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Business News/ Opinion / Online-views/  Indian IT and the lightning bolt of layoffs

Indian IT and the lightning bolt of layoffs

Leaders of Indian IT firms should see the layoffs as bolts of lightning to transform their companies into truly international competitors

Indian IT industry might never again scale the pinnacle, it can still be a scrappy competitor. Photo: MintPremium
Indian IT industry might never again scale the pinnacle, it can still be a scrappy competitor. Photo: Mint

I spent Thursday, 18 May, in a series of meetings with investors and fund houses in Mumbai. I find myself doing this at least once a quarter, usually at the behest of an analyst or broking firm that is eager to give its clientele an independent observer’s view into the workings of Indian information technology (IT) services firms. I usually ask that my fees be donated to a charity; in an odd way, I find that this liberates me and allows me to speak my mind without having to worry whether I am stepping on people’s toes when I express my personal views about the sector and about specific firms within it. The investors and fund houses who come to these sessions are usually looking to scratch deeper than the surface views that are available to them from the quarterly earnings announcements of IT firms and to look beyond the carefully choreographed views produced by the investor-relations departments of these firms.

Despite the recent round of layoffs, my attitude towards Indian IT remains sanguine, and I expressed as much during these meetings. I think many IT services houses, though not all, will be able to adapt to the enormous changes now facing the industry, and I believe most can settle at a percentage revenue growth in the high single-digits, while delivering margins in the mid-teens, which in my experience, are sustainable numbers in a truly international IT services business.

ALSO READ: Indian IT firms struggle to generate revenue from digital businesses

Of course, I flew right into flak on Thursday. Equity analysts and investors are very well informed, and are paid to form an opinion and an investment thesis upon which to base stock trades. They can be vocal about their views, and often interrupted to question my premise or to present an alternative view of how they see the numbers, especially since the growth rates and yields I was presenting necessarily mean that the actual dollar value of profits will shrink over the next few years at some of these firms, thereby dragging down other measures, such as earnings per share.

Several weeks ago, I wrote in this column that the Indian IT services industry has been catapulted into a different playing field, one that is singularly more bruising than the one they have occupied until now, with new umpires, new rules, and a new, rough set of competitors. In those columns, I suggested that the industry dive in and go with the flow, that it needed to go local and to start lobbying, and that it might face the threat of unionization.

I will make a small diversion to illustrate this point. What’s occurring now isn’t very different from what happened to Indian field hockey when the rules and playing surfaces were changed. The wristy wizardry of a dribbling Dhyan Chand on green grass could no longer win matches; a bruising, shoving, pass-and-run game took over once the playing fields changed to astro-turf and the rules changed to suit western competitors.

Indian hockey is still adapting. It went from occupying the top spot for decades, even forcing American men to give up the game of field hockey to their sisters after thrashing the US men’s team by the widest margin in history, to becoming an also-ran, but tough, competitor in most global tournaments. While the US still has a men’s hockey team, it has finished last in many of its outings and the sport there is nowadays almost exclusively played by women. And yes, the American women are a lot better at it than their brothers. I shall not dribble on this diversion much longer but will leave you with a thought: while Indian IT might never again scale the pinnacle, it can still be a scrappy competitor. Meanwhile, apart from a couple of notable exceptions, most American IT services behemoths of a decade ago are truly finished.

That evening, I heaved myself into an aircraft in Mumbai, the last person to get on, and wrestled my way into a window seat, the only seat available. After almost three hours in the air, during which lightning storms were flashing outside the aircraft, the commander’s voice crackled through the public-address system to declare that we had been put in a holding pattern around Bengaluru. We could not land immediately due to thunderstorm activity in the vicinity. After what seemed an eternity, he came on again, this time to announce that we were headed to Chennai as an alternative destination. We touched down in Chennai, refueled, and then took off again to make another attempt to land in Bengaluru.

And then it happened. As I was looking out the window, I saw a bolt of lightning pass the aircraft. I swear it was less than twenty feet away. I was transfixed. I had never witnessed a bolt of lightning at such close quarters. Words fall back from describing what I saw. Paradoxically, that terrifying sight was the most beautiful thing I have ever seen.

Several minutes later, much to the passengers’ relief, the brave-heart commander touched down gently. As I crawled into bed at 2am, I couldn’t help wondering whether the layoffs we are seeing are bolts of lightning that will get our IT services leaders to transform themselves into truly international competitors. It is said that lightning truly has a transformative quality.

To quote Meister Eckhart, the 13th century German mystic who once took lightning as an analogy when he spoke of the transformative experiences of a spiritual rebirth: “Whatever it strikes, whether tree, beast, or man, it turns at once towards itself. A man with his back to it is instantly turned round to face it. If a tree had a thousand leaves, they would all turn right side up towards the stroke. So it is with all in whom this (re)birth occurs, they are promptly turned towards this birth with all they possess, be it never so earthy. In fact, what used to be a hindrance now helps you most."

Siddharth Pai is a world-renowned technology consultant who has personally led over $20 billion in complex, first-of-a-kind outsourcing transactions.

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Updated: 23 May 2017, 04:52 AM IST
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