys? Why did Ashok Soota leave the company he founded? Why are margins collapsing at all next level companies in the industry? And what does the future hold for the entire segment of industry? If you had all these questions in mind, and more, read on below because these are not isolated incidents, these are not one off cases. These are the result of wrong policies being followed by companies for years. This is the story of resources that lost track of their basics of building a good skill based either on technology or on business sense. The pain areas and the challenges are listed in the following paragraphs. All the above developments over the last few quarters are not an isolated incident or something that has happened overnight, this was a disaster waiting to happen. As a technical person in the operations department you have a very different perspective of your role and that of your client. When you upgrade to a management role sometimes the perspective broadens to include other client activities but in most cases it ends up getting more documentation oriented. Finally as a sales and marketing person is the first time when reality hits you, and you realize the need to actually focus on the client’s objectives, the end use of the work that you are delivering and the need to be very closely ingrained into the client’s requirements. So, the period of evolution from one role to another is something IT companies need to track very closely, and be quick to identify those who are not measuring up. I had been running my venture since early 2000 as part of a larger organization. I started independently in 2004 because I foresaw the current situation 5 years down the line. I am on record since then, with various media, when I said that Services companies will drop profit margins into their mid-teens in future so I wanted to get into IT Products and in Intellectual Property based work. My logic was due to the percentage level that multinationals who set up base in India were charging for their work. Today all top IT companies are facing the brunt and when CEOs churn at companies like Wipro, and a leading organization like Satyam collapses, you can be sure that there is a lot of turmoil that is happening down the line
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in big companies and also in the other companies which are significantly smaller in size. Margin reduction has begun to hurt the industry since even multinationals like IBM and Accenture today have a large captive employee base in the country. Often, they treat the India operations as a cost center instead of a profit center, so they are willing to work with margins of as less as 8% too is what we hear from industry sources. So how do homegrown companies compete against that, and meet market expectations, markets have earlier seen 40% margin businesses initially and now are not comfortable with 15-20% margin ones! End result, unreasonably high salaries making IT industry employees the darlings of every consumer focused company, but at the same time making it a low margin business for the companies, in what was a premium industry earlier. The period between 1999 and 2008 has been very unfortunate for the Indian IT workforce in terms of cost versus value parameters of a professional. That was the period of aggressive growth which should have been capitalized on by the industry and by the professionals to make themselves invaluable and to find ways to deliver better value for the money they were earning. However, what really happened is that in the rush to increase turnover and manpower, each company had been falling over the other in getting resources to join them and this took salaries to unrealistic levels. They just considered it as a replacement of a 50$ per hour resource in a developed country being replaced with a smaller cost one here. For them, even a 100% or 200% jump was the norm of the day when hiring laterally. The net result was that by just switching jobs from one company to another these resources grew rich not in skillsets but in salary. The practice of linking skillsets and deliverability with salary was given the boot. Intra company too, raise was given to prevent attrition. Deliverability and skill development because non issues. From an industry perspective the average salary went up and the output remained the same. To his credit, Mohandas Pai actually tried to stem this trend and make Infosys different, he moved from his CFO role to HR and Education almost 5 years ago, which I feel was to help the company solve the biggest problem it had coming up. His new model to increase the number of professional bands and to fix people on lower bands is rumored to have been linked to various skills that he wanted his people to imbibe. But unfortunately for him, and even more unfortunately for the industry which would have benefited if he succeeded, the markets again changed in 2010 and hiring is back again in India so the backlash started hurting the company and the scheme got watered down. I for one, was not at all surprised at his news of exit this week from the company he served for 17 years, it was in the coming for a long time. Net result, the period of abnormal hikes is being seen again, though thankfully, with some moderation based on earlier experience in the last round. Finally, the growth of turnover and manpower led to a huge need for managers and in most companies the number of freshers was so high, that anyone with even three years experience started mentoring the newcomers. There is nothing wrong with the approach and actually it is very apt. However, this led to a sense of complacency among manpower resources at a very early stage into their career. No need to do hands-on work after becoming a module leader is the attitude. This made
