Gaining Momentum, Losing Altitude

When my niece was graduating from REC (NIT) Surathkal I urged her to join Wipro or Infosys. Explaining that it was a great place to learn in your formative years Vs joining a MNC. Her response was that MRC (Mass Recruitment Companies) are the last option in  campus and only those who do not get any jobs land up in these companies.

Things have changed a lot for these companies. I recollect in the 1985 – 95 era Wipro & Infosys used to attract  the brightest talent from India’s best institutions. Students preferred these companies to leading Banks, FMCG and at times even Global Consulting brands. Having worked in one of these companies for nearly 14 years I have fond memories of their golden years.

As I drove past Salt Lake at Cal last week and saw a dull, faded, torn signboard of the bright & radiant Rainbow Flower I was reminded of a quote that Scott McNealy made of DIGITAL (DEC) in the height of the dot com boom. We were lucky to have Scott in our induction program at Santa Clara and  Scott is the epitome of  a sharp, intelligent, aggressive CEO –   on being questioned about the future of DEC he said ” DEC was a great company but its now gaining momentum and losing altitude” .  I just hope this is not true of Bangalore’s leading companies.

There are many thousands who owe their first salary, first car, first trip abroad, first house, kids US citizenship, and many more fond memories to Wipro & Infosys. A whole generation has benefited. But sadly the sense of loyalty and passion that was exhibited by employees a few decades back is grossly missing. When you visit any online TOI / ET article about these companies  almost all the comments are negative and downright nasty – and I ask myself what went wrong ? How could the Bangalore Tiger & modern Indias global picture boy take such a beating  and plunge from its global high’s?

Yes the market has slowed and there is global recession, but these are companies that are still growing 15% + YoY and delivering margins in excessive of 20% – both of which when compared to the manufacturing industry or global IT consulting companies are still very very creditable. They employ over 150,000 people each and are juggernauts who even in recession hire in excess of 10,000 employees every year. So what is the possible reason for this negativity both internally & externally ? Is  the 20 year wave  getting over or is there more to it ? I spoke to many old friends in both companies , some who had just left and a few interesting observations emerged. These companies still have amazing leaders and people like TK Kurien are razor sharp, hard working , analytical wizards who are doing all that they can to turnaround, but I hope that some of these constructive suggestions help them in accelerating.

1. Where do you want to go, what do you want to be ?    

20 years back this question had a clear answer, Vision was to be a leading player , get to 1B then 5B and be a global player to be reckoned with.  The thrust was on Quality & Value for Money – Six Sigma , SEI CMM all of this made the mantra work. The dream was realized. What next ?  Most people don’t see the dream for the next 5 – 10 years. Is it just chugging along with Growth , is there a radical change , how do we move from one plateau to the next high ?  This question needs to be answered – not as poster across the company but a clear direction on where you want to be and what you want to be in the future. One needs to look beyond the quarter results, the 1% dip in EBIDTA,  and the fear of losing the 2nd or 3rd position.

2. Applying Thought & Powered by Intellect – is it a ground reality ?

Thanks to amazing visionaries Narayan Murthy & Azim Premji the companies did practise what they preached for many many years. Applying Thought & Powered by Intelllect on the foundation of Integrity & Values was deep rooted. Every employee inculcated it & personified it. At a young age responsibilities were demanding  and the sense of ownership was high. People worked 6 days, long hours and were thrilled and excited. Managers were fair, worthy were rewarded and competition  amongst peers was healthy, attrition was rare.

Somewhere down the line the whole equation broke down – as quality of hires started going down , future managers were weaker, not all decisions were fair , growth slowed down  – while expectations continued to rise , 15% + annual hikes and a promotion every 2 years was demanded. The fear of attrition resulting in many unworthy employees getting pampered and the work culture changed from brilliant hard working to arrogant mediocrity.

Add to this press reports on  misuse of B1 Visas & financial irregularities  have all cast a shadow on the impregnable fortress of integrity & principles which was the hallmark of these companies.            

3. Managing scale – too fast growth a dangerous thing.

When you have 10,000 employees and a 30 % bench its manageable, but when you have 150,000 employees and a 30% bench you are paying salaries to 45,000 people for doing nothing. Thats killing. Thats exactly what is happening to these companies. The scale and size they have reached is unprecedented in India. Only the Indian Railways or SAIL probably have the experience of managing so many employees. Systems have struggled to scale, the personal touch is missing and the juggernaut is indeed huffing & puffing and like my niece pointed out – a MRC that no smart kid wants to join. Whats the solution ? Maybe its time to create smaller companies of 25 – 30 K employees each and allow them the roadmap of growing to 50K employees in the next 3 – 4 years. Restrict the size of each business with a CEO to a max of 50K and create scalable units.

