India’s IT companies have become complacent: Ravi Venkatesan

Large companies have to continue to incrementally grow today’s business yet be willing to get into very different new businesses, even if it means disrupting themselves, says Venkatesan. Photo: Aniruddha Chowdhury/Mint

Updated: Tue, Oct 08 2013. 10 41 AM IST

Ravi Venkatesan, an independent board member of India’s second largest software services provider Infosys Ltd, says the country’s biggest information technology (IT) companies have become complacent after years of rapid growth and high-profit margins, and continue to avoid taking big, risky bets.

“Fantastic growth and fat margins have made many companies quite complacent so there has been very little game-changing innovation after the global delivery model,” Venkatesan, a former chairman of Microsoft Corp.’s India operations, said in an interview last week. “There has been innovation in hiring, in training and in new service lines, but a lot of this innovation is incremental and overall the IT services business is quite commoditized as a result.”

“More importantly, to feed the machine, a lot of companies are continuously diluting their hiring standards. As a result, the talent pool and the culture across a lot of the industry is pretty worrying. So overall, it’s a rather dire situation, whether people realize it or not,” Venkatesan said.

He declined to offer specific comments on Infosys, which is in a silent period ahead of its earnings announcement later this month.

In the 2013-14 fiscal year, industry lobby Nasscom expects Indian software export revenue to grow by 12-14% in dollar terms, the slowest pace since the 2008 global recession.

One of the biggest challenges facing Indian software firms is to move away from existing people-based, low-cost software services business, which is increasingly getting commoditized and even threatens to be replaced by software robots. “As that happens, then an industry that is built on talent availability and cost arbitrage stands a big risk of being disrupted,” Venkatesan said.

On the one hand, the century old International Business Machines Corp. (IBM) is pushing its solutions such as Watson to replace manual efforts needed to offer healthcare services; on the other, top outsourcing customers including General Electric Co. are increasingly offering software bundled with their traditional industrial products.

“A few companies like IBM are driving this type of disruptive innovation but a lot of our Indian services firms are at risk. This is pretty ironic because the global delivery model was such a disruption, such a tectonic shift and now the game has come full circle,” said Venkatesan. Edited excerpts from the interview:

RANJAY KUMAR

PGDM