India’s IT Revolution-The Maverick Effect

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MMA-KAS organised a discussion on the theme of the book: ‘India’s IT Revolution – The Maverick Effect,’ authored by Mr Harish S. Mehta. Mr N R Narayana Murthy, Founder & Chairman Emeritus, Infosys addressed the participants during the event. Mr Rajesh Nambiar, CMD and President, Digital Business & Technology, Cognizant, led the conversation on the theme ‘Trillion Dollar Digital Economy’   with the special invitees Mr Harish S Mehta, author, Mr K V Ramani, Founder and Chancellor, Sai University and Mr Lakshmi Narayanan, Managing Trustee, Chennai Mathematical Institute & Former Chairman, ICT Academy.

Excerpts from the talk by Mr Nr Narayana Murthy

For India to become the Sone kee chidia or the golden bird that Harish Mehta talks in his book, the country needs intellectual liberation. But we must remember that cultural transformation must precede intellectual liberation. The cultural transformation must result in Indians becoming honest, disciplined, transparent, accountable and hard-working. We must learn to put the interests of our institutions, our community, and our country ahead of our personal interests. It requires us to elect the best qualified and the most honest people to lead us. It requires our government to become a true catalyst in removing every hurdle for our citizens and our businesses. It requires us to introduce an educational system that enhances curiosity, critical thinking and problem-solving abilities of our children. It requires us to move from our tendency to gloat about our past, to thinking and acting quickly to solve the future problems of our nation.

Role of Nasscom

What is the role of Nasscom in contemporary India? The primary role of Nasscom in the early 90s was forming a cohesive group of leaders of competing software service businesses to accept competition. Such a group worked as a unified team to hold dialogue with the government on early issues like tax exemption, the availability of bandwidth and installing an IPR regime. Nasscom is currently occupied with issues like IT for public governance, cyber security, privacy and upskilling. Late Shri Dewang Mehta played an important role in the first decade of its journey. However, the initial successes would not have been possible without the effort of the CEOs of several large companies today, as well as, without dedicated individuals like Harish Mehta (the first elected Chairman of Nasscom), K V Ramani, Ashank Desai, Vijay Srirangan and Saurab Srivatsava. Dewang’s successors as Presidents of Nasscom and the successive chairman’s councils have also played productive roles in the later years. Of course, this chain of successes would not have even started if we did not have the support of India’s finest pro-business bureaucrats like Shri N Vittal, ably supported by late Dr N Seshagiri, Shri N Gopalaswamy and late Dr Varadan. In a parallel thread, Harish Mehta, in his book, traces the idealistic journey of a young couple—Harish and his wife Shaila returning to our country from the US and playing their role in creating new dreams, new adventures and new opportunities. This narration will serve as a good template for any NRI to follow in the footsteps of Harish and Shaila. Harish is a good example of optimism, positivism, teamwork and energy. Shaila personified compassion, friendliness and generosity.

Four Strategic Challenges for Nasscom

What is the main lesson from Nasscom that other industry associations can emulate? To me, it is enabling competition among fiercely competing companies in engaging with the government for better policies, for the growth of the industry. What are the current challenges of our industry and what can Nasscom do about it? There are many. Our future objective is to obtain a bigger share of the global services market, to add value to the domestic market and to become recognized globally in the software product market. I will mention about four strategic challenges in our way to achieve these and how to overcome them.

Revamping Education System

Our first challenge is to revamp our education system to enhance curiosity, critical thinking and proactive problem-solving amongst our youngsters. This will perhaps help many services companies to enhance their per capita revenue productivity. It will also help some member companies to succeed as product companies in the global market.

It will help services companies to transform themselves from reactive problem solvers to proactive problem definers and solvers for their global and Indian customers. The new education policy of my friend Dr Kasturi Rangan has made many useful recommendations. Nasscom therefore has a seminal role in exalting our higher education institutions to implement these recommendations with a sense of alacrity.

Champion English Language

English is the universal language of digitalization. English is also the language for mobility of IT professionals, going from one state to another in India. I am told that the maximum percentage of local people in a company is generally not more than 60%.

