Taut, tested arguments falling into place at long last are beautiful to behold. 
Like any good debater, Nandan Nilekani, CEO of Infosys, has finally got his case down. First, talk smack about India’s place in the world:
Q. Are you worried about the outcry over outsourcing in America?
A. What’s happening is pretty fundamental. If you go back to the 1830’s, India and China were 50 percent of the world’s G.D.P., and then they missed the entire revolution of industry. So if you take a long view of this game, it’s just part of the process. [Link]
That ‘missed the revolution’ turn of phrase is a nice little euphemism for the Gothic horror of the British Raj.
Second, deftly position the inevitable outsourcing question as non-unique, overheated arm-flapping:
Q. What do you say to people who think that globalization will inevitably harm the United States work force?
A. Every time Wal-Mart replaces a person at a checkout counter with an automatic machine they’re eliminating thousands of jobs. This is one more facet of that, except it’s more emotional because instead of a checkout counter machine replacing Steve Smith, some kid in Bangalore is replacing Steve Smith. You can point to that kid and say, “He took my job.” [Link]
If you go back to the 1830’s, India and China were 50 percent of the world’s GDPFinally, remind Americans of their own core values:
Q. Does it feel odd to find yourself lecturing Americans on the joys of capitalism?
A. You guys told us for so many years to cut out this socialist rubbish and go to free markets. We came to free markets and now you’re telling us, “Stop, don’t come…” [Link]
This guy is better at jawboning than the politicians. Next step: mayor of New York? 
This guy is cool, go Clash of Civilizations on their ass.
China missed the industrial revolution because of the British Raj. Any evidence to back it up?
As they say, history is written by the winners. This dude is quite obviously in seventh heaven, heading a company that is basically a glorified bodyshop, albeit one that he realizes is quite threatening to his audience.
But many a time it’s written by the literates, winner or not( What was that African pro-verb… Until the lions have their historians tales of hunting glorify the hunter).
And WalMart is a glorified grocery store. If you knew anything about the IT industry you wouldn’t be so glib in your dismissal of Infosys. All of the big 4 consulting firms have the same kind of ‘bodyshopping’ practices. I know – I have worked for two of them.
It is. But, they have made extremely significant innovations in supply chain management, marketing and strategic business planning. Infosys has nothing to show for. Infosys consultants claim that they have developed a winning methodology. I failed to see what was special about it, probably adopted by IBM etc. decades back.
For all the chest thumping, Infosys would not be in business unless they had a low labor cost advantage, while consulting companies in US started out because of their expertise. Of course in recent times, faced with competitive pressures they are trying to adapt themselves to stay afloat.
argus_nj
Argus_nj – I’ve seen some of your postings the past couple of days – and it’s been suspiciously close to flame baits. This isnt cute – if you have a point to make – please make it with some forethought – statements like the above seem to alternate between conjecture and gratuitous sneering – I cant help but think of it as puerile if a person forms a stance he/she thinks is fashionably contrarian and offers no facts in support
Nacheez made a point about having worked for two of the big-4. I got the sense he knew what he was talking about and despite his passionate opening I will continue to read his postings. I dont get the same from your commentary.
But maybe I’m reading more into this. I would be interested in your thoughts why the ceo of a billion $ company is peddling bodies.
I could say the same thing to you, but I won’t because I do not believe in personal attacks. I made a conjecture based on my beliefs and well supported by facts. Can you offer valuable counter-arguments? How do you know I have not given the matter any thoughts? Isn’t it presumptuous on your part? Also, I do not believe in revealing my personal information such as job experience etc. on an online forum.
I would be interested in finding out why the said CEO makes utterly juvenile, shallow and irrelevant remarks in an interview with a leading newspaper.
This guy is better at jawboning than the politicians.
This is true and nothing wrong in it. He is just talking “American” to America. I think its about time desi executives learn to dish it out. At the same time one must agree that “offerings” of his company are not something that him or his fellow desis invented. They are just doing it for cheap.
I have had the good fortune of working on business proposals where I had the option of “leveraging best-shore resources” available to me and I have also had the misfortune of competing with a total desi outfit (misfortune because they could undercut our bids drastically 🙂 ). In both cases I was generally impressed with fellow desis at all levels (worker bees to client facing execs). My observation was that while they are doing a great job of talking the talk, walking the walk is just a little bit lagging, at least from the pov of core technical expertise.
Another thing it is not just Infosys, like Ncheez observed correctly, almost all of the consulting firms have a substential presence in India.
