The Indian juggernaut cometh

by Sunny, on 18th October, 2005

Indian software companies are becoming confident, almost arrogant some would say, with plans of world domination. Don’t believe me? The NY Times interviewed Nandan M. Nilekani this weekend, the CEO of Infosys, India’s second-largest outsourcer.

Even consultants should beware, as he is after IBM and Accenture. You know why he’ll succeed? He makes $60,000 a year at a company worth nearly $20 billion. Last quarter Infosys recruited a phenomenal 8,026 employees and grew profits by 35.6%.

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.”

He handles himself pretty well, like a guy in fact who is secure in the knowledge that things will eventually go his way.

Rohin points out below that China is doing much better than India economically. But the latter is investing more in its knowledge base, a strategy much better for the longer term. Expanding into value-added services is logical progression.

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.”
That’s priceless.

Entry Filed under: South Asia, Economics

12 Comments Add your own

  • 1. Steve M  |  October 18th, 2005 at 9:56 am

    You know why he’ll succeed? He makes $60,000 a year at a company worth nearly $20 billion. - Sunny

    Please could you explain this statement? Are the chances of success of a businessman inversely proportional to the size of his pay cheque?

    I have done a considerable amount of business in India in the tube and pipe industry and have met many successful Indian industrialists. I find it extremely unlikely that Mr. Nilekani’s total earnings are, in fact, as low as $60,000. Is he a shareholder in Infosys, in which case he can receive money in ways other than just salary?

    If not, doesn’t Infosys make itself vulnerable to having their CEO poached by a company in India or the US who’s prepared to pay him the (World) market rate?

    Also, out of interest, do you know how $60,000 compares to the earnings of Nilekani’s workers?

  • 2. Rohin  |  October 18th, 2005 at 11:47 am

    As far as I know, Nilekani is famed for being an ‘ordinary guy’ - flying economy class and so forth, much in the same way that Ingvar Kamprad (boss of IKEA) drives an old Volvo and collects coupons. I read a piece in India Today a while ago about India’s most powerful people and I recall a few stories of down-to-earth CEOs.

    In comparison to the Laxmi Mittals and Vijay Mallyas of this world, it’s a refreshing change. Although Dr Mallya will always occupy a special position as ‘BOOZE BARON’ is perhaps the coolest job title in the world. Ever.

    I realise none of this answers your question Steve.

  • 3. Steve M  |  October 18th, 2005 at 12:01 pm

    I like the ‘ordinary guy’ approach but don’t know whether it’s a major reason for the success of an individual or company (depending on how one defines success of course).

    My problem is that I sometimes have a kneejerk reaction to anything I perceive as ‘kneejerk socialism’. It’s a minor neurosis - I can probably have it fixed just as soon as I find a therapist with an ‘ordinary guy’ approach to his fees.

    Your saying ‘booze baron’ reminds me of the time I travelled around various Indian tube mills with a wealthy American industrialist. The hotel where we were staying had sold him an expensive bottle of scotch to accompany him on our journey. It was only on the train that he discovered that the scotch was counterfeit - it smelt like perfume. Just thinking of the expression on his face still makes me smile 15 years later. He drank the perfume though.

  • 4. Rohin  |  October 18th, 2005 at 12:27 pm

    I bet it was the best perfume he ever drank. Nothing tastes as good as when you pay too much for it (see: haute cuisine).

    My saying booze baron reminds me of the episode of The Simpsons where Homer becomes the Beer Baron after Springfield outlaws alcohol. Bathtub gin is meant to be the reason cocktails were invented, to get rid of the awful taste. I want to try some bathtub gin - maybe wash it down with some perfume.

  • 5. Sunny  |  October 18th, 2005 at 12:37 pm

    My thinking behind was precisely the ‘ordinary guy’ approach. Infosys is known for being an Indian company that looks after its employees (a new concept to India) and not having a huge difference in wages. That maybe socialist, but its also a great morale booster.