Therefore companies have to hire about 40% of professionals from other states. These professionals want schools in a pan-Indian, globally valued language like English for the education of their children. Therefore Nasscom has its role cut out as a champion for English.

Guide Private Companies

Most large Indian companies derive about 5% to 10% of their revenue from the domestic market. Very little of even this small revenue is from digitalization effort of public governance systems at the state and the central level. Most of these revenue, definitely during my time, but I am told even now, is either loss-making or at very low margins. There are many reasons why it is so. I will not go into the reasons here. Nasscom can prepare a recommendatory methodology for private companies to prepare talent for successfully executing government projects in India on time, within budget and with the requisite quality. Nasscom can also produce a manual to help governments in India to plan a digitalization project, to prepare a proper bid, to select the right vendor, to detail the requirement definition and to manage time, cost, productivity, quality, security, privacy and disaster recovery in developing and maintaining and operating large application projects for digitalization.

Improving Per Capita Revenue Productivity

The fourth issue is that the per capita revenue productivity of the Indian software services companies in a global hard currency like the US dollar has remained almost the same during the last 22 years. I hope I am wrong. It used to be at least so till 2014 when I was at Infosys. The depreciation of the Indian rupee from 45 rupees per US dollar in 2000 to rupees 78 per US dollar today has helped the Indian service companies to manage inflation and the increasing cost to some extent and to protect their operating margins.

Improving per capita revenue productivity in US dollars is clearly a company level issue. The focus of service companies has to shift from competing on price to competing on value to our customers. Our companies will have to bring innovations to increase the business value leverage. We must focus on BVA: the ratios of value delivered to customers to price paid by customers, which is called BVA (Business Value Addition). It is easy to see that the price can be higher if the business value to the customer is higher. This will also move our companies away from our tendency to commoditize markets and compete only on cost. Nasscom can create a group to share innovative ideas in this effort. We at Infosys have always believed that sharing ideas will only make the ideas better. In any case, the success of an idea is determined primarily by how well and how quickly you can execute it.

Excerpts from the Panel Discussion:

Rajesh Nambiar: Why do you call our IT industry’s growth as a revolution?

Harish Mehta: A thousand years of downward spiral of India was changed by the IT industry. When you arrest the downfall of the country’s economy, I call it a revolution. Today, we have a flywheel of around 60,000 startups. The original flywheel that was built by the IT industry has created positivity and optimism in the country.

Rajesh Nambiar: Tell us about the early days of Nasscom and what it should do today, according to you?

K V Ramani: Nasscom today is a glorious institution. It did not happen overnight. In the mid-eighties, we used to participate in the Software India shows arranged by the Dept. of Electronics. We used to have half a day seminars and we were not even allowed to put our logos in the slides when we made presentations. None of us was allowed to talk about our companies. We were only allowed to talk about ‘software in India.’ The audience and speakers were Americans. We were allowed to meet them only during lunch and thereafter, we had to seek personal meetings with them.

We were usually a group of 25 delegates and there would be fierce competition in meeting the American clients. But during the seminar, we were completely cohesive and put up a unified show and talk about India in one voice. Those days, some of the clients have even asked me, “Where is software in India? We’ve heard of only cows and saints on the roads in India.” One more client asked me, “Tell me frankly. Have you come here to buy software or to sell your software?” That was the state of our software industry then.

Today, 35 years later, even if you are a startup in San Jose and go to an investor, the first question they ask you is, “What’s your tie-up with India?” They say, “Get India into your startup. Then only, we will come here for funding.” That has been our transformation. Of course, we had many challenges. There was diversity of views but we all stayed together.

In the mid-80s, import duty on software was 235%. Year by year, it got reduced and we were also increasing the turnover. At one point, we picked up momentum and the Indian IT elephant started flying beyond even our own wildest imagination. Going forward, Nasscom has to take multiple avatars, because the industry has become more complex.

Rajesh Nambiar: Lakshmi, can your share your thoughts about Nasscom?

Lakshmi Narayanan: To those IT companies that started later, Nasscom was there to share the industry best practices and guide them not to make the mistakes which the veteran companies made in the beginning. It was not easy to learn from individual organisations but an industry organisation like Nasscom helped us greatly, as it collated information across IT industry.  Many new companies, thanks to Nasscom, could emulate the successes of previously started big companies. When Nasscom said something, people were willing to listen as they knew that Nasscom had no individual agenda and that they were not promoting any individual company. Its reports had credibility and were based on a lot of data analysis and research.