My hope is that desis would be able to keep their gloating limited and at the same time apply some of the lessons learned from the successes of the “IT boom” towards general governance.
Nilekani said this :
Pico complained :
I dont think Manish claimed that at all. If you had clicked on the link you would have found out that it was about India. China “missing” the industrial revolution is an entirely seperate situation.
I would be interested in finding out why the said CEO makes utterly juvenile, shallow and irrelevant remarks in an interview with a leading newspaper.
argus_nj –> By these comments you have shown the SM that you are infact juvenile
Grow up my friend (or else) if you are adamant that you want to be ignorant, then so be it.
I agree that American executives could learn a lot from this guy:
and good on him for this verbal smackdown. It’s about time the Empire slapped back.
Maybe the IMF and the WB will reconsider their attitudes and “suggestions” when “helping” developing countries like Argentina.
argus_nj
market research reports published by Gartner and such have started recognizing Wipro, Infosys, TCS as contenders in business consulting services. To take up Nilekeni’s point, the likes of EDS and IBM would ignore the indian firms at risk of losing further market share. The business model nilekani is talking about in his interview has truly altered the way business is done – a business model in which a resource was hired for $150/hr about 10 years back, has a blended operating model with resources at $40/hr – n american service providers are scrambling to compete – they have been plumping up ranks in India while trimming down the european workforce – not inside news – all this is in the trade newspapers – IBM reported its revenues a couple of days back – read through the earnings’ report — body shopping is a primitive term, indicating that people can be swapped without detriment ot product quality – the new business model cherishes customer loyalty and the employees take as much pride and sense of ownership in the client as before – at the very least read the NY Times article – manish had the spicier excerpts – there’s more to the whole article.
Americans understand only American way of talking. Nilakeni is very good in this. I like him for this kind of talk
KIT
.
All the reports I read talk about offshore quality in IT services being higher and that its not only about cost effectiveness. Also aren’t most of the CMM 5 companies overseas.
Would be intersted in hearing the basis of your thoughts?
That was precisely my point. The big value they are adding is really cost reduction.
Ashamed of revealing your true handle? Your uncle works for infy or do you own Infy stock?
KIT
My observation was that while they are doing a great job of talking the talk, walking the walk is just a little bit lagging, at least from the pov of core technical expertise . Bula bi wrote Â… All the reports I read talk about offshore quality in IT services being higher and that its not only about cost effectiveness. Also aren’t most of the CMM 5 companies overseas.
Would be intersted in hearing the basis of your thoughts?
Bula Bi,
You have a great point.
Desis have done an excellent job of conforming to the processes that are involved in SW development etc. This is good because a higher level of compliance/adoption to CMMI and stuff provides a degree of assurance to clients especially in USA apart from its stated purpose. But, all this process and stuff does not really solve complex problems. At least I do not believe so. What I observed was that, although there was “due diligence” and an eagerness to help the client, the techi-talent was slightly lacking. IÂ’d attribute that to the lack of experience as the guys I worked with “sounded” very young. I observed this twice (not really a representative sample I ‘d agree).
There was nothing lacking in effort though. Fuckers could put in insane number of hours and they are extremely competitive (another good sign). Also, I am not a big player in this game so my observations are based on my limited exposure. .
Reading The World is Flat, one finds that Infosys and its ilk aren’t just bringing cheap labour to the table. The companies that have outsourced to India are happy with the productivity boosts the companies provide. (Of course, the World is Flat is not without its own bias.) Of course, it is easier to pretend bangalore is filled with nothing but call centres, with people doing crap work for crap pay.
I believe quite a few feathers are getting ruffled by the criticism of Infy. I understand this. People have vested interest in these companies, they may have jobs with them or have invested in them. More importantly, they have a false notion that somehow the glory of Infosys rubs on them.
I think they are missing the point that India has a lot more companies and innovators to be proud of. Infy is simply not one of them. The forced points like Infy has CMM etc do not prove anything. So has Accenture, IBM etc.
I would say Infy and its likes are causing India great harm, by locking up the entire talent pool into software projects, they are reducing exciting possibilites in other fields. This is primarily the reason India is not able to beat China in manufacturing.
Please ask yourselves, would Infy get any project at all if they had the same cost? Nilekani flaunts a “model”. What “model”? It is called cost advantage, simple arithmatic.
I would appreciate if people would refrain from personalities and offer valid and logical arguments and information.
Argus_nj
One word…. WalMart :)) I’m disappointed. If you don’t think changing the fundamental cost structure of an industry is a significant achievement, it is futile to argue with you. Of course Infosys hasn’t done this alone but they are certainly one of the most successful implementers of the new model. But why am I talking to you …
Me too.