    There was also a piece I read somewhere about the top brass for Infosys being dominated by South Indians, who are by nature quite fiscally conservative.

  • 6. Steve M  |  October 18th, 2005 at 1:39 pm

    Talking of The Simpsons and following on from the recent Apu thread, did you notice his less than flattering role in the imprisonment of Marge episode? Out of character or is there a darker side to his nature? Who was his ‘partner in crime’ in that episode and was he leading Apu astray?

    I think we have the right to know.


    “I’ll keep it short and sweet — Family. Religion. Friendship. These are the three demons you must slay if you wish to succeed in business.” - Montgomery Burns

    ‘Fiscally conservative’ or merely ‘compassionate capitalist’?

  • 7. Sunny  |  October 18th, 2005 at 2:10 pm

    Heh, I love that line.
    Saying that, I lived in Madras, South India, for three years. I think fiscally conservative describes them better. Apart from the politicians, the businessmen in south India prefer not to be outwardly frivolous at all.
    I’m gonna do some more digging on Infosys and Wipro, they’re remarkable companies.

  • 8. Steve M  |  October 18th, 2005 at 8:12 pm

    We used to sell tube and pipe welders in about equal numbers to the USA and India (until the Indian government put an import duty of 300% on - then we’d have to build them, disassemble them, crate them and sell them as ’spare parts’, thus avoiding the duty. This was generally known in the UK and India as an ‘Indian Takeaway’).

    Anyway, I’m not going to criticize American business acumen - after all, they do run the world right now. However, there was a huge difference between the response of the Indians and the Americans in the event of a fault. The Americans were good at insisting we send an engineer out to the US immediately to fix the problem. The Indians wouldn’t be so insistent but, no matter how quick we were, they’d invariably have already managed to get the mill working themselves.

    My friends in New Delhi at that time strongly advised me to buy property out there. I wish I’d taken their advice.

    Anyway, all in all, it’s no surprise to me that Indian companies are doing so well - despite struggling against British 19th century style bureaucracy.

    But I digress …

  • 9. rizwand  |  October 18th, 2005 at 8:44 pm

    Ah, the joys of globalisation. Infosys is in the right place at the right time.

    Outsourcing to India is still small scale relative to the potential (despite some media hype scare stories) so these boys can continue to enjoy the good times for some time yet.

  • 10. navee  |  October 19th, 2005 at 5:15 am

    The 60K $ salary thing looks like a imagination of some enterprising journalist, the real income for nandan is not the salary, it is the shares that have made him and other multi-millionaires. And this is true not only for founders of Infosys, but also for a large number of early empoyees of Infosys.

    And there is nothing socialist in Infy approach, it is purely numbers driven company, where everything is measured in operating margin. That is why its bottom line has been so good till now as it has combined the focus on operating margin with highly de-risked approach.

    All this has served Infosys very well as it was playing in smaller leagues till now. Infy rarely used to get multi-million contracts till now, so it was not much on radar of bigwigs like IBM global services, CSC or accenture. But now the real battle is begining, as Infy is trying to move to big projects and up the value chain with ventures like Infosys consulting, IBM, accenture are recruiting like mad in India. This has two pronged affect as due to good job market in India, the salaries are rising, the cost of executing projects is also rising. And as Infy is trying to move to bigger contracts, the amount of risk in them is also greater. More or less now, it is the game of keeping ahead of the cost curve, till now Infy has done great !!, but for how long they will keep this going I dont know …

  • 11. kitten  |  October 19th, 2005 at 12:35 pm

    I work for an outsourcing company and we use Wipro… they send everything there as it’s so much cheaper. People are worried here as we do a lot of the ground work and our clients send the actual work offshore!

  • 12. Tim Worstall…  |  October 23rd, 2005 at 2:38 pm

    Britblog Roundup # 36

    Another sunny Sunday afternoon and it’s time for the Britblog Roundup once again. Your nominations for what was good and great on the blogs from theUK and Ireland this week. Get your entries in for next week to britblog AT

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