I received quite a bit of interesting response to my last post about THE HINDU working in foreign partners. When I posted this note and a question for readers to judge, I had decided not respond because it was not related to investing. However, reading through this discussion, I can see many have put lot of thoughts behind their responses and I got to know differing viewpoints. I respect your differing opinions and hence I am compelled to present my thoughts too.

This issue seems to be a hot button (any of my investing post does not generate such a two sided discussion). I showed this post to few my friends and it generated similar debate. In almost all cases, there are folks on both sides of the aisle. Here also a very good debate from both sides.

In my view, I look at this aspect in three different time scales, viz., (1) Prior to 2000; (2) period between 2000 to 2008; and (3) 2008 onwards. I am not saying this is the only way, but we can only reflect on the past and project for future.

Prior to 2000 most of the stuff our IT outsources did was Y2K projects which indeed was labor intensive. This is not to say our IT companies did not have other project, but those did not have any prominence (or perhaps not seen in media – I do not know). What this period did was, brought our IT companies on the global map, even if was perceived as low cost service providers. But that was the need of those times. Our IT companies wanted that global presence and in my view they did an extremely good job. They were being noticed.

The period between 2000 and 2008, is the one where IT companies started the path of growth. This is the period when foreign companies like IBM, Accenture, et. al. realized the outsourcing potential, and got into the high end enterprise side of the business. While our IT companies stuffed with growth, cash, and easy projects very happy to continue plucking the low hanging fruits. Easy projects because it was driven by “cost reduction efforts of US/Europe”. This was the time where they could have started sowing seeds for next growth (rather than getting complacent on pure labor arbitrage). Instead they started down this concept of global delivery model, economic scale, etc. all of which has root in labor arbitrage.

I believe this was right thing to do and perhaps was required to certain extent. We do have large population to support and this was done very successfully. We would have been in much more chaos had IT companies not started outsourcing. While you are getting flushed with crores and easy projects, that’s the time one needs to focus on next phase. You have 1,00,000 folks working in your company and you cannot find 5000 brightest ones to work on the next big thing. You are happy to keep them on bench doing nothing, but won’t create development projects, won’t engage them in some positive manner. Well, I do see some murmurs and on-n-off stories about our IT companies doing something, but again, where is it, bring it out, show it to world! Since it is not out there, all I can say it is probably not worth it! They are happy to proclaim increased seats, increased sq. ft space, addition of folks in payroll, etc. All of this is geared towards labor arbitrage. The perception has been set, which makes it difficult to overcome (although not impossible). Within this period, Google came out with its mobile operating software, Apple with its own iTunes platform, and there are many more such examples….. Our companies with 100000 folks came out with global delivery model.

2008 onwards will show us where we are heading. I tend to agree that all the reasons that we use to explain our inability to climb on higher side were valid in past. From an Indian perspective it was absolutely necessary. But in my view it has now become an excuse (rather than the driver). Unless we stop such excuses, it is not going to help us in future. Past is gone. The perception has been set, lack of products is visible, and lack of vision is obvious. It is possible that I am oblivious and hence cannot see it.

• To John: I did not understand your Mercedes Benz analogy. Assuming the newspaper is already expert in workflow solution and web publishing, I would tend to think that in this scenario, our IT companies are very well position to provide the low cost back end service or customization. Isn’t it? You do not need media/publishing expertise? All you need is somebody on IT sourcing to execute it?

• To Prasanth and SEO Mantra: That’s the perception that our IT companies have created for themselves, Isn’t it?

• To Manshu: I agree.

• To Income Portfolio: That’s a very good example, and probably very relevant. What does that tell us? Is this an IT issue? Is that we do not focus on quality or we do not have right issues to work at? Perhaps, getting done and billing is more important.

• To Priyanka: Those are good examples and I have somewhat similar observations. I touched upon this in my message above. I would tend to agree with you. But note chasing low hanging fruit is also important. You need hands, legs, eyes, etc. Meaning everything has a place and importance. Our IT companies forget this aspect.

• To Amogh: Yeah it was interesting to read variety of viewpoints. I tend to agree with your thoughts and I touched a bit in my message above. However they were valid in past. We should not be looking into past to attempt to rationalize future. As you said, “… in parallel build capabilities for future….” You hit the nail on its head. This is what I believe is missing. OR I cannot see. Until I cannot see, for me perception will not change.

• To Arungsg: Bharti outsoursing is one more example. Good one. Based on what our IT companies were doing in past, it would have not been possible for them to execute those type of projects. But assuming that our IT companies are evolving, let us see if out IT bigwigs can get and execute such projects in India.

• To Ravi: If I can understand properly, I think you are trying to separate the domains. You are attempting to look at this as two distinct elements i.e. subject expertise (media/news business) and means of execution (IT tools and services). It looks like your view is that THE HINDU website requirement is more of subject expertise (rather than IT tools and execution). You may very well be correct in this example. It is possible the way you have looked into it. However, if that’s the case, it would be interesting to know who executed it and whose tools they have used?  Assuming that they selected a media business platform, even then I would presume it is IT related, i.e. product? I still continue to think THE HINDU site is faster because of IT architecture/platform that it uses, and not because of media/business expertise. Sure there is subject expertise involved, but they are more of inputs and not execution tools.

• To Yoginder and Takla: Looks like your thoughts are shaped with the past and that is part of the set a perception I discussed above. It is difficult to address and your message is perfect example of that.

Finally, I am not saying newspaper was wrong in selecting foreign partners. I do not know what their criteria were and what their objectives were. This was not about being right or wrong. However, in my view, examples like these, does add to the general perception of state of our IT companies as a whole.

Evolution of IT outsourcing in Indian, Evolution of IT services, foreign sourcing, HINDU's website, IT business, IT business model, IT innovation in India, IT services innovation, outsourcing, Website design