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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. Based on my research of global business trends What is the impact on IT in India? Where are the latent opportunities?

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India Vision 2010: What Driveth IT ?

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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


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

My Perspective

2


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

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

Globalisation is Here to Stay- For Example

3


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

A Telling Example- Cited by Shashi Tharoor

4


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

The Game Changes

5


Revenue/EmployeeProfit/Employee

FY02FY06FY02FY06

The Linear Business Model- Revenue Growth in Direct Proportion to People Employed

  • Decline in Productivity

Wipro 36L 20L 9.2L 3.9L

Infosys 24 18 7.5 4.7

TCS 21 20 5.7 4.5

Source: Business Today, Feb 11, 2007

6


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

Implications …

7


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

Implications …

8


“ 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

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

Where is the Money ?… In Implementation & Consulting Services

9


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)

FY03FY07

Domestic 6.315.9

Exports 9.831.9

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

The Domestic Market- SMB: A Gold Mine Waiting To Be Tapped

10


Saw the Value in Application Software

Acquired Great Plains, Vendor of Accounting Software for SMBs in U.S.

Next: Navision, a Dutch ERP Vendor

Developed Microsoft CRM

$800M in Revenues & 275,000 Customers by 2006

400 Customers in India

Asian Paints Subsidiaries in 9 overseas markets

Orient Ceramics: Initially considered J.D. Edwards

Microsoft Is Already There !- Microsoft Dynamics ERP & CRM Solutions

11


JetBlue Airways Case Example

Low Cost … Like Southwest

But High Touch … Unlike Southwest

Skies Ahead of Competition

JetBlueAmericanSouthwest

Airlines

Revenue1.2B18.50B6.4B

Gross Margin36.62%21.18%29.01%

Operating Margin9.46%-0.09%7.56%

The Aviation Sector- Ripe for IT Solutions

12


A Late Arriver and an Early Adopter

  • “Last-Mover” Advantage

    • Costs and risks of adopting technology decline over time

    • Systems are integrated from the start

  • Aggressive and Early Adopter of IT

    • 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.

13


JetBlue: Low-Cost, High Touch – How? High Tech!

  • CEO’s mandate to CIO: “automate everything”

    • Focus with IT is not ROI,

      but reducing Cost Per Available Seat Mile

  • Paperless cockpits

    • 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

14


JetBlue: Low-Cost, High Touch – How? High Tech!

  • Home-based reservation agents using VoIP

    • 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

    • Flight planning and reservation systems

    • Maintenance software tracks spare parts and parts life

    • Other digital processes: expense reports, payroll processing, training management

15


Pharma Contract Research & Manufacturing

  • Projected Growth by Assocham

    20052010

    CRAM$532M*$900M

    Clinical Trials$100M$1B

    * Manufacturing – 84%

  • 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”

16


Finally … Automated Decision Technologies

  • Expert Rule-Based Systems

    • To “manage by wire”

    • To extract “ news” from data

  • Capital One Credit Cards

    • Intelligent Call Routing

  • Birla Sun Life Insurance

    • 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

      ……….

17


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