Future of Indian IT and Knowledge Industry – Pramod Bhasin, Non-Executive Vice Chairman and former President and CEO, Genpact

Pramod Bhasin is the Non-Executive Vice Chairman and former President and CEO of Genpact.

Reshaping the IT and knowledge based professional services organizations of tomorrow is critical for us because that’s where we belong. Let me try and address it in a number of different ways as to where I think we can take this if we really take it to our full potential, both as a country and as an industry.

Firstly in my view, this industry has barely got off the blocks. I hope others on the panel will agree. But do you know that 15-20 years is very young for any industry; we have years to go ahead of us, we have miles, miles to go before we sleep and the range of opportunities and the range of potential types of businesses that we could is enormous. It is ours to take! Given our demographics, given our population, given where our country is sitting in terms of costs and as a developing country, still the opportunity to get beyond what we do in our industry today, is immense.

It may often seem choppy, it may often seem difficult because as the developed world, Europe and America and all those other places, goes through their ups and downs, we will always feel the heat. But the fact is that our industry grew and NASSCOM predictions talk about a 13 to 15% growth. These are astonishing growth rates for an industry that is large; a hundred billion dollars. A hundred billion dollar industry growing at about twenty per cent for the last ten years is an astonishing number by any standards.

We must reflect on ‘Why?’ and the answers are very simple. Our demographics are extraordinary. We must never lose sight of these demographics.

Sometimes I think in our own despair, in terms of castigating ourselves and how many problems there are in the government or in our education system or in our own companies, sometimes we forget that the foundations and the benefits, the qualities that India can bring to us are invaluable; the demographic dividend, the growth of women, the value addition that we’re being able to provide is something that the entire world needs and as the demographic platforms change in the developed world versus the developing world, you will see this demand continue to increase for the talent base that India can produce.

The fact is: volatility requires greater flexibility. The world is gonna be in a volatile position for the next five years. That’s my fundamental belief. Fiscal deficits are not going to go away. There isn’t sufficient leadership around the world and will take them time to get their act together so that we get to a point where we reach this point of stable growth. So, I really believe that the world will continue to remain volatile. Within that volatility, very few companies or industries around the world have more opportunity than Indian companies do; they’re flexible, they move fast, they have easy chains of command, they’re still quite small.

We can talk about our giants in India, but by global standards, we’re still quite small. Six to eight billion dollars in revenue is still quite small when the largest company in the world, Walmart, is about two hundred, three hundred billion dollars in revenue. So I think that we have a long way to go, and that runway ahead of us can be wonderful. Now we can really look forward to that runway, because we should look at it as an opportunity for us to grow. But, our ability to be flexible will provide us room for that growth.

As countries and industries think about recession, they will want greater flexibility. That greater flexibility, I believe, will often be directed in terms of giving business to companies and industries such as ours. Why is that? At some point, companies will reshape themselves. They have to. You cannot face the prospect of the next three years and think about it and say, “I don’t know what to do so I’m going to stay with the status quo and not make any move”. People will make moves to change the way their companies work. When they do that, we will get past the points that we have faced in the past. What has happened in the past; in the past when there has been an economic downturn, companies have frozen. Companies have said, “We’re going to wait to see before we take any decisions”. I think those days are gone and now we may be the beneficiaries of significant opportunity. As a result of the recession that is there in the world today, as companies attempt to reshape themselves.

I really believe that the true technology revolution is happening now. It hadn’t happened earlier. The conference of cloud, social media, big data, analytics, the theme of this conference: IT and knowledge based services, that confluence is coming together today in a way that I can only describe as akin, perhaps, to the industrial revolution, or a railroad track being put in the middle of America, which sprouted opportunities on either side.
It is that powerful; the use of the cloud, the use of social media, and the way it’s affecting our lives and the lives of the companies and customers we serve, the changes in cost dynamics that it is driving is enormous! We have just, and I think there are others here on the panel who can talk about this better than I, but we just started touching the tip of the iceberg here in terms of the change that this will drive in how we behave, how we spend money, what products companies offer.

We are now seeing application development happening from a million people around the world. It is no longer confined to big companies. Anybody, anywhere in the world can produce an application which can take away part of your business or add to it. Understanding how that will work will affect our lives, will affect our businesses, but again will allow us to grab hold of major opportunities. At the end, there will be no IT, BPO, KPO type firms; most of them will end up producing products and services. If you’re a bank, you provide financial services, if I’m Genpact, I provide banking and financial services to banks, and over time, we will all be known for the expertise that we bring to the table.

Most of the major companies in India, of course, have already moved in that direction many years ago. But over time we will be known for the combination of analytics, of knowledge, of BPO, of KPO, and all of those elements that a company wants, because we will be asked to provide customised, specialised services on platforms that are fairly well standardised. That’s where we have to go, and we are nimble enough and fast enough to grab that opportunity because the world is ready to accept it if we give them good products. I would add two or three more points and then move on to the next part of the agenda. The world is changing where now this is about expertise. We are past labour arbitrage. Labour arbitrage is a given, many people can offer it.

