Apr 27, 2007

One Trillion Finally

Indian economy hits the one trillion mark finally! Yes that is a huge landmark and how did we get there? Part of it is the searing growth the economy has seen in the last 3-4 years but some of it is also due to the big jump the rupee has had in the last 3-4 weeks. That should do good for our import bill but our exporters are not too happy.

IT Services Biggies have just announced another round of stellar results but the rupee movement must be throwing a spanner in the works. In the long run a strong rupee is good for the economy. IT Service exporters will need to get used (and overcome) the impact of an appreciating rupee and dwindling tax concessions as the Software Technology Park tax holidays come to an end.

Apr 15, 2007

Patriotic Professional Vs. Professional Patriots

The politicians in Karnataka are up in arms against NR Narayana Murthy, for his alleged stand on the National Anthem. At a function in Mysore in which the President of India participated, the National Anthem was played in instrumental as NRN felt it may embarrass the non-Indians in the audience if it had been played as a song with lyrics.

Now in the Olympics, a gathering as multi-national as possible, National Anthems are always played in instrument for all the medal winners. Hence his feeling is not entirely misplaced given that Infosys is now a company were people of several nationalities come to work. The problem is this topic falls in a gray area and there is no set precedent or a law about how the National Anthem should be played, unlike in the case of the National Flag.

What is ironic about this episode is that politicians (many of them with criminal records) are questioning the patriotic credentials of a man who has done far more for the country than many of them combined. It is a clear case of the politicians for whom patriotism is a profession, ganging up against a professional of the highest order.

Apr 6, 2007

Pre-Emptive Billing = Extortion

After the first sensual appeal of a new glittering car, everything financial about it after the purchase is murky. Have you ever dealt with a used car salesman or a glib car mechanic? We all know how much of a rip-off these encounters are.

Yesterday I gave my car for servicing to Malik Motors, a dealer for Tata Motors at Tolichowki, Hyderabad. Obviously they offered all sorts of additional services beyond the basic oil check, fluid refills. And after servicing the car billed me a fuel performance product without even checking with me, the customer. They just assumed that I will buy it given its touted benefits since it just cost another two hundred rupees. Now rolling back that transaction in their billing systems took them another 30 minutes when I was really hard pressed for time. The added assumption here was given the difficulty of reversing the transaction, the customer would meekly accept it and fork the additional money.

I noticed they were using a sophisticated real time customer relationship system deployed by Tata Motors to track the history of each car that has ever rolled of its stable. However the aggressive and preemptive billing behaviour was anything but sophisticated. There is a thick line dividing proactive customer service and extortion. Too bad they found it an easy jump across.

ps: This happens to be my first post from a mobile phone (edited later on Blogger)

Apr 1, 2007

IT Services Or IT Products Or Something Else?

There is an interesting debate going on a couple of blogs about what India needs most today to power economic growth. Is it IT Services Or IT Products? Which one should the enlightened pursue harder and which has the potential to contribute better to economic growth? Sramana argues for products while Basab defends the IT Services story.

It is now a well established fact that the downstream impact of the IT-ITES industry on the Indian economy is manifold. NASSCOM recently released the results of its study on the multiplier effects. Here is a quote from the indianeconomy blog:
* For 1 job created in IT-ITES, 4 jobs are created in rest of the economy
* Re 1 spent on OPEX generates additional output of Rs 0.9 (Multiplier 1.9x). Re 1 spent on CAPEX generated additional output Re 1 (Multiplier 2x)
* Re 1 spent by IT-ITES professionals generates additional output of Rs 1.1 (Multiplier 2.1x)
* In terms of potential impact on the economy by 2010, total economic output could be as high as $120 billion, while jobs created (direct+indirect) could cross 115 million

While the case for IT products is also undeniable, India first needs more of labor intensive industries, preferably the manufacturing types that employ low skilled labor more than it needs IT products. That alone will establish a large industry base that when maturing will generate demand for IT products - yes, you need to first serve local markets before taking on global ones like every successful product major. Look at who the successful Indian companies are buying IT products from? If you take the case of India's incredibly successful telecom sector as an example, most of the top players (Bharti Airtel, Idea, Hutch Essar) have engaged IBM for its products and platforms (services too).

In addition to the direct contribution to GDP a manufacturing base will also generate demand for Indian IT products. Most companies often cited (the likes of Microsoft, Nokia) catered to local markets first before going global and increasing their revenues per employee (Microsoft is more than half a million per employee and Nokia is closer to a million per employee). A solid manufacturing industry base will also guarantee that more low skilled people will get lifted out of poverty and thus ensure political stability leading to continued reform which will in turn create the right ecosystem for generating Intellectual Property. Today's well known constraints that inhibit this include a hamstrung archaic labour laws, VC ecosystem, overloaded judiciary etc.

Once you have sufficient milk in the vessel, churn will automatically happen to produce cream! As Indian industry matures, IT product companies that cater to them will mushroom and then blossom to take on the world! So let us first help by pushing the Indian establishment to organise reforms that spur low skill intensive manufacturing. Products will take care of themselves.