Productivity and Indian IT

The business with IT services in India is great. The fact that close to 25% of exports in India are from this very Industry matters a lot. This impact of the IT services sector in India grew to 7% of the GDP in 2008, and has been growing ever since. But has it been productive enough?

About a month ago, while early at work one of my colleagues brought this issue. The kind of revenue Infosys and TCS bring in. Apparently TCS had reported a $10 billion revenue which brought big smiles across the Indian IT services industry. Pretty impressive, yes! But we still do not sum up to the kind of productivity the ‘valley’ in U.S flaunts.

I am not a professional at calculating productivity or anything, but here’s a layman’s approach at it. As simple as it could get, I considered just a set of 2 numbers from each company’s Wikipedia page.

1. Annual Revenue

2. Number of Employees

That is straight math. My attempt to get – Revenue per Employee. Now before we proceed, this is my very own layman’s perspective. I liked the idea of doing this math and looking at the results. These do not indicate any hard conclusions. That made clear, here’s a Google Spreadsheet link.

Productivity Sheet

(I’ll be updating the sheet, as and when I get time or come across some interesting numbers)

Note that companies like Accenture, though in the Service sector show exceptional results. Companies headquartered in India have failed to do so. The kind of talent being brewed in India and the markets we target are a cause of worry. We have very few players in niche markets that could pay more in the long term. We might be geographically challenged, but we could do a lot more with the talent we have.

I’m no pro at finance or economy, just that I sense a room for improvement and find very few reasons to be happy with the Indian IT business. One reason could be the focus on services. Services are basically risk free. There is a sure shot revenue; so most companies (even startups) do not risk getting into the innovation business. This kills the ecosystem. We won’t be self-sufficient in the long run without a good product ecosystem. On the same note, Services are not as productive on the revenue/employee chart as well. This is quite clear from the sheet. Numbers for product oriented companies are at least twice as that of services. Services cannot be ignored, but the Innovation sector should not be ignored either.

While I was drafting this article, I came across this post from PuneTech that does a good job at studying the Indian IT scenario as well. @akkiman (Akshay Damle) points precise factors that affect Indian IT. The Indian talent pool and its manufacturing unit (Universities) is to blame. We have good amount of talent, but far few risk takers. Students in India do not aspire to work on break-through technologies, as much as they do aspire to work in any company that can be classified as an MNC. I have personally met folks who  asked me to suggest skillsets that create immediate entry points in these so called MNCs. That’s the sad part of the story. The talent pool that sticks to India is basically looking for a 9-5 (read 11-8) job, that provides enough security to obtain credit cards and housing loans.

For India to stay competitive, it has to focus on

1. Talent pool
Students should be made responsible to keep themselves updated. I believe Universities can do less in these terms, but they can cut some slack for students to go outside and get in touch with what matters most.

2. Infrastructure
The Indian Infrastructure for IT should be more habitable. One that encourages research and innovation. Fab-labs are a must. Technology is pacing in terms of Hardware. Products fabricated within the borders will promote innovation at a higher scale due to lower costs of production.

3. Productivity
Businesses should understand the ROI in terms of productivity – and not just capital. Indians often ignore the fact that effort put in saving a penny if focused on the right task could yield 10x. Care for employees. A good employee/employer relationship goes a long way in terms of productivity. Hold a workshop for freshers on expense management, tax savings, etc. Also, an IT company, compelling its employees to fill excel sheets for an hour, could definitely be more efficient by purchasing a good ERP solution for a few grands. Spend to make their lives easier, instead of treating them as just “resources”.

There’s more that should be done, but I’d say – these 3 are fair to being with.