Wednesday, February 11, 2009

Look inwards, Kamalnath tells IT vendors

Commerce minister Kamalnath says it is time Indian IT vendors targeted the country's domestic market, notably, its middles and lower segments. The minister may not have read our earlier post,in which we had said the same thing. Agreed,it makes a difference,coming from the minister.

Mr Kamalnath's call for IT to look inwards came at the Nasscom India Leadership Forum 2009 meeting in Mumbai.The minister reckoned that the time for the IT sector to consider it future strategy was NOW. Looking inwards is the best, and probably, the only way to go for Indian IT vendors, considering the scale of domestic market waiting to be tapped. Mr Kamalnath mentioned that hardly two percent of India's population used computers.

Didn't realise, did you, it was so low;and we count ourselves as a fast-moving economy. Anyway, Mr Kamalnath, while pointing to the direction IT vendors need to take, could have as well given us his thoughts on how they could go about reaching out to the middle and small-scale segments of domestic economy.

In suggesting an inward-looking strategy the minister would need to respond to in-house scepticism, as reflected in a comment by Ashutosh Didwania, IT professional. His perception is that our domestic market isn't mature enough to convince the IT majors that they need not look beyond national boundaries.

We see a perceptional difference here between what the minister says and Mr Didwania's take on the approach IT vendors' adopt to tap domestic market. Going by Mr Kamalnath's reported statement, it is for the IT majors to do the convincing (not the other way about) and educate uninformed segments of our domestic ecomony, about the efficacy of using IT application to improve efficiency and productivity.

To quote Mr Didwania further, 'IT service sector,..based on the demand-supply chain...needs (domestic) demand to be significant in order to make business sense...An IT services company...is bound to depend on selective projects. It's not about selling products to millions, it's about providing services to the select few which as a matter of fact are very rare in India... Indian market has a long long way to go before it can attract IT biggies in a significant manner.
IT companies scaling down profits or employees accepting lower perks is simply not an option as for that to happen there needs to be a strong domestic base, which currently is way off target.

Mr Didwania's comment reflects the mindset of an IT professional. Those who dismiss the idea of IT scaling down revenue expectations would do well to consider this. In the prevailing global situation neither our IT companies nor their employees can hope to see anytime soon the kind of pre-recession profits/salary levels they had got used to for so long.

If only our IT companies and their staff were to lower revenue/pay level expectations, it would facilitate reaching out to the vast untapped segments of our domestic economy. TCS, they say, has its smaller centres (say,Gauhati) workng for domestic clients. Domestic market accounted for seven percent of TCS total revenue. Infosys earns 1.5 percent share of its total revenue from domestic clients. Moving to Tier II and III centres - Nagpur, Jaipur, Ahmedabad, Pondy , Mysore - where IT companies offer lower compensation packet to their empyees may well be a major first step to seeking domestic clients.

Maybe CNBC, NDTV-Profit and other business channels should line up talk-shows to assess the industry mood and mindset on an inward-looking IT growth strategy.

4 comments:

Happy Kitten said...

Even my thoughts went the same when I was watching the news about Cochin Port becoming India’s first e-port. I kept wondering why our IT expertise is not used in India itself. I do think it can be made feasible and India deserves it too. Let our experts make things easier in India too and not only in other countries.
http://www.igovernment.in/site/Cochin-Port-becomes-Indias-first-e-port/

I also read that they are building a Laptop which will cost only 20USD. Don’t know if it is going to be feasible. Maybe it could be either a heavily subsidized product or crap. But then if it succeeds in being useful to the masses who presently cannot afford a computer, then let it be subsidised.

Ashutosh Didwania said...

Well...for starters the salary of IT professionals has got absolutely nothing to do with the business consolidation in the domestic market. People need to understand something basic i.e. IT companies can only do business when there is a demand for what they are trying to sell. Unfortunately the demand for IT services is pretty negligible in India. Even if you are down to medium and small scale companies, you hardly find any business logic involved. I guess people associate IT service companies as simply being a bunch of software programmers which is so very untrue. The IT Services sector is more about technology consultancy rather than being software providers. If one is looking for software products then a product company is the one he/she has to look for, not an IT Service company. Some of the example of Indian Product companies are Tally, 3i Infotech etc and they are pretty much focused on the Indian market for the simple reason that their products have demand over here. That's not really true for the Indian IT Services sector as of now. Hopefully things would start getting better in the near future.

aneri_masi said...

Ashutosh,
Just out of curiosity, what is stopping the IT services companies from starting to build products as well?

As for the question of whether there is a demand for what they have to sell, I feel Indians are VERY open to new technology. My mother had 3 MP3 players for listening to bhajans even before I got one for myself. Yes, I know this is not an example of an IT service, but it is an example of a very eager consumer!

Anil P said...

This is interesting. It might actually throw up a dilemma if the IT Majors began looking inwards. Because IT Majors are looking beyond Indian shores, smaller vendors have been able to fill in the space in India, setting up small firms (10-20 workers), and in turn outsourcing part of the work to people working out of a Home PC.

It's actually staggering the number of people who're self employed, using technology to deliver services to small-time IT vendors.