BackIT firms need to break free from the quarterly earnings circus
Should Indian IT firms follow Best Buy’s example and go private to steer themselves in a new direction?
Premium(Hemant Mishra/Mint)
It’s that time of the year when India’s largest tech firms start announcing their quarterly earnings with Infosys Ltd kicking off proceedings on 12 October.
Others will follow.
There will be CEO commentaries on the tough business environment in the US and Europe, attempts to explain attrition and utilization rates and other assorted operational benchmarks, and “downgrades", “upgrades", even no grades by investors.
Infosys chief executive S.D. Shibulal will probably try again to explain his ‘3.0’ strategy that will bring more business from newer bets that the company is making. T.K. Kurien at Wipro Ltd will likely say things are “turning around", but caution against any premature celebrations. And Vineet Nayar of HCL Technologies Ltd may explain how his company’s aggression is translating into big outsourcing contracts.
It’s the same story played over and over again, quarter after quarter.
Over the years, these companies have perfected the art of reporting financial numbers and established operational benchmarks that measure how efficient they are. This worked when offshoring and remote delivery of projects at half US costs was a new thing. Now, when global delivery of outsourcing projects is a commodity business and International Business Machines Corp., Accenture Plc, and other foreign companies employ thousands doing the same work in India, it’s beginning to grate.
In private, some CEOs of Indian tech firms say they wished they could go private for a year or two.
“Sometimes you feel like a Mark Zuckerberg trying to explain Facebook to Wall Street—it’s nearly impossible to make a bold bet which does not offer hopes a return for three years," said one of the CEOs.
While being a publicly traded company brings financial discipline and establishes transparent benchmarks, it comes with short-termist scrutiny by investors and shareholders.
Earlier this year, Best Buy Co.’s founder Richard Schulze announced plans to take the struggling US retailer private in order to steer the company in a new direction.
Maybe that’s what Indian software services firms need to do, too.
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