It is now about expertise. If we offer our services, companies and customers demand that we are better at it than they are. They demand that we provide them a service which they cannot provide themselves and then they demand that we provide it to them at a cost which they cannot afford themselves. That’s where we need to go, and with that vision, we must abandon at some point of time, the concept of labour arbitrage. I’m not saying that labour arbitrage is gone. It isn’t. It isn’t going to be gone for many many many years. India has a natural advantage in that area which will last for a decade.

As we all think about moving out into the other parts of the world; into China, Latin America and Africa, we all will be learning how to develop products and services that go well beyond labour arbitrage and which can work in those environments, at those costs because the product that we deliver them, and the services that we provide them are that good.
I would also ask you to consider a few other points. Today we are service providers.When will we deliver products to our end customers? Today we provide services to other companies that then go ahead and provide services. The day will soon be here when companies such as ours or perhaps others, who are new, provide end customer services: B2C. B2C all over the world, B2b providing services directly to the end consumers who needs and so you go beyond a service provider to providing a real product. Of course many companies such as Infosys, TCS and many others already do this already. They have banking products and other products which they go and sell directly to the banks and it’s not just as a service provider. But there will be a time and a day, when we will be able to provide to analytics, or brokerage, or investment banking, or information technology, services to the end consumers all over the world.
The ablity to connect through social media, the ability to connect through the cloud now allows us to do this at a very economical factor.

One of these days you will hear, and there are already a few companies in India that do this, you will hear about the potential to go out and find the end consumer directly and thereby capture the entire value chain. But to do all this, we back to how we reshape our industries and how do we reshape the professional services organisations of tomorrow and I would suggest that there are five things we need to do: Our education system has to change. It has to change quickly and radically.

We cannot continue and the same level of quality and at the same level of capability that we’re delivering today. I would tell you roughly, and I think many others would agree that we can hire only ten to twenty percent of the people who apply to us. That is tragic in many ways; it’s not just bad for our companies, it is tragic for the remaining eighty to ninety per cent of the people who went to college and then couldn’t find a job. That game has to change. Though I hate using this bugbear normally but I’ll use it a little today. China has said that it is going to build 40 Harvard universities and it is on its way to doing it. It won’t build Harvard universities I suspect. I suspect Harvard will have something to say about that. But it is going to build forty world-class universities. Both Beijing and Shanghai universities are world-class, top of the line! Absolutely top of the line. They have identified 10 cities where they have said they will build IT services businesses as a hub.
They provide infrastructure, training, education, they pay the fees for people to get paid, they bring people in, they provide visas, they provide all the capabilities and they are fuelling this as the next wave of growth in their country.

We have to, in our way, we don’t have to copy anyone, be able to leverage our current infrastructure far better than we do today to deliver the level of quality, and education and training that this industry really needs to adapt and change.

Focus on expertise. The world is about expertise today. You have to be an expert in pharma, or banking or supply chain in order to be able to drive a product or service to your customer better than they could themselves. For that, we must build domain expertise to a point where we can stand up and say – we are the best in the world at what we do and what we do has a following.

R&D. R&D has to go in. We have to spend time on R&D. we have to develop cutting edge practices and standards. We have to build the standards. We must no longer be worried about doing what others tell us to do; we must worry tomorrow about building the standard of where we think the world should be. We should define what is best in class for the world and for ourselves.

I’ve talked about it; get beyond labour arbitrage, get beyond the concept that talks about it and get into an area where our products work anywhere in the world, wherever we serve them, because we are now truly global and we have to be truly global as an industry, not just in the employee base but in terms of where we sell. So moving away from the developed world into the new economies of Africa, Latin America and China and Asia.

Products and services: When will we go B2C? When will we go B2b? When will we be spreading this effort around the world? I did hear a word from a major American IT company which I really liked from the CEO. He was asked, “You’re a global company, where is your head office? What do you think about globalisation and threats to globalisation?” He said. “You know, we’re local everywhere.” I think, our industry is also going to get to a point where ‘we’re local everywhere’, we’re not foreign. As the world expands into China, as this industry expands into other areas, we will also be there with them because that is our natural advantage that we can play out.

Lastly, we have more opportunity ahead of us, than we’ve ever had looking back. The future is far more interesting because of the conference of technology, our own level of maturity, the demographic of our country and the expertise that we have built up. If we can package that, and take the risks that it takes, and we have the money to do it, and we have the brains and the flexibility, I really believe that the future ahead of us is astonishingly bright. We must learn to reshape our organisations; they won’t look like the way they do today. We must learn to build products, we must learn to launch products faster, and wemust learn to launch more R&D. All of these things we have to do. But it will be propelled by the optimism and opportunity and the fact that the world now sees India as a high value service provider and not just a place for lower labour costs. And when that happens, they will come to us for the highest end of work that we can possibly imagine in every domain, in every field, and the universe of industries and the markets that we serve will expand exponentially.

Pramod Bhasin is the Non-Executive Vice Chairman and former President and CEO of Genpact. This is an excerpt from his key note address at AIMA’s Second Knowledge Summit in Bangalore.