Indian IT services industry, the way forward

India's growth story

As India continues to grow and surpass unchartered territories one tends to wonder is the trend likely to last forever? The ruling government projects that we will average a growth rate upwards of 8% for the next decade and replicate a China like growth story. One might argue that if China can, so can India, in fact economists like Sanjeev Sanyal predict that we will experience an Asian renaissance much like Europe.

Undoubtedly India’s growth has been miraculous, unlike China, the growth has been despite poor policy implementation, corrupt-unstable governments and snail paced infrastructure development. We have 700 million people who are in the employable age; the number is expected to rise to 829 million by 2015. Which means close to 72% of the population will be young and employable. The demographic change will increase our savings rate close to 35% of GDP, reducing our reliance on external capital to fund our growth. We are potentially entering a period of prosperity not witnessed for more than a thousand years in India.

Post liberalization India has been in a tearing hurry to make up for decades of mediocrity and catch-up with the western economies. While growth has been a constant, the sectors have varied over the last two decades. India’s growth was initially led by IT, now we have sectors like manufacturing, banking, financial services and infrastructure becoming the engines of growth.

The IT services growth has been fascinating, now accounting for 8-10% of the GDP and 30% of India’s exports. Over the last few decades the primary driver for the IT off-shoring business was cost arbitrage. This was largely on account of our large pool of high skilled engineers and wage disparity. But after 20 years of 30% growth, there are close to 2.3 million people employed in the IT sector and the country will be close to a 100,000 engineers short to drive a 30% linear growth

Education

India generates close to 500,000 engineering and science graduates in year and if IT sector has to continue to experience a linear growth over the years institutes will have to proportionately increase the number of engineering seats. This increasingly seems harder as education in the country remains hamstrung. Education reforms are taking forever and the system is struggling to remain relevant. Education sector remains closed to eagerly waiting foreign institutions and therefore will depend on government spends and domestic private investors. Private investors are politically backed, corrupt and have little expertise in running these education institutions. The irony is India spends a meager 4.1% (U.S and U.K both spend 5.7% and 5.3%) of GDP on education which is a paltry sum for a knowledge economy, with 68% literacy and a booming IT sector.

While institutes attempt to crank out more engineers the quality of engineers becomes a challenge. Companies struggle to increase the graduate’s proficiency through factory like training academies that are expected to take in semi-skilled engineering graduates and convert them to highly skilled software engineers. As supply fails to keep pace with the growth salaries are expected to increase by 40% in 2011, further narrowing margins and increasing prices.

What next?

So the writing is on the wall, IT services have to move up the value chain. Given western economies are not yet ready to open up their purse strings, Indian IT services might be a low cost option to IBMs and Accentures of the world. We are already seeing two trends to back the theory, IT companies are beginning to invest into IT consulting, solution accelerators, disruptive technologies and innovations. On the other hand Accenture and IBM are expanding their investments in India. But will service industry transform to eventually change the face of the Indian sweat shops as one US senator commented? Going by recent trends, that is the next logical step.

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IPL auction : Country, cricket, dollars and more drama

Country, cricket or just dollars?

There's still a generation that firmly believes cricket must be played for the pride of the country, not for money. In fact some of them feel IPL cricketers are overpaid and that’s hastening retirement in cricket. I suggest let us take an honest look at the numbers in comparison to other international sports. 78.5 million dollars was spent so far in the IPL auction. The numbers saw a lot of jaws drop, but IPL is still a fair distance from becoming the highest paying sporting event.

Lets draw a few comparisons with another international team sport like basketball. Currently basketball is the third highest paying team sport int the world. The average salary for an NBA player is $5m, compared to IPL's $565,000. The highest paid NBA player last season was Tracy McGrady who landed a whopping $23m contract compared to Gambhir who won $2.4m. NBA pays 10 times more for any player compared to the IPL. One might argue the US GDP is 10 times India's, but sporting events are not measured by GDP but by TRP. The average number of viewers for the NBA finals last year was 3.6m when compared to 8.34m viewers per day throughout the tournament. This puts the enormity of the IPL in perspective, so let us take note of the facts before we get carried away by the number of millionair cricketers. So if you think this is too much there is more to come folks.

The rich did get richer…but what’s cricket got to do with this?

