NTLF 2020: Indian IT services industry is no longer playing catch-up, say tech majors

Edited excerpts.

Gopinathan: The next decade is going to be about continuing to transform ourselves. We have had a tremendous journey over the last 20 years, many of the stalwarts are here. We acknowledge the 20 years of participation of Nasscom here. If you look at it what we have done is we have built up an enviable talent pool in this country. What industrialisation did to Europe, technology is doing to India and the same role that Europe had in industrialisation from a global perspective India is at the cusp of making that kind of an impact on the world. So we are in a phenomenal position today compared to where we were when we started this century and it is up to us to reimagine where we can use this talent and this opportunity to drive the next 10 years.

Gopinathan: The biggest shift has been that if you were to think about the big technology changes that happened over the last couple of decades, we were always on a catch-up mode. The start of the technology wave was typically much earlier before we got up to it but the last few years if you take the elements of what we call as the digital transformation and even more so when we are coming at automation, we are the originators of this change.

Gopinathan: Absolutely not.

Parekh: Absolutely. I think we are at a stage where globally technology has become so relevant and the critical mass that collectively India has, all of the companies here have is just driving this change. So we are absolutely at the forefront of the change and the good news is there is so much new that is going on in what people are calling digital transformation and that is driving all of the change that we are putting in place. So it is a hugely positive optimistic view of the next 10 years.

Parekh: One of the things that we start to see is in this area of cloud - there are a lot of players who build cloud ecosystems with the way we have started to build within India with different companies, the way to switch between clouds, the way to create cloud independent growth scenario’s that is quite innovative. Each of the companies here, many of the companies in the audience are doing that today. We are seeing that across all of our client base and we see there is a huge amount of respect that clients have for that level of innovation that many of these companies bring to those clients.

Premji: Can I challenge the question in itself, because I think we are going to break this idea of Indian companies versus global companies. The reality is some of the global companies today have more people in India than some of ours have here. So the concept is not about whether you are global or Indian, the reality is we are all multi-national companies. Indian companies began with Indian heritage, so there can have more Indian talent compared to global companies. I think that philosophy has completely changed.

The other thing that has changed is it is not only technology companies that have a presence here, but it is also customers and end enterprises we were talking about earlier. I was talking with a customer earlier who is a large global bank and they have more people here, they are building a talent base here not for cost and quality, but for strategic differentiation. So they would tell you don’t walk our corridors of London and New York to get business, walk our corridors of Hyderabad, Chennai, Mumbai and Pune. So the philosophy has changed dramatically. So I would not pile Indian companies and global companies separately because we are all leveraging a very similar talent base which is a very powerful and qualified talent base.

Premji: I think two things are happening. One is you have young companies that are becoming true product companies coming out of India and it is still early days but I think that is happening and that is the challenge we keep getting which is –India truly becoming an innovation hub if we don’t have world-class companies coming out of India, which I think is changing.

I can speak for Wipro – our philosophy is how do we leverage product and services in a combined manner, unlikely that we will become a product company or have large scale IT that we sell independently, but how do we combine products and services and take productised services or business process as a service. That is the journey we are on but the journeys could be different for different stakeholders.

Gopinathan: For example, we have filed more than 5,000 patents and have been granted more than 1,000. The fundamental belief is that when you think about IPR and I will come to productisation - we have the intellect, we didn’t have the discipline and the capability of converting that intellect into property and then to exploit that as a productised right. That is the journey that we are on. It requires us to go through this in a systematic way.

Gopinathan: We are definitely in the form of actually capturing our intellect and converting that into an asset. Collectively, if you were to think about Indian companies, we have not yet mastered the art of productising and exploiting it. But that is just a capability and that will come through.

Gopinathan: One step at a time.

Gopinathan: Absolutely, I would definitely put it well before 10 years. In fact all of us here, we have had phenomenal success in productising the automation side capabilities, all of us have had very good success productising on the domain side. In fact, the top three banking and financial services software all over the world belong to one of the three of us. So we are not just talking about local products, we are talking about global dominance in specific niches it is becoming broad-based. There are many here in the audience I am sure who are creating the niches and much more technology focus areas and some in domain focus areas. So the groundswell of productisation that is happening in the country combined with the talent and the fact that we have such good visibility into the value creation across multiple industries, I believe that we are in a beautiful position to actually push this forward and unleash the full potential of what we have here.

Parekh: The discussion we were just having - just to add to it and come to the question there is a view on products which we just discussed, there is a view on platforms and platforms are where we see again with the people representing the companies here but also in the audience a tremendous amount of success. So you can see platforms today for example on mortgages, you can see platforms on insurance, these are the platforms that give you scale and then give you tremendous benefit to growth.