Dude, everyone knows the type of operational excellence and business genius WalMart had to exhibit to achieve their cost competitiveness, in the face of cutthroat competition from other companies.
Infy had a readymade pool of cheap labor, pure and simple. Their success is laudable, they did identify and exploit their inherent advantage. However, to put them on a pedestal and pretend that India has only Infy and offshoring to show for is doing a disservice to the country’s future potential.
Nandan is a brilliant public speaker, eloquent, forceful and he also has a superb sense of humor which he uses to good effect.
As fas as Infosys or other Indian IT companies are concerned, their capabilites are already well known to those who matter namely their clients (The Fortune 500).The Big american IT companies already have huge operations in India (IBM is 10,000 + , Accenture 5000 + , EDS, CSC are in India too).
The media perception of high value work staying in the US is just that : a perception.Everything is being outsourced. In any case, if Americans have the perception that it is only grunt work that is being outsourced , it is to the advantage of Indian companies . The media outcry over lost jobs is less if the perception is that it is only the grunt jobs that are being outsourced.
The more we are underestimated, the better it is for us.
Certainly does not appear to be from the interview.
argus_nj
You’re the best argument against supportive parenting imaginable. Sweetheart, when your amma said you were special and exceptionally smart? She lied.
She did and I know it. You believed the lies.
People please. How many times do we have to tell you. Don’t feed the trolls. They go away when you don’t leave food out for them.
My apologies. Engaging Argus in a discussion seems to be impossible, so I stooped to name calling. Childish of me, I do apologize.
Yeah, Friedman is pretty much an idiot.
Here’s an interesting article that’s bound to cause problems for outsourcing/globalization advocates. Disclaimer: I’m for outsourcing/globalziation but it’s things like this that will heap more abuse on India call centers…
if you didn’t know much about software engineering, CMM/CMMI ratings do not speak to a company’s ability to meet requirements with cost and schedule constraints, which are primary business concerns. they only attest to how well measured work is and how well defined the processes are.
not really. Infosys, Wipro, TCS, etc are a part of the fastest growing component of the Indian economy. This is the area of India’s economic future that has the greatest potential. It’s not the ONLY area, but certainly the area with the most hope. Biotech is also up there, just look at cipla. I wouldn’t just label it offshoring though, I would probably call it Information Technology and Services growth, becuase there’s also a hell of a lot of work the big 3 are doing within India.
nandan nilekani being the ceo is no accident. narayan murthy, who founded infosys (and was my dad’s classmate @ NIE incidentally and sends his daughter to claremont-mckenna), saw a need for a customer-facing exec that could speak the customer’s language. with outsourcing blowing up, he went with nilekani, who seems pretty adept at what he needs to do.
absolutgcs,
Thank you. See, mutineers, how easy it was? Instead of personalities, Mr absolutgcs added his wisdom, carefully chosen logical arguments and thus enlightened us all.
Anyway.
I agree that the Info tech sector is the fastest growing (roughly say at about 25% a year) sector of Indian GDP. Now, Infy has a revenue of $1.6B (Fiscal Year ending March ’04). Assume that the total Info Tech sector revenue is $8B (outside estimate). India’s GDP is in the ballpark of $700B (2004 nominal dollars). Hence, the share of this sector in the GDP is just over 1%. India’s GDP is growing at about 8%. At 25% growth, the share of the info tech component would be about 0.25% of this growth. As you can see, there is a lot of room for exogenous growth.
A recent study by Mckinsey shows that the biggest problem facing the outsourcing industries is the dearth of quality trained people and there is reason to believe the limit is being reached. It is not easy to build world class universities overnight. It will take decades before India can generate enough graduates to be able to deliver the kind of work Infy is doing today at a scale that can penetrate the global market at a significant scale. You might know, they recently added a few IITs and IIMs. But it is not enough. Infy realizes this, that is why they are adding the consulting wing. The idea is to also capture some high value consulting projects, which will keep the pretty growth figures for some time to come (and their stock prices).
Keep in mind, very soon East European countries will catch up. Infact it is already happening. The language problem is diminishing, my Bulgarian friend says a lot more people speak decent English there compared to even a few years ago.
I believe India’s real growth will come from small scale mass manufacturing and the food/biotech sector.
My basic issue with the info tech driven growth is that it is very vulnerable to technology changes. Unless you control the technology, you can get slaughtered in the marketplace. It is hard to imagine a change that will destabilize infosys, but let’s say technology changes in such a way that the programmer involvement drastically reduces. Things of this sort has happened before, example – IP telephony almost completely destroying traditional telecom.
