India Vision 2010:
What Driveth IT ?
Keynote Address
By
Dr. Lakshmi Mohan
School of Business, SUNY at Albany
(e-mail: l.mohan@albany.edu)
February 3, 2007
1
My Perspective
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Based on my research of global business trends
What is the impact on IT in India?
Where are the latent opportunities?
… Apart from the 4 Key Areas
To Be Presented by Leading Experts
2
Globalisation is Here to Stay
- For Example
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Medical Tourism: $2B by 2012
- Apollo Hospitals: 7 locations
Caters to international visitors
with foreign language interpreters,
specific regional meals and
travel arrangements down to the airport transfer
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Antwerp’s Diamond Industry
- Cutting & polishing diamonds outsourced to Surat
- Big diamond traders in Surat outsource, in turn,
the low-value diamonds (worth Rs 10,000 crore)
to small units in villages surrounding Surat,
Saurashtra and north Gujarat
3
A Telling Example
- Cited by Shashi Tharoor
Employment in Indian curry houses in
England is greater than the combined
employment in iron and steel, coal and
shipbuilding industries.
Source: Times of India, 28/1/07
4
The Game Changes
Ver. 1.0 – Body shopping model of the 1990s
Ver. 2.0 – Global Delivery Model
Ver. 3.0 – Move Up the Value Chain
… Grow without adding pro rata bodies
& costs
… Reduce the linearity between
revenue and employee numbers
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The Linear Business Model
- Revenue Growth in Direct
Proportion to People Employed
 Decline in Productivity
Revenue/Employee
FY02
FY06
Wipro
36L
Profit/Employee
FY02
FY06
20L
9.2L
3.9L
Infosys 24
18
7.5
4.7
TCS
20
5.7
4.5
21
Source: Business Today, Feb 11, 2007
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Implications …
1. Assumes that the supply of cheap and
skilled labour is endless
2. Can lead to a crisis should a downturn
occur
– Not just a loss of productivity
due to benching
– Actually, a loss due to salaries to be paid
to bloated workforce
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Implications …
3. Managing a huge workforce (> 100.000)
– “ There will come a tippling point when
handling scale itself will become an issue.”
– Global IT Giants Have Vast Workforces
IBM – 190,000; Accenture – 133,000
– An Important Difference:
EBIT: Low-to-Mid $20,000 (Rs 9L)
vs $10,000 to $12,000 (Rs 4.5 – 5.4L)
for TCS, Wipro & Infosys
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Where is the Money ?
… In Implementation &
Consulting Services
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“ For every $ spent on ERP software, Andersen
Consulting made $4 - $10 in services to implement the
software in a company.” – CEO George Shaheen
i-flex Plans to Grow Services Business
– Accounts for over 40% of revenues
– Wants to become a full-service player in the financial
services space … Solutions, IT Services & BPO
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Infosys Investment to Grow High-Margin
Consulting Business
– $20M (Rs 90 crores) to jump-start the consulting arm
– “We needed to get the ear of CXO-level executives.”
Sources: Businessworld, Aug 28, 2006 & Business Today, Feb 11, 2007
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The Domestic Market
- SMB: A Gold Mine Waiting To Be Tapped
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India Prized in the Global Economy
− Will overtake the U.S. by 2050 – Goldman Sachs Report
− Foreign exchange reserves: $176B
− S&P’s “Investment” Grade Rating – first time in 14 years
IT Market ($ billion)
FY03
FY07
Domestic
6.3
15.9
Exports
9.8
31.9
SMB Segment: Fast Growing
– 1.7M strong; spend Rs 3,400 crore in IT
– Supply chain of large enterprises
– SAP & Oracle are targeting this segment
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Microsoft Is Already There !
- Microsoft Dynamics ERP & CRM Solutions
Saw the Value in Application Software
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Acquired Great Plains, Vendor of Accounting Software for
SMBs in U.S.
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Next: Navision, a Dutch ERP Vendor
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Developed Microsoft CRM
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$800M in Revenues & 275,000 Customers by 2006
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400 Customers in India
− Asian Paints Subsidiaries in 9 overseas markets
− Orient Ceramics: Initially considered J.D. Edwards
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The Aviation Sector
- Ripe for IT Solutions
JetBlue Airways Case Example
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Low Cost … Like Southwest
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But High Touch … Unlike Southwest
Skies Ahead of Competition
JetBlue
Revenue
1.2B
American
Airlines
18.50B
Southwest
Gross Margin
36.62%
21.18%
29.01%
Operating Margin
9.46%
-0.09%
7.56%
6.4B
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A Late Arriver and
an Early Adopter
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“Last-Mover” Advantage
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Costs and risks of adopting technology decline over time
Systems are integrated from the start
Aggressive and Early Adopter of IT
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Innovative IT is the key to JetBlue’s low cost strategy
Voice over Internet Protocol (VoIP)
for Customer Support
VoIP interacts seamlessly with other Internet-based
data and systems. As a result of not requiring a
dedicated line for telephone service and the hardware
used for the same, VoIP telephony is much cheaper.
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JetBlue: Low-Cost, High Touch
– How? High Tech!
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CEO’s mandate to CIO: “automate everything”
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Paperless cockpits
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Focus with IT is not ROI,
but reducing Cost Per Available Seat Mile
Pilots get laptop computers,
reducing time for pre-flight load
and balancing calculations
also eliminates costs of printing updates to
flight manuals
100% Ticket-less Travel
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JetBlue: Low-Cost, High Touch
– How? High Tech!
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Home-based reservation agents using VoIP
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600 home-based reservation agents
use VoIP lines
Travel agents cost $14 per ticket;
JetBlue reservation agents cost $4.50;
Website reservations cost $0.50 per ticket.
Highly automated back-office processes
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Flight planning and reservation systems
Maintenance software tracks spare parts and
parts life
Other digital processes: expense reports, payroll
processing, training management
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Pharma Contract Research &
Manufacturing
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Projected Growth by Assocham
2005
CRAM
$532M*
Clinical Trials
$100M
* Manufacturing – 84%
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2010
$900M
$1B
Outsourcing by MNCs of Clinical Trials
− Cost is almost half of that of U.S.
− Abundance of genetically diverse patient pool in India
who is “drug naive” (not taken other drugs for their
condition in the past)
− Many qualified doctors available with expertise to
supervise and conduct clinical trials according to
“Good Clinical Practice”
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Finally …
Automated Decision Technologies
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Expert Rule-Based Systems
 To “manage by wire”
 To extract “ news” from data
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Capital One Credit Cards
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Birla Sun Life Insurance
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Intelligent Call Routing
Automated Underwriting & Risk Analysis
Premier U.S. Universities Set Up Dedicated Schools
to Meet Growing Demand
– Berkeley School of Information Studies
– Pittsburgh School of Information
– Penn State School of Info Science & Technology
……….
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