4. Grooming managers with values

This is tough if you have high attrition. But what stops these companies from starting their own colleges in their own campus. Focused on CS & EC – a 4 year program that is geared to get them productive on day 1 , no finishing school training needed. Inculcate not just competency & skills but also embed values. If you do it right people will stick to you for long stints with no bond. I am happy to see that at least Wipro has started a University and I hope that in the near future they embark on a venture to backward integrate and start a graduate school for engineers.

5.The role of Finance Managers

In both companies the role of Finance Managers has far exceeded their scope. The whole purpose of functioning appears to be to squeeze that extra % of profit by cost cutting or innovative accounting. This is hurting and the core business team seems to be quietly resentful but helpless. Partly this is linked to the obsession with the Stock Market & the quarterly results – that obsession needs to wane down.

When Hema Ravichander the successful HR head of Infosys moved on and was replaced by the finance director it started to spell the beginning of the end of good robust people practices. A decline that accelerated over the years.

6. Are you a true blue Global MNC ? 

Or just another Indian company with offices abroad. The desire to hire & integrate people of other nationalities has been attempted again & again but not worked. At a top level the core team of 20 people who on an average have spent 20+ years each in both these companies do not allow outsiders to integrate. Of the total 150K employees how many are Non Indian , if  90% of work comes from outside Indias shores should there not be at least 30% employees who are Non Indians ?

Are you an equal opportunity employer? Or do you have different travel limits, hotel limits, food limits for different levels of employees.

Many Sr Executives from Wipro & Infosys have left and joined Indian IT Companies or Startups –  will say a company like Accenture look at hiring the top talent from these companies at C level jobs ? I doubt – or at least there is no history of the same.

Its time these companies stepped back and took a real hard look on the way forward. For the sake of  Bangalore , for the sake of India lets hope they Gain Momentum & Gain Altitude. Here is wishing them all the best in the years to come as they traverse this challenging journey.

09 comments on “Gaining Momentum, Losing Altitude

  • Atul Bhatt , Direct link to comment

    Very insightful article. Just to complete the thought of “gaining momentum….” it is important to note that once you have a certain size, the momentum has to continue to increase naturally. The direction is as much a function of headwinds as it is of intrinsic factors. These giants – TCS, Wipro, Infosys had great opportunity in the last 25 years and they took advantage of it. No doubt becoming leaner, nimble and agile will help these companies fly high again but it is all a function of relative headwinds.

  • Chivas 'the' Regal! , Direct link to comment

    Great Article!
    Most of the MRCs that are going through massive change, have totally forgotten the infusing Change Management measures and activity around it. Services as a business has everything to do with people, but processes, policies and procedures are everything to do with how to make a ‘fit dollar’ and more dollars. Brilliance that existed in mid 90s in most of these companies don’t exist anymore, every raising standard of living in India is most to blame it. Its a brilliant idea to restrict size to 30k people to run ‘a real services company with attitude’ – at the moment most of them are neither have attitude OR quality.

  • Arul , Direct link to comment

    If you think MNC’s like Accenture are great then think hard again. Just type in ”Áccenture Sucks” on Google and see for yourself what their momentum and the speed of loosing altitude is. They are nothing but body shops like the rest of them. No values, pathetic culture, only cheats and office politicians seem to do well in this industry.

  • Jayant Kshirsagar , Direct link to comment

    Very good insights VAK! Just to let you know, I happened to attend an event at IIT Powai last month where a renowned speaker advised aspirants not to join, ‘SWITCH’ companies. By ‘SWITCH’ he meant Satyam, Wipro, Infosys, TCS, Cognizant and HCL : )

    Total agreement with what you mentioned in the beginning of the blog that these companies have benefited a generation of people. I am one of them and must thank Wipro for the same. Your article provoked to me pen down what kept me going at Wipro for 10 long years and here are my top 5 reasons. They are no different from your list. Sharing the list only to validate your point of view –

    1. We all worshipped Wipro for its values and ethical practices. Besides, it was a leading IT
    company that was making India proud globally. It gave me great pride working for such
    an organization.
    2. While with Wipro, I was fortunate to have got the opportunity to work with some of the best
    managers. Even today, I look at few of them as my role models and keep consulting them.
    3. The management was always fair to me during appraisals and promotions. I do not remember
    a single occasion where I did not agree with my appraisal rating and feedback.
    4. I always got my freedom and independence. Experiments were encouraged without fearing
    failures.
    5. Constraints and low budgets got the best out of me. My learning curve and thus employability
    went up high because of the learning gathered from these experiments and skills developed to
    ability to work under constraints.