Then you have automation stories which are different ways of productising, then you have stories which are around what we call things like BOT factories these things make automated development also more and more feasible. So there are many different ways that companies in India and this is as Rishad pointed out not just companies of India origin, but operating from India which have tremendous ability to drive this.

In terms of what can stop us - frankly my view is I don’t see anything that has stopped us because if you look at it at a global scale - tech is a prevalent theme everywhere. So you have, let us say a manufacturing company in a small manufacturing town in the western world calling themselves a tech company now. Here we are the tech centre of the world - there is no technology which is developed which we within India don’t have a leading view on. So if you just put those two things together we have a one-way ticket to growth.

Premji: All organisations are morphing and changing. What was relevant five years ago is less relevant today. You had everything in data centres, you are moving large chunks to the cloud, you are moving them to public clouds, you are moving them to hybrid clouds, to private clouds. So the reality is that the nature of work is changing and you are going to keep up with times.

You have to be open to the mind-set of allowing some business to go from the past to be able to capture some of the new business that is the future. To use the word cannibalisation you have to be able to cannibalise yourself because if you don’t sum up, your competition will. That is exactly the propositions your competition will take to the customer and you have to have that openness.

I acknowledge that it is not easy, it is not easy in a public limited company that reports results quarter to quarter but you have also got to be strategic about this because if you are not going to do it, you are going to be taken away anyways by somebody else. So you might as well do it to yourself. I am of that view.

Premji: To give you a simple example, you may have 300 people working on a particular transaction operations process and you are working with people and you can significantly automate that process by leveraging intelligent BOTs, you are going to do that. We change the profile of the way you command pricing for it but if you don’t do somebody else will. That is why I also believe going forward that the nature of commercial models may change. Historically we charge in some form of people whether it is the fix price projects, whether it will be capacity, maybe you will move to a model where you charge for people at BOTs as an example. That can be a commercial model that can perhaps evolve over time. So things will change.

Gopinathan: I think the commercial models have been constantly changing and they will continue to change. So if you look at our own business, percentage of the business now comes out of transactions and the ideas is that that you take a larger and larger chunk of the value chain and you take on responsibility for delivering that value and that is phenomenally exciting – it started earlier on transaction processing. Now it is shifting more and more into other domains and as we get a larger chunk of the value chain, the amount of value addition that we can put on to that also keeps on increasing.

Gopinathan: Let us think about multiple stakeholders here. There is the customer set, there is the employee set, there are the investors and then there is the media. I think the problem is more on the right hand side rather than on the left hand side.

Parekh: I would not say you are the problem. I think you are very much part of the solution. The way I would look at it is if you were to see where your clients are going and make sure those expectations and you try to build relevance to them, all the other things sort of follow through and of course there is intensity but it is in any enterprise which is trying to do something and there is, fortunately, a way to drive that because these are at the end usually profitable, growing businesses. So there is an expectation different stakeholders have but if you remain relevant to your clients and you make sure that your employees are seeing the change in the reskilling, you usually are okay.

Premji: We are not an industry going through a time where we are saying to people give us a stopgap because things have to readjust from disruption and then come back – that’s not the conversation any of us are having. So I think I struggle with that question a bit. The other thing is most stakeholders are quite smart, so if you start with investors, investors understand why you need to be making investments in the short term and this is how you measure me in terms of input matrix that you see and output matrix that they see --- people understand. I mean if you are investing in a product business, you are not going to see returns for a long time before you invest in the products.

I think you can talk to stakeholders whether they would be investors, whether they be customers, whether they be internal stakeholders and be able to explain a roadmap that you need to take but it’s important to underscore that this is not a history going through a phase where there is going to be complete disruption and a pause before we come back as an industry.

Premji: I don’t know. We haven’t seen it in India so much so far. Is it possible? It certainly is. We do not worry about it so much given that we have a strong promoter ownership in the company that allows us to be at some level protected from that kind of challenge but it’s certainly something that one has to be cautious of and think about as one is making decisions.

Gopinathan: We have a very activist chairman.

Parekh: The view we have is if there is inefficiency in the business, there will be someone whether it’s activist or someone will want to have a view on it and try to get you to make some changes. So in that sense, if you are constantly paranoid and making those changes then you are usually okay.

Premji: Personally I am a huge believer in M&A. It’s a very powerful medium and way to very visibly communicate that you are serious about investing to very quickly acquire new capabilities. So I am a big believer in M&A. We have done a fair number over the last few years. We have done less over the last 18 months but we will continue to leverage.