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them lose touch with most of the technologies that they started working with. They conveniently forgot that technology has been changing so regularly over the past few years that there was a huge need for every technical resource to keep learning all the time, attend training programs and get additional skills with certification. Employees did not realize the importance of this since they were anyway getting good salaries and good offers from the market even without increasing their knowledge base. Neither were in-house training programs in large companies filled. The business teams never had free time to attend those programs and it was difficult to get people to fill those classes except when they come from college and take their induction program. From an industry perspective the skill level across all levels of professionals went down significantly. There is a huge need for all technical resources to actually build their skills technically as well as in management roles before they start handling key responsibilities which affect a client’s deliverables and ultimately his business. The above scenario granted promotion on the number of years. But the quality of the average Manager due to this strategy has dropped so much that it is important to now only have those people in management roles that have a good business approach. I believe that the two have unfortunately been seen as separate issues in our country whereas in reality the overall perspective of every single technical lead or manager needs to be a well rounded and 360 degree one. During a recent lunch meeting organized by an industry association with Consulate officials of a leading country, the representative told me offline that India has a big problem of employability coming up because the educated ones are not easily employable and those who are employed are not capable of becoming business leaders and adding value to the companies they are expected to contribute to. On probing further, he added that companies tell him the ability of middle level managers to execute tasks given to them is so limited that it is becoming very difficult to find right people to actually deliver results. Nothing could be closer to reality was my immediate thought when I heard those words. It would be a very big mistake if the professionals in our country at Management level did not see the correlation between what is happening at the CxO level in both Top and mid-sized companies and the issue of quality of manpower. Every individual needs to realize that they are going to make or break their company’s fortune in the end so anything they do to understand the business objectives of their own company and of their clients, will help everyone in the ecosystem. Else the effects will show up either as a Satyam collapse, or as a CEO of Wipro getting fired, or as the key team at Infosys and Mindtree leaving the very company they gave their best to grow. Because the good days of high margins, reasonable salaries and fast growth are now replaced with low margins, abnormally high salaries and stunted growth, so smiles are being replaced by frowns, summer of discontent is brewing in most organizations and it is just a matter of time before a major upheaval happens. Once again, looking into the crystal ball in the coming 5 years, I feel there will be three distinct types of managers.
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At the bottom of the rung would be those who cannot get the business outlook into their thought process, who are so engrossed and burdened with their day to day professional and personal responsibilities that they have no time to learn, no time to improvise and no time to imbibe the business approach, just focus on more money from a new company they jump to. They will be consigned to the unsuccessful jobs and low growth areas permanently by hitting a glass ceiling at some stage. At the middle level would be those who accept upfront that they do not have business skills and would rather stick to technical areas, they will choose their roles carefully, not look at money as the means to an end, but look at the roles they get as a means to earn the amount they desire. They will also learn technically through formal, informal training programs and spend time to improve their execution capabilities to grow technically. They will eventually become very valuable as a technical resource and while their reporting structure will not have too many resources under them, they will secure a strong and successful future ahead. At the top of the ladder would be those managers who do not wish to remain in technical roles in future, they want to acquire business skills, they undertake management programs and people handling skills improvement programs to become smarter and more successful managers. Above all, they will start integrating better with clients, understand their requirements better, not from a technical design perspective alone, but also on how their output can improve revenues for that company. They will rise to the top of Management roles in organizations, be well rewarded financially and will have very successful career, well sought after in the job market! Which rung do you want to be on? Time to decide is now, else it will be too late! The Information Technology (IT) industry gave opportunities to graduates, engineers, post graduates, housewives, retired personnel and the like. It leveled the playing field between an electronics engineer and a civil engineer or any other similar degree by putting them all on the same plane. It has increased the income levels of many middle and lower income group families. The benefits are just too precious to lose, and we need the country to double or triple the manpower that can be employed by this industry. Only a better qualified workforce is the key. .
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