    Yes, unfortunately things have deteriorated big time on each of these points in the past 5 years or so for the reasons you mentioned. All of us have experienced it. You have only shown the courage to call them out since Wipro is very close to your heart and you care for it. Hope the current leadership at Wipro takes a note. Getting TK at the helm is a welcome change! He is a strong man and he can clean it up all.

    On an additional note, I feel Indian IT companies should now focus on building products for end consumers rather than continue doing outsourcing jobs to gain new altitude. Yes, we have created big IT giants but we could not produce a Google/Facebook/Apple. Any thoughts?

  • vak1969 , Direct link to comment

    Feedback from Tanmoy Kundu sent by email

    My experience with offshore dates back to 2006…

    First in Deloitte, where I had my team in Mumbai and Hyderabad captive units – worked well as there was strong control that I could exercise from US (as it was the same company and I could talk to the Managing Director to get what I needed) despite initial ramp up hurdles

    Next it was Affiliated Computer Services and Wipro was our development partner and they complete failed to deliver a 16 million dollar offshored program (turn key) a large part of it is due to the inability of their practitioners to navigate a complex and matrixed US organization, understand the dynamics, mobilize the corporate leaders and get the work done – it was pure lack of maturity, presence and lack of business domain expertise and not technical expertise (there were several great Java practitioners on the team who many onsite people could not understand and hence could not agree to their solutions)… Nevertheless even after a cancelled contract, Wipro used to claim success for this account on their healthcare industry segment for many years to come. ACS as the customer is equally to blame for this debacle of not understanding the Indian developers psychology and how to engage them

    Next it was Weightwatchers, we had offshore in Jordan – if you are wondering why Jordan, it was because the offshore company owner, an Indian, had married a Jordanian and decided to open his shop in Amman Jordan. WW was simpler business than healthcare industry and I think we had the cream of the crop from Jordanian schools who worked for us – there were some amazingly sharp guys/gals and it wasn’t too bad of an experience. I guess there has not been a huge proliferation of IT in Jordan so we could still recruit smart people who were loyal (wont go to the next shop in a heartbeat).

    Subsequently at Wyndham Worldwide – the largest hotel industry in the world. We had Cognizant Kolkata supporting us. It started horribly again. Senior onsite Cognizant guys if given too much pressure would quote family and medical reasons and take the next flight to Kolkata and switch accounts. Finally (fortunately) one of my Jadavpur classmates who is a Sr Director in Cognizant Kolkata helped me out with resourcing issues by pulling his strings at the right places

    I am in United Healthcare now – very complex health insurance business, equally complex organizational structure. And we have Cognizant and Accenture as our supporting consultants. Cognizant mostly supplies our technology resources and same situation as my previous experience in ACS and Wyndham..

    I am not in this boat alone. There are several of my friends who are in delivery leadership roles and face the same issues as I am.

    If I were in the office of finance, I would have loved offshoring as my blended rates would go down every year and my books will balance well. Unfortunately I am not…

  • vak1969 , Direct link to comment

    Feedback from Kalyan – Sent by email

    We actually use TCS.

    We have offshored a bunch of low end work to BPO (data entry, basic report generation) and a bunch of high end work (statistics, marketing analyses, IT development) to KPO. These guys are doing a better job than onshore: quality actually went up, and we saved close to 30%. They do much better when we give them end to end responsibility, and we actually get those young analysts on client calls for the marketing analyses.

    These guys make me feel proud. Of course, my personal experience could be tainting my overall opinion, several of the other folks on this email chain have more knowledge about whether offshoring is working or not.

  • vak1969 , Direct link to comment

    Feedback recvd on email

    Interesting point Kalyan. What I was talking was strictly from IT services companies. You have expanded the discussion to captives – US companies have their own centres in India.

    That is a different ball game – the challenge there is different. The Captive Centre’s are able to hire the right talent, effectively based on a stricter recruitment criteria and liberal compensation and benefits. The story starts with all the love affair one could imagine.

