Technology adoption cycles are diminishing and disappearing. Steam engine and printing may have taken 60-70 years to fully impact our lives. Internet, however, improved our productivity by 20 times in much shorter time. Mobile phones have enhanced our productivity roughly by 40 times in the last 10-15 years, while artificial intelligence (AI) is expected to improve the productivity of individuals and enterprises by few hundred times in less than five years! Technology is increasingly becoming critical and core and is not discretionary any more. The changing scenario has opened up a huge business opportunity for the tech industry, says Krishnakumar Natarajan, executive chairman of Mindtree, a global information technology solutions company based in Bangalore, in a conversation with Mini Tejaswi. Natarajan, earlier with Wipro, had also served as chairman of Nasscom from 2013–2014. One of the core founders of Mindtree, he is also a technology and industry leader in the country. Excerpts:
What kind of transition is happening in the industry and will it change the pecking order in India?
A massive transition is expected. From early 90s to now, Indian tech is a $140-$150 billion industry today. The nature of demand was quite clear and we were trying to solve pain point of a customer at a reduced cost to improve his operational efficiency. This is a common thing that happened across every outsourcing opportunity that comes by. Be it mainframe or maintenance, customers did not have enough people, so we trained people and offered services at a cost down by 30 per cent. We repeated the same during Y2K and also in testing and in infrastructure management. So, is that business going to go away? Well, nobody can say tomorrow we are turning the taps off and some new thing will come up. But the fact is, the customer is looking for more efficiency, high speed and much lower cost. So, when contracts are coming for renewals they often say: you used to do it for $100 dollars and now can you do it for $90 or $85. Technology is no more an enabler, but it is becoming the business itself. A new model will be evolved in the next 2-3 years. In this transition, the pecking order will change and today’s leaders need not be leading and likely some new set of leaders will emerge in the Indian IT landscape.
How digital is beginning to change the way companies serve their clients?
That’s an interesting topic. More and more clients want to change the ways in which they engage with their consumers. It could be typical thing like a hotel wants to offer a unique experience to each of its guests. The entire backend and system of records will still run on Mainframe, SAP or something like that. But a guest in a hotel or a customer of a car rental firm will be made to feel so unique and special. It’s about knowing the customer so well. Enterprises are becoming intelligent and are trying to identify the personal preferences of their customers in advance. Digitalisation is helping enterprises to enhance their consumer experience. That’s why you hear an ICICI Bank or an HDFC bank say, hey do you want a personal loan or a car loan, and we will clear it in two minutes. Earlier, you had to run around, submit a bunch of documents, including your salary certificate. Then you had to do frequent follow up calls and wait for 20 days to a month. Today everything is done online. Banks have systems that can intelligently analyse customer information and assess credit worthiness of loan applicants on the go. And there is lots of real time analytics happening in detail. Everything is automated and if the customer has a satisfactory score, his/her loan is approved in two minutes or two hours from 20 days to a month earlier. Automation is bringing in phenomenal efficiency, speed and customer happiness. These are facets of digitalisation which is critical for almost every organisation to survive. And this is creating new set of demands in the industry.
How is the digital share of IT business growing?
The Indian tech industry is in the $140 range, roughly $20 billion of that is digital business now. Also, price compression is happening in the remaining $120 billion, a 10 per cent deceleration may mean a $125 billion next year. But the digital share is probably doubling up, that means the industry would still be over $150 billion next year. So, the growth will not only come by just preparing an army of programmers, you have to do different things to cater to the newer requirements of customers to clock in growth.
The other key thing is digital is new. Customers are exploring small experiments with a ticket size of say $100,000 or $150,000. Traditionally, IT companies are used to doing bigger projects of $5 million that goes on for 12 months. So there are differences in the operating model itself.
You spoke about price compression. How will that impact the industry?
See, for the quantum of work, ours is a $140 billion industry. But will it remain there and grow? It might even reduce, because there are technologies which are helping you to work more smartly. So it's not necessarily the size of the revenue will go down, the effort will also come down. Technologies like Artificial Intelligence and Machine Learning are going to make a huge difference. Just to give you an example, suppose if you are a customer of Kotak Mahindra Bank and you are using online banking and you encountered a problem and you call up the bank. Earlier, each of such calls was handled by a human and today it could be answered by a chatbot driven by Artificial Intelligence. Companies are able to improve efficiency in customer delivery and also profitability of their business by applying digital technologies. However, existing solutions and systems may stay for next five or more, post that there will be clear price compression and some enterprises may even find unviable to continue.
What are the measures the Indian industry has taken to ready itself for these newer challenges?
Tech firms are busy building local delivery centres. They are increasingly hiring locally, in customer geographies. Top of this, there is uncertainty about visa environment. Also the customers want everything in four weeks. So, you need to have talent close to the customer, which means you have to be recruiting from the local universities, you need to train them there, and you need to build overall capacity locally. Some of the talent or capability issues can be solved through acquisitions in customer markets. But the fact is Indian companies haven’t done many cross boarder acquisitions as they come with cultural integration challenges.
What kind of reskilling and training are required?
With new technologies emerging, reskilling is of paramount importance. We can argue that Indian companies have always mastered the art of reskilling their people for new technologies. When the industry started we didn’t know much about infrastructure management or testing. And all the new skills were in a way were organically trained. We are equipped to train and transform talent. But in a digital scenario, tech providers can no more work in silos instead they have to address issues in collaboration with their customers. So, not just the skill sets and technology, how do you co-create and innovate along with the customer, based on newer demands and changing behaviour of customers’ customer etc is critical. This scenario is something new to Indian tech providers, and therefore they have to develop new skill sets to address these issues. So, in India, we have the responsibility to train over three million people to equip them for the new work environment. Many times even the customer does not know the problem and the tech provider needs to identity the issue and therefore it is critical for enterprises to have people with a different kind of mindset and thinking ability.
You said even sales scenarios have changed. How?
Earlier tech firms used to sell saying: hey you have this large Mainframe application having 100 people on it and we will take care and reduce 30 per cent costs of running it and will do it at higher quality and so on. That offshore-centric sales pitch doesn't work now. Today you have too many things and you don't know what to present to your customers. You can say, your frequent fliers are not very happy, so we have done a work in car rentals where they had similar problem and we solved it. So it has gone through a big transformation with the focus predominantly on customer facing people. It is about being thoughtful of what clients want, think of solutions for it and doing it quickly at the lowest possible cost.