The CEO & Managing director of one of the top IT services companies believes the Indian IT outsourcing industry is merely going through a transformation and not a slowdown, as many feel, in the wake of growing protectionism and changing technology.
C. P. Gurnani of Tech Mahindra tells Hoshie Ghaswalla that the industry is witnessing a course correction at the moment that will set its pace of growth for the next phase of the journey.
Excerpts:
Much is being discussed about the end of the Indian offshoring industry. What’s your view on the same?
The Indian IT Industry has entered its period of adolescence. To say it’s the end of the offshoring industry is a bit too early. What we are seeing now is a kind of resurrection, a course correction that will set the pace of growth for the next phase of the journey. The quantum of offshoring that is happening at the moment is quite miniscule, but the overall scope is quite huge. However, what has happened over the last few years is, there has been a steady shift in the demand pattern. That, what was considered a priority before for enterprises, in terms of their technology spending, is no more the priority with the changing consumer needs and radical progress in technology. The technology mandate has changed from helping them manage legacy technologies to making them future-ready by embracing digital technologies as the world is increasingly becoming interconnected. So what is happening now is, clients are repurposing their IT budget, though the overall thrust on technology is very much there. The Indian IT outsourcing industry is going through that phase of transformation as it gets ready for newer kinds of opportunities.
Offshoring, of course, is facing its own set of issues. Are these related to the shift in market requirement being driven by automation and digital transformation? Or by the H1B visa-related regulations?
Automation is just one of the key ingredients of digital transformation, not the only one. If you look at the external world now, there are two sets of things happening at the same time. While the geopolitical uncertainties in various parts of the world are giving rise to a new wave of regionalism and protectionism, at the same time, the world is also increasingly becoming interconnected with proliferation of smart devices and technologies such as Internet of Things (IoT), cognitive machine learning and artificial intelligence. While the first one is affecting the free movement of people and the overall industry sentiment, the second one requires service providers to radically change their approach. That transformation is underway now, which is why we are seeing some of the hiccups. One thing is quite clear that visa related challenges will always be there. The industry has to make its own way within those limitations.
About H1B, has Tech Mahindra seen any direct impact due to the issues being faced due to the proposed regulations? What do you plan to do if severe restrictions are put down on the H1B visa?
The fact of the matter is that some bit of protectionism will always be there owing to the geopolitical challenges and uncertainties, and we have to learn to adequately plan ahead of time. My personal take is, it will probably have negligible impact, at least in the short term, especially when your pipeline is good and you have a critical mass of people that are already available in the global system to be able to address it. Also, if you look at it, nobody is stopping H1B, all they are saying is they don’t want entry-level programmers to come in, which is only fair. For example, at Tech Mahindra we don’t apply for a H1B, unless the associate is experienced enough and suitable for the role. But clearly, if the cost of H1B goes up, it is disadvantageous to everybody as it takes some time to adjust to that kind of market condition.
What percentage of your force is local American? And what percentage will it be in 2020?
We are an equal opportunity employer in every country we operate in. It is no different in America. Today, more than 30 per cent of my US employees are local hires, of which a significant portion is US citizens. And looking at the trend, I can say the number will only increase. We are not only hiring laterals, but are aggressively going to campuses and hiring freshers now. The good part is Tech Mahindra has a strong brand recall in the geography and that is helping us to attract key talent.
Has Tech Mahindra moved to delivering on the next level of requirements in developed markets driven by digital transformation? Could you share an example?
The world of tomorrow is going to be different from the past. In the past, enterprises and organisations were overly focused on maintaining and running their legacy system; so ‘run’ was part of the business, while there was not much eagerness to ‘change’ or ‘grow’. It has now become a necessity owing to newer digital technologies that is further augmented by the proliferation of smart and connected devices. The world’s NextGen IT solutions will be embedded into mobiles and machines. And the power to control them will be centered in ours. By 2020, 25 per cent of traditional spend on legacy IT will be saved by going digital. Eighty per cent of the new spend will be around digital technologies, and the overall digital tech spend will be 35 per cent.