We have today great IT products used by the government like Unique identity, FASTag, Co-Win, the Income Tax system and Passport system  which can be used by populations around the world and not just in India. These promote ease of transactions and ease of doing business. Nasscom must focus on export of these products.

The other aspect is the technology itself and Nasscom is a key contributor to government’s policy making in technology area. Another strength of Nasscom is that it does not take more than it can chew. Though there were many requests to Nasscom to take on hardware also in its domain, it has consistently stayed away from it, saying ‘no’ to the proposal.

Rajesh Nambiar: Mr Murthy, what would it take for India to take up the cause of hardware, just like Nasscom has done for software?

Narayana Murthy: The reality according to me is that India missed the bus of hardware industry as early as 1975. Fifty years ago, our bureaucracy, made it so difficult for the hardware manufacturers to set up shop and succeed in India. In certain cases, the duty on raw materials was higher than that of the finished goods. I do not pass any judgements on them and they were all well-intentioned. It is now too late for India to pick up speed in hardware. 12 years ago, Intel came to India. They asked for some facilities. Our bureaucracy did not accept their request. As result, they moved to Vietnam. For India to succeed big in hardware, it will lead to a lot of friction.

Rajesh Nambiar: What should India do to stay relevant in creating technology talent, especially with some new technology coming up every day?

Lakshmi Narayanan: Open innovation is a big thing that has happened. The idea travels so fast. So, research talent and capability is available, though not in the numbers that we want. The key people are there in India. To scale up open innovation, we need more and more talent. I know children in the age group of 14 to 18 who learn computer languages, AI models, neural links, etc. I am confident that people have the capability and capacity to learn and make a progress. I believe we have cracked the problem of developing talent for the problems of today and the immediate future. Where we need to focus is developing talents for the future that lies much ahead.

Harish Mehta: I have two out-of-the box ideas. One, at a very young age, make learning chess compulsory. It is a very low cost device and even the poorest of the poor can learn and start developing certain abilities as a child. Two, make coding and artificial intelligence compulsory for every student, right from the early years.

K V Ramani: We are in the 75th year of our independence. Yet, not even one educational institution of ours, finds a place in the Top 100 of Times ranking or QS ranking. Even the IITs rank between 125 and 150. They do a great job, no doubt. I feel that it is a matter of policy. We have been too busy, focussing on literacy and primary education, which could be at a demand at the country level. But simultaneously, we failed to invest in higher education, technical education and research. Most private universities in our country are beyond 700 in international rankings.

Every year, nearly 3.5 lakh students are going from India to overseas, primarily the US, for undergraduate education. If they go for PG for a specialisation, we can understand. Each student or their parent pays 30 lakhs a year. Imagine the impact on our national economy. Why is it that we have not ramped up our UG education to a level that we can meet with others? The new education policy is an outstanding document. We need to make the political, parental, student and academic community to buy into it. This is the basis on which I started the SAI University. We want to be the first international university in India.

Narayana Murthy: Ramani’s crusade is extremely praiseworthy. One thing that we Indians lack is discussing our problems openly. Unless we do this, we will not be able to solve them. It is in our culture not to discuss our problems in the open.

I used to take part in customer surveys and analyse them very carefully for 33 years—between 1981 and 2014. The general consensus was that our people were excellent in doing what they were told to do. “But your people would not tell us if there was a problem in our business process and how they can suggest us to make it better,” was the feedback, by and large. That is why I talked about the importance of Business Value Addition (BVA). AI or programming is the easy part. What is important is moving from a reactive problem solver to a proactive problem definer and solver. They are a few good universities coming up which are trying to arouse curiosity, analytical thinking and proactive problem solving. That is what this country needs.

A nation becomes vibrant when there are independent thinkers. Late Robert Kennedy once said, borrowing the words of George Bernard Shaw, ‘Some men see things as they are, and ask why. I dream of things that never were, and ask why not.’ That, to me, should be the purpose of our education system.