The Hindu Business Line : Software in a baggy green?

In the mid-Nineties, two unrelated things happened. Indian software boomed. It is today an industry that had a revenue of $39.6 billion in FY 2006-2007 and has registered a modest growth (!) of 30.7 per cent that seems to have displeased the shareho lders of this sector quite exceptionally, if the share prices of companies such as Infosys, Wipro and TCS are any indication.

Wipro’s revenues are a mere 35 per cent higher than the same period last year, the revenues of TCS for the same period grew 37 per cent, while the net profit of Infosys grew by 23.8 per cent, while their corresponding share prices fell by nearly 40 per cent.

The industry that boasted of companies listed on the NASDAQ and the NYSE and spawned words like ‘Bangalored’, now regularly gets bad press and its employees are branded as people who ruin the culture of cities like Bangalore. “From where to where,” might be one predictable reaction, particularly of those unfortunate enough to still hold on to technology shares, and yet these people might still be marginally better than those who might have entered the sector at much higher prices.

On to cricket and the Australian cricket team that would spill blood, sweat and tears for the revered ‘baggy green’. In 1995, just about the time that software started to make waves, the Australian team under Mark Taylor beat the West Indians and became the unofficial champions of the world in tests. Since then, they have remained there and have also had their status confirmed in tests and have since won three consecutive ODI World Cups in as far-flung places as England, South Africa and the West Indies, and sadly enough for the rest of the world, Australia have been unbeaten in the last two World Cups.

In this period, the dominant and yet ill-behaved Australian team has won 16 test matches in a row on two different occasions and has, coincidentally, been stopped in its tracks on both occasions by India. The recent 16th win was a contentious one and when the Australian team looked for applause, it got recrimination from the media and there were even calls for the sacking of Ricky Ponting, who is still unclear as to what had hit him or what he has done wrong. So much for the perspicacity of cricket captains!

But the bad press that the victorious Australian team has got is phenomenal. So here are two performers who both seem to be going through “bad times” as we Indians might say and would be well advised to have their charts read! But however interesting it might be to bash the Australians at this point in time, let me stay with software and examine its current ills more closely and suggest a way forward, though I am sure, the software industry has enough experts to run its business, I am merely a well-wisher who addresses perceptions and not performance.

Born in the US!

The software industry started looking at the low-hanging fruits in the US simply because there was no domestic market worth its name in India. Looking at the figures of the software majors, one wonders whether there is one even today. Having said that, one must compliment the software industry for having built its delivery capabilities using a global delivery system, getting close to its customers by building offices in every possible centre in the world, recruiting in thousands, delivering shareholder value and generally doing more things right, than wrong. The business model that had been built on a weak rupee and a strong dollar delivered fantastic results.

Yet, there was a cost to it. The software industry made a lot of enemies with the government and the bureaucrats, particularly in cities such as Bangalore, as they made no bones about the fact that at every possible forum they said the infrastructure (and here I speak with greater authority on Bangalore), to put it mildly, “sucks.” They ruffled more feathers when they said that “software works despite the government” and often threatened to take their future development centres to other States whose infrastructure was not as horrendous. Other industries bristled as they lost talent even as they sarcastically referred to software engineers who had lost their engineering souls as “techno coolies.”

And yet, there was a basic problem as industries like manufacturing struggled to get talent and basic research was a forgotten discipline. Companies like TCS and Infosys recruited thousands of people every quarter and to add to the demand, the Accentures and the IBMs of the world have a dominant presence in India.

The times they are changing …

Yet, the last few months have seen the fortunes of the software industry and its individual constituents change. The rupee became stronger and then the sub-prime crisis hit (or is perhaps still hitting) and the world and the software industry waits. Indications are that we will not know the results in five days as we would in a test match but may have to wait much longer sweaty palms et al. There is also a US presidential election around the corner.

The other day, I was speaking to my investment adviser (sounds nice to claim even if the value of investments is negligible) who likened having stocks in software to having stocks in Hindustan Lever, as the magic is over! The original widow’s stock could now cause people to be widowed as a wag put it! But let me quickly clarify, it is not only about the stock market as only a small portion of India is affected by the stock market, sadly the most articulate and most voluble part. But what it means is that most of the media stories seem to be hard luck stories about investors in technology whose net worth is being wiped out even as start-ups and other IPOs have their offerings oversubscribed over a hundred times without breaking into a sweat. Software, the darling of the bourses and the media, seems to have become relegated in importance and not even does it feature in page 3!

Yesterday all my troubles seemed far away

Just go back to the early years of the millennium or the turn of the century and you could not find any other company or industry sharing the limelight and hogging the headlines as software did. Mr Narayana Murthy was smiling at you from every newspaper and magazine and often was in your living room as well, as he was on one channel or the other. He was the spokesperson for the industry, exhorting youngsters to join the industry, being voted as business leader of the year and led discussions on corporate governance and ethics. Software perhaps needs a leader now as the position, at least in media terms, has been vacated, a leader who thinks beyond his company and has the credibility and conviction to lead with charisma. Yet there is a significant shift in terms of the entire economy as well which needs a cross section of industries to do well for it to boom.

We had the unveiling of the Nano which was the mother of all newsmakers. The Tata-Corus deal, the Reliance spat and now the issues and the brothers competing in net worth, the retail revolution led by Kishore Biyani and then we can see that there is a whole host of excitement that would put a twenty-twenty game to shame and that probably explains why in media terms at least, if not on performance, software’s best times have been years ago though it seems like just yesterday.

Feeling groovy

The prosperity of the software industry and its employees has meant some serious consequences on the social and moral fibre of a few cities at least. It is perhaps pertinent to recall that the Nasscom clubs IT and ITES together for all its figures and industry data and there is perhaps a problem here. They are both different beasts. The software industry has qualified engineers, many of whom come from ordinary backgrounds and who have made it big only on the basis of their education and competence, while the ITES industry has college dropouts and a lot of kids who have too much money and too little maturity for their own good. The brand personality of these two industries could be as wide as the difference between Anil Kumble and a Michael Clarke or a younger Ricky Ponting in his wild drinking days. Sadly the image is getting clubbed and the software industry needs to think about this. After all, the image of the software industry for me is the loud, brash kid who lives next door landing up noisily at unearthly hours, whatever his contribution to the success of the telemarketing world!

It’s been a hard day’s night

Both the Australian team and the Indian software industry could feel aggrieved at their misfortune and wallow in self-pity or move forward with a clear action plan. Well personally, I do not care if the Australian team never regains its lost glory. I certainly do care for the software industry as to my mind it has put India on the global map in a manner that no other industry has. It is like any successful brand that loses its way thanks to the environment that it has no control over. But what is in its control is to get its act together as an industry and renew its focus outwards to society and some of the larger problems that are facing it, showcasing its contributions to the country and its development, and not merely its foreign exchange earnings. (Incidentally, the non-resident Indian remits more money than the entire software industry, if my friend is to be believed!)

Take a careful, objective image check of what relevant audiences are saying about the industry and reposition itself in tune with the times. Highlight the value-added work that they are doing. Showcase the people from abroad who are quietly working in Indian companies, share the research and the patents that they are working on and try to show a softer, more refined face to the public which seems angry with it for some reason. Show a less confrontationist face to government and still find a way to get their ear. It is time for the software industry to find an Anil Kumble to lead it out of the current image crisis and I am sure it will.

(The author is CEO, brand-comm, and the author of One Land, One Billion Minds.)