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Outsourcing executive sees 'win-win' solution for global IT strategies

Cultural compatibility, along with quality software engineering and support, made India-based Tata Consultancy Services a $2.24 billion software outsourcing company with a tight grip on the Western market. "Software we write runs your banks, airlines, insurance companies," says Surya Kant, vice president of TCS. Kant was a featured speaker recently at the first session of the W. P. Carey School's new MSIM (Master of Science in Information Management) Executive Lecture Series. American businesses provided approximately 60 percent of TCS revenue in 2005. And Westerners will keep coming back for more, Kant says, because the Indian firms do it right, at a lower cost, to customer specifications.

2006-02-15

India dominates the software outsourcing market today thanks partly to the British Empire's nearly 200-year-long colonization, according to Surya Kant, vice president of Tata Consultancy Services, a $2.24 billion company based in Mumbai. "It is the reason I can speak to you in English, the reason we are able to work with the West," he says, adding, "Everything bad has something good come out of it." Kant, a cross-cultural deal maker as comfortable on a Chinese factory floor as in his plush Park Avenue office (the North American headquarters for TCS), says cultural compatibility, along with quality software engineering and support, is a buffer ensuring the company's tight grip on the Western market. "Software we write runs your banks, airlines, insurance companies," he asserts, part of an economic win-win that benefits everyone. Kant was a featured speaker recently at the first session of the W. P. Carey School's new MSIM (Master of Science in Information Management) Executive Lecture Series. So while the British colonists are long gone — colonization lasted from 1757 to 1947 — American businesses provided approximately 60 percent of TCS revenue in 2005. And Westerners will keep coming back for more, he says, simply because the Indian firms do it right, at a lower cost, to customer specifications. "Our company is closely linked to the health of the American economy," Kant said. That's also why TCS managers preferentially hire engineers "with a U.S. accent and culture-trained," according to current job postings on the company Web site. TCS, the first and largest software exporter in India, has offices in 34 countries and employs more than 59,000 people worldwide. The human-capital edge While TCS maintains enormous development centers across India, the company also cherry picks high-technology pros in Hungary, Uruguay and, most recently, China, running offices operating in different time zones to offer 24-7 support to international clients. A joint venture with Microsoft and the Chinese government announced last June cracks open another huge market and could help compensate for a slowdown in the U.S. market predicted by some industry insiders. To keep up with global demand, TCS recruits 15,000 to 18,000 engineering and computer sciences professionals culled from the 300,000 tech grads India mints every year, Kant says. That's a lot of new blood, and for negative population growth Japan, an impossible feat; but as Kant says, "India has the human-capital edge — India creates a lot of people. We turned the population problem of the 1960s-1980s into an asset via outsourcing." Working for TCS in India, an entry-level engineer earns "up to $10,000 annually, which is a very healthy, middle-class salary," says company spokesman Michael McCabe — though paltry compared to U.S. tech grads. TCS sweetens the pot — and extracts more working hours — with workplace concierge services ranging from private-school placements to nanny services, dry cleaning to ticket-purchasing. The company even provides home-to-office transportation, Kant says. "We have no labor unions for IT workers — happy employees produce good work," Kant says. "We provide a happy ecosystem for them to spend 8, 10 or even 12 hours a day." All well and good, but as Kant admits, salaries are growing for India-based TCS employees, so at some point it seems likely it and other Indian IT outsourcers will start losing their price-point edge. He downplays the issue, pointing to India's 40 percent-plus compounded annual growth rate since 2000. "IT-enabled services is an engine for growth in the U.S.," he insists, adding that this particular business segment is projected to grow to $80 billion by 2008. Salaries will continue to grow with business, but the wide gap between salaries in the West and East will remain, he hints. To offset any "crunch," though, TCS will expand services in Europe. Investment in education is key To ensure a continuing supply of tech-minded workers, TCS is investing heavily in the Indian educational system, ponying up for scholarships, sponsoring classroom projects, fueling research and development grants and constantly tweaking curriculum requirements at universities and technical institutes, he says. His aim: to build the number of engineering and computer graduates so that India remains the go-to for IT products and services in coming years. The Indian government actively supports IT-related education and fosters an outsourcing-friendly environment, enabling the country's growth and success in this area, says Julie Smith David, an associate professor of information systems at the W. P. Carey School — a strategy American leaders would be wise to emulate. As David says, "There are smart people everywhere; we don't have a lock on that — nor does India. But their public culture is focused on creating an excellent environment for the IT industry. Everything they do is done to make those companies flourish." Now, Indian doctors — again, aided by a development-savvy government — are copying the IT model, establishing cardiac-care specialty centers in New Delhi and Bangalore, David adds. Twenty years from now, India, rather than the U.S. or U.K., could be the place to get your heart fixed. Which brings up a touchy subject: are American businesses getting too dependent on Indian tech gurus for their own good, incrementally giving away an entire industry to taxpayers in another country? Kant says no. "India won't do all businesses, for one thing, it just enables IT and automates business processes. Business design, strategy, etc., the core of American business, is not being done by Indians," he explains. But that role is a little too passive for David, who argues that American business, government and education leaders need to refocus to avoid falling behind. "I'm not sure if I buy that," she says. "We need to create a culture that supports innovation, too. American communities need to think how to enable concentrated efforts to become the very best, like Bombay is doing with IT." As such, she agrees with President Bush's initiative to enhance math and science education for U.S. children discussed during his State of the Union Address. Additionally, however, David agrees with those who support immigration reform that encourages foreign-born graduates who majored in math, science, engineering and computers at American universities and colleges to settle here. "Let's encourage the best and brightest to stay here rather than go somewhere else with their brilliance." The next MSIM Executive Lecture Series seminar will be held Feb. 11, and will feature the best-selling author, David Linthicum, who will speak on Web services. For more information, e-mail Angela.Walline@asu.edu.

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