Second point is, Infy and the likes are locking up the Indian talent pool. These guys could do havoc in manufacturing, introducing internal demand driven growth to the economy. Just look at South Korea.
Everything is vulnerable to tech changes. Tech drives economics and history. Embrace it.
Second point is, Infy and the likes are locking up the Indian talent pool. These guys could do havoc in manufacturing, introducing internal demand driven growth to the economy.
Oh yeah? And YOU are willing to invest in them to ‘wreak havoc’. In manufacturing with an agriculture-friendly, anti-business environment?
Does Mr.absolute-genius think the businessmen are big fools out there that they don’t know what gives them the best return? Or then again, you want the best and brightest of Indians to work for lower value jobs?
News, other people have brains too, and are well capable of making calculated decisions and not whimsical ‘u should be doing this’ biases.
To claim Walmart is the same as Infy is claiming the river and the rivulet are the same.While both cut costs, Walmart does it by introducing new processes that replace/reduce manpower costs besides utilizing non-US cheap labor .Infy and its ilk have only one thing to offer:cheap labor.Period.For a billion dollar company not to produce one single world-class product is apathy at its lowest.
Yes! IBM is so much better than INFY. INFY has a RoA of only 24.3% as compared to IBM’s robust 7.3%. Now only if those idiots (managers) at INFY would learn to make high margin world-class products like IBM and improve their RoA to IBM standards investors will reward them with a PE of 16 just like IBM instead of the current measly 40!
These are separate issues. Businesses are free to invest wherever they want and individuals are free to accept the most profitable employment.
I was trying to explain the long-term economic impact. As of now all the eyes are fixed on the bodyshops like Infy because of their recent performance. I just hope we don’t get blindsided by this.
This is expected, a purely services (labor) based company with little investment in infrastructure and practically zero R&D expense will have more return on assets.
…for some reason when I read argus_nj’s comments in this thread, I am reminded of an uncle …
Maturity and clarity of thought is often associated with aging and the elderly.
Small scale mass manufacturing ? what on earth is that ? I am speechless
:a purely services (labor) based company with little investment in infrastructure and practically zero R&D expense will have more return on assets.
another gem.
Good point. At least you have attempted to read my posts instead of resorting to heaping abuses.
I meant mass manufacturing of small items, like electronic goods and the general merchandise you find in WalMart with a made in China stamp. Again, this is not the only big opportunity for India.
I apologize, didn’t intend to have that effect on you.
I strongly recommend you read this beginners guide:
http://www.investopedia.com/articles/fundamental/04/012804.asp
For instance, RoA on any brothel operator in Thailand will be much higher than that of Infy. Does not mean a thing, does it?
Cheap labour leads to productivity boosts.
There is a difference between productivity and efficiency.
Not really Mr. Genius. Cheap labor is available all over the world. Infy, TCS etc have managed to achieve reliability in their processes.
It’s not as if every Indian is born with IT skills, or for that matter has access to computers, these companies have taken huge risks honing employee skills and re-investing their profits into an immature industry in an immature business environment.
Business, employment and investment are seperate issues? Not related are they?
Again, this is the kind of arrogance that deserves some sound abuse. What makes you think you have a better idea of long-term economic impacts than the businessmen/analysts/investors in the markets?
Do you have a source of information superior to theirs? If yes, go and invest in your ‘manufacturing-havoc’ and give them students better starting pay than Infy (since anyhow you said it’s justified in the long term).
Again, a classic misquote, trying to distort my post into something that suits the poster’s agenda:
My entire post was:
These are separate issues. Businesses are free to invest wherever they want and individuals are free to accept the most profitable employment. I was trying to explain the long-term economic impact. As of now all the eyes are fixed on the bodyshops like Infy because of their recent performance. I just hope we don’t get blindsided by this.
Note that the “these” in my post refers to the two separate issues, represented by the underlined two phrases.
However, for some reason, the poster Mangal translates these into:
Business, employment and investment are seperate issues?
Not quite the same thing, are they?
What makes you think you have a better idea of long-term economic impacts than the businessmen/analysts/investors in the markets?
People make mistakes, yes even so called businessmen/analysts/investors. Remember the dot-com bubble? http://en.wikipedia.org/wiki/Dot-com
Hurling abuses at someone who has a different viewpoint is not going to help you any.
I would not recommend Infy stock now. http://www.fool.com/News/mft/2005/mft05101422.htm