So while many believe in the 80-20 rule, the IPLs 20-20 formula seems to work on a 50-20 rule, in other words 50% of the $78.5m was spent on 20% of the players. The top 20% won bids at an average cost of $1.5m per player. A mere $10m was spent on the remaining 50% at an average cost of $158,696, or 1/10 the cost of the top 28 players. So, not everyone gets rich at the IPL.What this also demonstrates is that not all franchisee owners were smart bidders. They overpaid for some and were left with a lot less for other valuable players. Since there is ai salary cap per team, bid price is an equation of the amount left in the kitty and not the intrinsic value per player. A few glaring instances are Irfan Pathan, who was paid $1.9m compared to Mike Hussey, ranked No.3 in the ODI rankings, was paid a measly $0.43m. Another instance is of misplaced investments was Ravindra Jadeja who doesn't even make the Indian playing 11 , fetched $950,000. Compare this with Daniel Vettori, one of the most economical one day bowlers ranked No.1 in ODIs and a useful lower order batsman, was sold for $550,000. So auctioning is a complex subject and I am no expert, but certainly think the minimum bid price must be fixed based on a performance based pricing to ensure it not just all business after all.

Veterans ignored

The once famed left hand legends, Lara and Ganguly, find no place in the IPL. I am left searching for clues to understand why Ganguly persists after making three poor shows in the IPL and almost crossing the age limit. Someone who was once the god of offside batting looked rather meek against the swashbuckling T20 players. Class is permanent but does not always translate to runs on the cricket field.

Lara’s case is also understandable as no one has seen him bat since 2007 World Cup and to expect people to put their money on him might be premature. He might stand a chance if he can perform in the forthcoming English season and prove his mettle before he chooses to go under the hammer.

While the West Indians don’t seem to care if Lara played in the IPL or not; the Bongs went bonkers, burnt effigies and staged protests. It was not until King Khan soothed their nerves by saying “There is no KKR without Dada”, no one heard him whisper “As a mentor”.

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Corruption out paces India's growth

India's economy grows at 8% and corruption at 11.5%. One wonders, what could happen if India never had corruption? For one we will be the 8th largest economy in the world (we are currently 11th) not taking into consideration what could have been if the money was efficiently invested. Our public debt currently 58% of GDP will be reduced to 23%. Our defense spends over the last 15 years could have been written off. We will have more than one third of the infrastructure budget to sustain our growth for the next 10 years. My hypotheses are based on a recent GFIP report estimating a total of $464 billion was lost to corruption, which itself could be a gross under estimate.

India clocks an 8% GDP average growth, imagine us minus corruption, then, China will have something to worry. Imagine India without potholes, fly overs that don't collapse, no power cuts, regulated traffic, high speed trains, functional airports, clean public toilets, it is a never ending list of public services that I dream of and have little hope of seeing come through in my lifetime.

The solution could be extremely complex, we could talk about strengthening the judiciary,widening the tax base, e-governance and stricter financial reporting for government projects, strengthening the law enforcement authorities, imposing a life sentence for corrupt officials and there could be a slew of measures that the common man cannot think of. Or, we could take matters into our own hands and just cut out the supply. All it takes is a mindset change, instead of looking for a quick fix, we have to think about the legacy we leave behind. Nothing a smidgen of national pride cannot solve.

Stop paying and start reporting corruption. This could be made possible via organizations like Janaagraha a bangalore based non-profit organization that started www.ipaidabribe.com. The site both reports instances where citizens had to pay a bribe and offers guides on how not to pay up. The site has 142,702 hits, we just have to widen the reach of such services 7,000 times. I sometimes wonder why not extend a parallel government supported by a bunch of pro-bono legal experts, maybe dial 000 for justice. A multi-lingual IVR based service to demystify public services and to report corruption cases. The idea may sound outlandish but I think its time we stop being couch critics and stem the rot. Would love to hear what you think.

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Who's the greatest of them all

“Who is the world’s greatest batsman?” is a question that has kept many a cricket commentators busy. The players of yester years talk about Bradman’s genius, in fact bradmanesque became an expression often used to describe a perfect innings.

Then in the 70s an era when fast bowlers dominated world cricket, a man rather short in stature walked tall amongst the West Indian giants. Gavaskar almost single handedly turned the tide for the Indian team. From a team that had almost resigned to defeat, to a team that once again learnt how not to lose.