As a company, Tech Mahindra owes its origin to communications; as the sole service provider to one of world’s largest telecom companies. So our DNA lies in communication, and we are perhaps one of the very few players who have worked across the entire spectrum of communications with deep understanding of the network and communication technologies. We have worked with service providers, device makers and chip designers to cement our leadership position in these fields. Our leadership in networks combined with our deep IT skills, help our customers ‘run’ better (through DevOps/ automation), ‘change’ faster through the enablement of enhanced customer experiences (Bio, VR, AR), and ‘grow’ bigger by unleashing the power of the Internet of everything. This is part of our journey as we cement our position from being a provider of IT services and solution to a specialist in digital transformation (DT).
What has Tech Mahindra done to keep pace with the change to digital technology?
As an organisation, we are closely aligned with Mahindra Group’s philosophy of Rise — to rise above the mundane, challenging the status quo, and drive positive changes. So we have undertaken several programmes to encourage disruption and question the normal — to reinforce our entrepreneurial and innovative mind-set. Learning is a key element that ensures we are ready for the future. Our associates (employees) are our key assets, and one just cannot ride the growth path with outdated resources. We always have to think from the future relevance perspective and gear our businesses and workforce accordingly. Thus, reskilling our associates has always been a way of life at Tech Mahindra.
We have devised a four-layered training programme around digital technologies (all the way from awareness to architecture) called digitALL. Almost all our associates have completed Digital 101 programme. We also have more specialised digital 201, 301 and 401. Besides these, a lot of training is happening around new age products through our virtual training platforms. In a nutshell, we are creating a future-ready and digitally-trained workforce that is ready to contribute to the new sets of demands.
What percentage of Tech Mahindra’s business is from the demand in newer technologies? What percentage will it be by 2020?
Today, almost 60-65 per cent of our business is IT services, which includes legacy businesses such as ADMS, IMS, Legacy ERP, etc. While the rest is in areas such as engineering services, customer experience / design services, network services, IP, IoT, security services, etc. In our journey from IT to DT, we would like to see the mix change with 50 per cent of the business coming from traditional IT services areas, while the other 50 per cent from the new age and digital services.
What progress has Tech Mahindra made in the automation space?
Automation for us is not just a lever to manage cost but to improve on operational efficiencies. A part of it is driven by the demand from client organisations. Tech Mahindra is uniquely positioned to take advantage of some of these opportunities. We are one of the earliest organisations to have our own automation and artificial intelligence platform called AQT. For us, automation means improving ‘quality’ and reducing ‘time to market’. Internally, we have set up something called Centre for Automation Technology, where we have a dedicated workforce of around 300 engineers, internally known as ‘automation commandos’. So whether it is robotic process automation, AI or cognitive intelligence, analytics or chat-bots, we have built IPs in all these areas, and we are aggressively taking to client environment. Besides, we have also rolled out a programme called “Automate to Accelerate” involving around 1,500 projects and touching around 20,000 of our people. So without going into numbers, I can tell that we are more confident about deals because of automation. While it is certainly contributing towards winning more deals, the market is also reacting better.
What is the single biggest challenge you perceive in the current scenario?
While there is a popular perception that much of the challenges faced by the industry today are because of external factors, I believe the biggest challenge the industry faces is more internal than external. ‘Disrupt or get disrupted’ — this will determine future winners. The leaders of tomorrow will be those who spot challenges and opportunities ahead of time, and disrupt their business model, strategy and technology offerings before they get disrupted by somebody, may be a startup, the name of which was may be unheard of until the other day. We also have to remember that technology is getting obsolete much faster today than earlier. What was once considered a cutting-edge technology, is nowhere to be seen now and has been replaced by something else. So the skillsets also need to be changed accordingly. Those who are able to adapt faster — learn these new technologies and skills — are the ones who can drive the organisations of tomorrow.
What is your advise to the Indian IT industry?
As has always been the rule across all economic cycles governing industries, it is ‘disrupt or die’; we need to always challenge ourselves for perfection and bring innovation at the core of whatever we do.
