July 18, 2008

So, finally, after triple digit growth, yearly staff doubling, billion+++ revenues, the larger IT services providers in India are showing signs of hitting a wall with their growth.

I can’t speak for the whole industry - I haven’t been exposed enough to all the large providers to generalize. But the one I did work with (shall go unnamed, but is a Top 3) for 2 years was a classic example of a company not understanding the difference between talent & resource.

According to this service provider, the answer to all problems was “throw more people”. As long as the projects & revenue came in hand-over-fist, inefficiency was irrelevant and so was innovation. They were akin to farmers getting harvests from land they owned but did not sow.

So now, hiring is slowing, revenues aren’t growing as swifly, the dollar is weak and operations aren’t diversified enough to cushion the US slowdown. This is going to force the top 10 to start looking into innovation, lean processes & a general sense of realignment that they are not indomitable.

Accenture & IBM Global Services have accepted the challenge and have responded to it emphatically with solid revenue growth through innovation, talent & operational efficiency.

Back when we worked as a sub-contractor for one of these Indian majors - I got to interact with some of the upper management in charge of “North American” operations. And the general trend I noticed was that all of them had a pathological aversion to risk. No matter how calculated the risk may be.

In my opinion, there were two major reasons for this:

• A very long promotion curve. To be even a VP, you need to put in 10-15 years.
• A highly politicized environment that festers regimes & self-serving agendas.

An organization that promotes people so slowly, clearly doesn’t see people as talents or measures their merit to the organization. What this does is creates pointless hierarchies where each successive manager is increasingly defensive in his/her mindset.

I am hopeful that some of these majors wake up and that upper management has the fortitude to change the culture, stir the pot & place the company on the path to sustained prosperity. It’s the least it can do for its customers, shareholders & employees.

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