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October 16, 2005

Merely Following a Megatrend

Merely Following a Megatrend

By ZUBIN JELVEH
Published: October 15, 2005 New York Times

Is your job at risk? If it's the type of work that can be done over a wire, then probably yes, says Nandan M. Nilekani, the chief executive of Infosys Technologies.

Infosys is India's second-largest outsourcer. After achieving success in software engineering and back-office service, it has now begun to compete with companies like I.B.M. for more lucrative consulting work. This week, Infosys reported that its second-quarter earnings rose 36 percent. It raised its earnings forecast for the full year on stronger demand and a weaker rupee.

In a recent interview, Mr. Nilekani, a chief executive who makes $60,000 a year at a company worth nearly $20 billion, spoke about Infosys's success and the danger that it and other companies like it pose to American competitors.

Q. Are you worried about the outcry over outsourcing in America?
A. What's happening is pretty fundamental. If you go back to the 1830's, India and China were 50 percent of the world's G.D.P., and then they missed the entire revolution of industry. So if you take a long view of this game, it's just part of the process.

Q. Is there anything you realistically fear from Western policy makers?
A. No. I think politicians have to win elections. But underlying secular trends like technology and demographics - you can't stop these things, they're all megatrends. They're going to happen whether you like it or not. In fact, the guys who are going to win are the ones who say, "It's going to happen anyway; let's figure out how we can take advantage of it."

Q. Why did you branch out from just doing back-office work and add consulting to the mix of services you offer?
A. Our customers want us to be good at sitting down with them, understanding their business challenges, helping them devise a solution and then implementing it. They expect us to go up the chain in terms of relationships and business value. We're not trying to be strategy consultants. We're not sitting there and saying, "Buy this company."

Q. So now you'll be competing with the likes of I.B.M. and Accenture. Do you think you'll change the cost structure of the consulting business?
A. This is a battle of business models. We believe that at the end of the day we have a disruptive business model that is a threat to the existing business model and older companies will have to reconfigure themselves to look more like us if they're going to be globally competitive.

Q. What would that mean, to look more like you?
A. In any software project, we do 30 percent of the work in the U.S. and 70 percent in India. Our competitors do 100 percent of the work in a particular location. We have sort of become masters of delivering high value and high quality at lower cost, and on top of that we're trying to add consulting. Their challenge is to retain their relationships and business knowledge while reconfiguring their internal operations to become as efficient as us.

Q. Do you think you will be able to accelerate your consulting services as fast as companies like I.B.M. ramp up their operations in places like India to lower their costs?
A. I think the challenge is fundamentally different. For us it's about hiring and growth and building a brand; for them it's about restructuring the work force and I think, frankly, I wouldn't want to do that job because it's very painful, whereas this is exciting.

Q. What do you say to people who think that globalization will inevitably harm the United States work force?
A. Every time Wal-Mart replaces a person at a checkout counter with an automatic machine they're eliminating thousands of jobs. This is one more facet of that, except it's more emotional because instead of a checkout counter machine replacing Steve Smith, some kid in Bangalore is replacing Steve Smith. You can point to that kid and say, "He took my job."

Q. Does it feel odd to find yourself lecturing Americans on the joys of capitalism?
A. You guys told us for so many years to cut out this socialist rubbish and go to free markets. We came to free markets and now you're telling us, "Stop, don't come."

October 16, 2005 in Reality | Permalink

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