Premji: It’s just the fact that M&A is binary. If you buy some things work out some things don’t work out, but as a tool, we believe in it very strongly. I think you got to be very careful about not getting carried away and going overboard and how you integrate capabilities, how do you make them work within your system, I think is very critical. So we are going to find the right balance and not go completely bizarre. I think it is also important that we do not look at M&A as a tool for the acceleration of growth. We look at it as a tool for the acceleration of capability and so different organisations use that tool differently as well. We are very clear that we are in the capability bucket as oppose to the growth acceleration bucket.

Premji: I think you will continue to get capabilities around new edge cloud capabilities, how do you significantly enhance digital capabilities around strategic design for example; how do you open up new geographies which are still small and you want to be more relevant and scaled in those kinds of markets. So things like that.

Parekh: In M&A, it is a tool that can be hugely positive. There are always challenges – finding the right cultural fit, finding the right integration, but assuming that you get by those over time, we have done three types of acquisitions in the last two years; one is in the cloud area, we have done two companies there. One is what we call experience which is all of us experience technology and it is a new way of integrating digital studios in.

The third is in the platform, a discussion we had earlier to scale out some new platform. So, anything that helps us to be more relevant to our clients, those are the areas we will drive M&A in. Fortunately, all the companies here have a very strong balance sheet, huge cash generation. So, we have the tool kit to do this; it is more a function of integration and cultural fit. Those are things you have to watch out for.

Gopinathan: We have been systematically investing. So, if you look at it across all three dimensions, and like Salil and Rashid said, whether it is from a services perspective, product perspective, or from a new market perspective, we have always systematically grown, especially on geographical expansion M&A is our preferred route. Whether it is Latin America, Europe, or Japan, we have always gone M&A joint ventures, systematic acquisitions.

So, it is not that we have not done it, but we are more measured and so we like to give it enough time for it to play out. The last time that we had done a big one has been when we did France and Japan which is about four or five years back. Typically we have been more – I would say the cadence has been lesser, but the size has been fairly large.

Gopinathan: I think the biggest part of it is the evolving landscape from an end customer perspective because all these industries are going through a significant amount of change. Their expressions of technology and how technology can add value as well as how they consume it is constantly evolving. Our biggest consumers are banking and financial services, retail, etc. and all of these are at the forefront of continuously reimagining themselves. So, the turbulence is both an opportunity as well as a risk, it depends on where we land up on an individual situation.

But I believe that especially for services companies, periods of change are huge periods of opportunity, actually, the change is a friend, we just need to make sure that we are riding the wave correctly and investing right.

Gopinathan: Bulk of the regulatory focus that is currently on, especially when it comes to data privacy, etc. and all, I think we are well aligned to that and we are on the right side of it. We are more focused on what we do with the data than of ownership of the data per se and technology today allows for that data to be locally resident wherever it needs to be. So, we are quite agnostic to where the data is.

Similarly from a privacy perspective, our business models are very agnostic to many of the evolving concerns that are there on that. Similarly on the security aspect. So, I believe that we are on the right side of most of the big regulatory changes that are currently happening.

Premji: There are 3-4 things, some of them can be harder, some of them can be softer in terms of trends and challenges. One is data - the explosion of data and how do you use it smartly. We have talked a lot about structured and unstructured data, more and more data on the edge with things and devices getting connected. The whole opportunity, the whole challenge of how do you leverage it smartly to drive differentiation as companies and how do we as partners help our customers in that journey. So I think the next 10 years will be a huge opportunity for data leveraging to drive business impact, that is one.

Second is the future of work - how does work happen, where does work happen. So it is a combination of the future of work and the future of talent. I am a huge believer that over time you will have to access talent, you will have to go where talent is as opposed to where you want the talent to be because somebody will be sitting somewhere in the middle of nowhere in their pajama's and want to be able to access them. I think that is going to be a reality over the next 5-10 years.

I think things like sustainability and how are you sustainable as an organisation, these are some of the softer things, they do not impact the business directly, it was a big conversation at Davos but how sustainably conscious are you as an organisation, what are you doing to contribute to saving and working beyond your business, to working for the communities that you live and breathe in.

Fourth is diversity and inclusion. I think that is also going to become a big thing, it is becoming a bigger and bigger conversation in rooms. A lot of us as organisations have a large scale body of balanced gender representation as an example but at leadership perhaps it is not as strong. So how do we drive that?

Premji: I am personally not a big believer in this as a metric. I have genuinely learned to believe over the last 12 months that it is truly impactful business to bring in diversity of mindset and that comes from diversity of minds, it comes from diversity of gender, it comes from diversity of ethnicity, of social living and you really have to bring those into conversation and I think it makes for more impactful business but also customers are demanding that much more.