Integrated Solutioning: The Way Of The Future

Exclusive Interview with

Krishnakumar Natarajan

Chairman, NASSCOM

What is your take on the Indian IT industry in its current form? How important is it to create a brand in this sector?

What I do believe is that the IT market is not a winner-take-all type of a market compared to other markets, say Auto or even Pharma. IT is a very relationship-oriented business.

How do you feel 2013-14 will be for the IT sector from a market perspective?

I believe that when compared with last year, FY14 will be better. What we have observed is that in the last six years starting 2008 when Lehman happened, everyone had certain concerns about what would happen to the financial market and the main street, which led to a sudden compression of demand. This carried on for almost 15 months. But what happened after the compression was like a spring effect. Immediately, the demand took off. In that period, though enterprises had enough cash they restrained investment in technology. So, technology spending certainly slowed down a bit. Compared to that, we are now seeing some part of the spring effect coming back. So essentially, what I feel is that the industry will be better in FY14 as compared to FY13.

For the Indian IT companies, do you think that domestic demand is going to make up a significant percentage of their business starting this year?

I certainly think so. Not only are Indian companies upping their spends, but the overall universe of companies doing so will increase. In fact, last year the export growth was about 10 per cent and domestic growth was marginally higher at 12 per cent. In the next couple of years down the line, the domestic demand will be higher than the export demand.

But most importantly, the big ticket spends are happening through government projects. Case in point being the Department of Post, Revenue Departments, etc.

But are the margins good enough in these government contracts?

Well, the volumes are large and the scope is wide. Over a period of time, these contracts will eventually be very valuable.

And is there a fear of policy paralysis that looms over such spends? Or of any kind of knee jerk change in policy? That doesn’t happen here, correct? Once the decision is taken, it is taken.

No, that does not happen here. In fact, the government is very proactive and all policymakers understand the long-term implications.

And at which level of the IT infrastructure pyramid do you see the spends happening? Software, applications, services?

To my mind, the software-as-a-service (SaaS) model seems very positive. There are interesting start-ups which are coming and saying, ‘do not bother about anything, we will take an integrated solutioning approach’. The whole model is changing.

So, those companies which operate in this domain are future winners?

Oh yes, absolutely!
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Which are the companies that you feel will be benefited by this kind of a model?

Do you think smaller players will have an advantage over the big boys?

You will find many companies getting vertically specialised and reaping benefits. Like even in case of a company like ours, Mindtree, we have a very good story in some very specific verticals and domains like FMCG and CRM etc.

But why is this standard grouse that IT companies don’t operate in the products space? Is that a genuine lament?

Yes, to some extent it is a genuine lament. The typical rhythms of a product company and a service company are very different. In services, the customer tells you what to do. At best, I tell the customers that I have already built something and that I would modify it for them. In case of products, the customer is not telling you anything. You have to imagine what the customer wants and then build it for a multitude of customers. So, you need to have the capability of visualising what a set of diverse customers would want, then bring in the right technology.

The real ability of a product is, you build the right intellectual property and use it many times. That is where the real value comes in. The fact is, products in India are at an early stage but the opportunity is huge.

Even now, do you feel that we are at a nascent stage on the product curve?

Yes, you can say that. We are at a nascent stage. But, you can see a genuine impetus all round. Even at NASSCOM, we have launched a new programme called the ‘10000 Start-ups’. This is actively supported by the government with a vision to have a significant number of tech start-ups in India in the next 10 years.

How does this work? Will the government fund it?

What the government is saying is that you raise some private funds and we will equally fund it. We do have some private companies like Google, Verisign and Microsoft which have pledged to the idea. The government is not directly promising any equity though.

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