    However once the center starts delivering – two things can happen – either the center succeeds or it fails. If it fails, obviously India and Indians are blamed and rightfully so. However if the center succeeds then what happens – the India managers ask for bigger responsibilities and accountability. As long as these accountabilities are limited to middle management and below – India is a darling of the HQ. However if you succeed to the point where you ask for mid-senior to Senior roles – the challenge starts. Who wants to lose his/her job. The blame game starts, successful managers performance rating drops two to three notches in a year – the manager either quits or is asked to leave and a new one comes in place. The so called powers in HQ start their spin doctoring and eventually win.

    Kalyan – as you pointed out that your companies center in india was successful. It must have been and I have no doubt about it. So what is making it work – as CV once said in Captive centers, you are a “Well fed Alsatian on Leash”. If you happen to the management in the India center and can work and accept the alsation theory – you will be successful. I am not sure I could do that. But I am sure there are enough in India who can do it – willingly or unwillingly.

    There is hope though – there are some companies who have broken the myth – Microsoft, HSBC, Honeywell, Intel to name a few.

    Rakesh

    US CFOs are not stupid and CIOs are not girlie boys. There are many benefits to offshoring that several US companies have realized. Like anything else, needs to be done in moderation.

    My company has benefited immensely in gaining depth of talent by offshoring Tech services to India. Maybe we had a weak team onshore, I don’t have enough experience to tell.

    Interesting discussion thread, thanks guys.

    Yes Tanmoy,
    It is correct we need this. Whatever you have said is available in India, though it may very well be in flashes on brilliance. You will be surprized to see some of the domain talent that I have interacted within India. Then you must be asking why these people are not floating up…

    In my view:
    1. There is no culture of risk-taking. We are so averse to risk that we would rather fail by not taking risks than by failing by taking the risk. This stems from the fact that Indians in general will never take a stance – we will follow – but not take a stance. We have never seen it and never learnt it as well. Even the communications that we do within India is always relative in terms of measures of time or measures of success criteria.

    2. Communications – I believe that people know how to communicate – it is just that they do not know how to express their thoughts in English. Either we make an Indian Language at least universally acceptable within India or each individual has to spend extra effort in gaining mastery over ability to express his/her thoughts in English.

    3. One Individual managing more than 15 employees – I believe that this is definitely a flaw of the system, somewhat attributed to the fact of lack of ownership. In the consulting model the job of the vendor manager is mainly to make sure that folks report to work, are trained and are available for client meetings. Even the vendor manager is not be able to do a good appraisal of his directs without a written feedback from the client. Effectively the vendor manager becomes an automated fax and e-mail machine or if you want a more sophisticated word – an intelligent router.

    4. Manager at young age – this is a social stigma. Even the parents and in-laws do not think you have succeeded unless you become a manager at a young age.

    There are challenges – the question we have to ask – should be try fix these or thinks of ways on how to turn these challenges into strength – like we did with the “being lead” culture we made the IT services model flourish. This model is being copied elsewhere in the world, but has not seen the success yet that was/is experienced in India.

    Rakesh

    I agree Rakesh – the goal should be to lead not follow. But you cant lead unless you are an expert in that area and have great communication and influencing abilities so that people listen and right now it is missing..

    Here’s my wishlist as to what I would like to see in the IT consulting vendors in years to come:-

    More emphasis on vertical (industry) skills rather than horizontal (service line) skills. We have enough Java expertise in India, don’t need more. We need solution architects (not technical architects), Delivery leadership (not PMs) and Product Leaders (not low level BAs) to add value
    Compensation model that is tied to expertise and delivery ability in a particular domain. Too many engineers and even senior folks leave companies too soon and it becomes a “rolling stone” scenario
    Push back when your blended rates are being negotiated with firm value proposition and historical evidence. Create an optimization model within the company to show that “more can be accomplished thru less (people)”
    Reward analytical skills more than mechanical approaches. Almost every shop is SEI CMM 5 certified, but is it adding quality? Tonnes of practitioners with individual certifications – can they drive anything?
    I know there are lot of mid-senior level (VPs. Directors) IT managers in India who manage upwards of 500-1000 professionals. 90 pct of US CIOs do not even manage that many IT professionals. Is this the right approach or an aberration?

    Cheers!

