New Delhi: India’s neighbour and economic powerhouse China is building on its English-language skills and will emerge as a serious competitor to the Indian software industry, says Infosys Technologies Ltd chief mentor N.R. Narayana Murthy. Indian information technology (IT) firms will now have to be more aggressive in markets abroad and hiring there, Murthy said in an interview. Edited excerpts:
When I spoke with you in summer last year, you talked about how the technology sector would have to change the way it approaches the offshoring model. By the end of 2009 most firms were talking about hiring outside. Do you think 2010 is going to be a big year as far as this trend is concerned?
Yes, I would think so. Certainly, the Indian IT industry will have to be much more aggressive in hiring local talent and in local markets. They will have to be much more aggressive in training them and absorbing them and creating a universal culture. They have to be much more aggressive in making sure that they live in harmony with those societies.
Tackling competition: Infosys chief mentor Narayana Murthy says the IT industry will have to be much more aggressive in hiring local talent. Harikrishna Katragadda / Mint
We discussed how the cost structure has changed and moved from fixed to variable. How do you see the business model, in that sense, changing in 2010?
What is likely to happen is that Indian companies will absorb the increased cost of local hiring because the local markets will understand that definitely, because they are making an effort to create more and more jobs and because they are bringing value and because they are creating leverage for the customer company.
I do think that problem will be accepted by the customers, but the challenge for Indian companies is to demonstrate leverage. In other words if the customer gives us $1 (Rs46.20) we should give back $2-3-4 to the customer. As long as we focus on increasing their leverage, they wouldn’t mind spending.
In terms of competition for Indian IT, where do you see it coming from at this point in time?
At this point in time, India is still the leader undoubtedly, though the Philippines has been a little bit more aggressive in the BPO (business process outsourcing) space. But in the software area, definitely the US and India are the clear leaders. I think this will continue at least for the next year or two, by which time China will perhaps become a significant competitor because China has done a very good job of improving their speaking skills in English.
In terms of infrastructure, China is about 100 years ahead of ours. So give another two years and China will become another serious competitor.