    Rightly said. Any model works when there is a win-win for both sides. Looks like it is win-win on both sides. As tanmoy said – CFO gets to squeeze a little more, and we are able to employ a few 100,000 graduates who would rather have been unemployed. Things are not all that bad. there are companies who are effectively using the “Bangalored” phenomenon – Yahoo, Google, Cisco, Banks etc… Even Accenture is using it very well. While I was in the US i had contracted work to Accenture, TCS and Cognizant and I have hear stories about Wipro and Infosys as well – the challenge with the Indian IT services companies is not the companies themselves but the mindset of the Indian population. The masses are so entrenched into “being lead” than leading that the IT services model had to succeed. it has succeeded and worked for the last 15 years. having worked in america for 11 years and hence having worked in India for almost 5 years and observed the indian IT industry from within – there is a need to “lead”. It is a culture change – something that IT companies could potentially drive as well. For e.g – how many times in life have we said no to something.

    From a work place perspective there are cultural issues – mostly in America and India 75% of the work is done by 25% of the staff. The good news is that in America the remaining 75% come work, do something, party, drink etcc… The bad news is that in India the 75% will do whatever it takes to pull down the 25%.

    I would say it is the human Indian that has to change and I am confident, that the IT industry has lead the path in India for last 15 years will do so for the next 15 as well.

    Rakesh

    Sent: Wednesday, 26 September 2012 8:21 PM

    Wow Tanmoy – straight from the heart! I agree with your observations and analysis. Will catch up with Anand’s blog too

    India created a hype for cheap off-shoring many years back, then it was so good that there was demand supply mismatch. So came the private tech engg colleges and tom dick and harry learnt how to code. Now that has created the Bin Ladens who are hitting us back. Its a big mess; and interestingly the play is still on head count. Get more freshers, keep average costs down and find more business to grow. I thought this model was unsustainable even 5 years back, so I am quite happy that I was wrong and the machine keeps churning the same way to provide more employment opportunities to our youth – thats good for India as a whole….but……

    cheers! Amit

    From: Tanmoy Kundu
    Sent: Wednesday, September 26, 2012 7:04 AM

    Off shoring, in general, is a disastrous experience for onsite management of US companies – I am not just speaking from my experience – almost every onsite senior management I have talked to feels the same way today.

    US Information Technology departments are no longer governed by the CIO, it is dictated by CFOs. And all the CFO does is (to meet the financial quarter needs) to figure out how to crunch the numbers and pass that on to the Indian consulting companies..

    Most US business are very complex and evolved; a lot more sophisticated than anything that we have ever seen or grew up with in India. These processes are not black and white and usually has an element that has to be assessed and understood with a sophisticated thought process

    When Indian IT was in it’s infancy, we had good and efficient people joining that industry who had the aptitude to understand and adapt. Now the quality is different.

    I was surprised to hear that students with 50,000+ scores in JEE goes on to study engineering and eventually lands up in one of these IT shops.. The basic intelligence of such workers are abysmal, coupled with the complexity of US business which makes it worse. Despite their abilities, the attitude of the Indian worker has changed from acceptance to defiance over the years (possibly due to the rising affluence) which does not help at all…

    If Indian IT has to go to the next step, it has to understand industry and business process – mechanical coding and testing mentality will not take them anywhere – it needs accountability, organization and above all delivery capability

    There are many smart Indians in the IT companies (from premier institutes) with many years of experience – unfortunately we (in US) do not benefit from those senior IT professionals as they have been removed from the line of fire (delivery) and occupy administrative posts of managing people with fancy titles…

    If the quality issue persists (and Indian companies consistently agreeing to reduce the “blended” rates under pressure from greedy US CFOs and CEOs) then this model will soon go bust and there will be more work near shored than off shored.

    With ever rising Indian salaries and cost of living, the cost of getting work done in Bangalore is not too much different from getting it done in Detroit…

    And with the falling quality, this model is not sustainable in my humble opinion….

    Wipro and Infosys are seeing the impact of the above first, the rest will see it sooner or later….

    So instead of making our bharat “mahan” we need to make bharat “smarter”!!

  • Joseph George A , Direct link to comment

    Vak, In scale, the Factory metaphor gave the ‘individual’ an apparition of achievement. whether you were tagged as an Individual Contributor or as a Delivery Leader. In mindless replication, aggregates of individuals saw no horizon greater than their own reward. The rest was affordable charity.
    The design of work in complex IT systems design is actually ‘team’ dependent. Mere assemblage of individuals cannot produce either brilliance or notable creditworthy aggression. Today, individuals with aggression cannot harness the power of teams, because they’ve learnt to live without it. After the inertia of such work recedes, either they’ll end up eating humbler pie or run icognito to their retirement homes.
    Your use of the word mediocrity is in contrast to an experienced brilliance. Is that not a misnomer? What other word would you use describe the situation today.

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