If the 70s was a golden era for fast bowling the 90s marked the decline. As one day cricket became a popular format, unorthodox stroke play slowly crept into test cricket, greatly helped by flat, batsman friendly tracks. As one might expect, we saw a crop of new batting greats that included the likes of Brian Lara, Sachin Tendulkar, Rahul Dravid, Ricky Ponting and Virender Sehwag.

What makes the job of picking the greatest so difficult is establishing the criteria to measure these stalwarts of cricket. Each of these batsmen batted in a time when conditions were very different. For instance, Bradman and Gavaskar played in a time when batsmen had very little protective gear. Gavaskar and Lara were lone rangers while the likes of Bradman and Ponting played in the company of formidable batting line ups. Does any of this make one any less than the other? The truth is, it’s really hard to tell.

If you sift through all the parameters, batting averages, aggregate runs or even hundreds scored, it’s clear that none of them really reflect the batsmen’s contribution to the team adequately. Ultimately cricket like any other sport is played to win and in my mind the man who could influence the team’s success the most is the greater batsman. While statistics do not show the beautiful cover drives and on drives it does present a point of view.

“The main ingredient of stardom is the rest of the team”- John Wooden. The team’s success determines the batsman’s success. In an ideal world every player’s goal is to ensure the team wins. So in my view a 100 scored to win a match is more valuable than one that saves or loses the game. So the following criteria measure the batsman’s performance relative to the team’s:

• How many times has the team won when the batsman scored more than 50 runs? The counter argument could be, how many times, has the team won despite the batsman not scoring runs. The two factors put together is Contribution to Success and measures the team’s reliance on the batsman’s success.

• Percentage of Loss, when a batsman is successful, indicates if the player scores runs when needed the most. But it cannot be looked at in isolation; when viewed in conjunction with the team’s Loss rate, we know if the batsman was crucial to the team saving or winning a game.

Batsman's team score card

Contribution to team’s success

Don Bradman being the greatest batsman that he was, forces us to discount him in any statistical analysis as an anomaly. For a player in a very successful team his Contribution to Success (CS) was as high as 63%, which means he had a great role to play in the team’s phenomenal W/L ratio. In fact only 16 innings of his above 50 have resulted in defeats for Australia. The next highest is Brian Lara who had a 46% CS, understandably a team with a 0.51 W/L ratio was heavily reliant on Lara scoring big runs. Also what is noteworthy is he scored some mammoth totals when he did score runs.

Probability of the team’s failure when the batsman was successful

Dravid more popularly known as “The Wall” of cricket has a formidable 16% Probability of Failure when successful. This is extraordinary since the team had a Loss rate of 27% during his time. But it comes as no surprise to an avid Indian fan as Dravid has saved the game for India several times when the batting was in shambles. Virendar Sehwag at 22% takes the second place since his Probability of Failure is the same as the team’s Loss Ratio. Sehwag’s devastating knocks can take the wind out of any opponent’s sails and very rarely do you see India lose when he scores due to his formidable strike rate and ability to score big tons.

When you look at team contribution the Don and Dravid stand right at the top, where Don had a lot to do with the team’s phenomenal W/L ration and Dravid’s innings have saved India many a blushes. Followed by Lara and Sehwag, where Lara propped a struggling West Indies batting line up and Sehwag’s aggressive stoke play put India in insurmountable positions. It’s strange that you don’t see Gavaskar, Ponting or Tendulkar feature when you look at the world from a different eye glass. But can numbers lie? A reason why one must also look at other aspects of the game as well.

A lone star can shine bright. Batsman like Gavaskar and Lara played for teams that rarely won matches. In such circumstances we must look at the batsman’s individual endurance, consistency and brilliance. My chosen measures are:

• Longevity by number of innings played. It takes immense physical endurance to play the sport for long and that in my mind deserves recognition as maintaining high degrees of performance becomes harder over longer periods of time.

• Consistency is measured by a batsman’s success rate. If a batsman can consistently score 50 or more runs every other innings. It gives the team great confidence to bat around him. Australia was a team that was very hard to beat because they had a number of batsman with a high success rate and bowlers with a high strike rate

• If every time a batsman scores a 50, he can go on to score a big ton, it makes him all the more dangerous to the opponent. Conversion rate can measure how often the batsman does that.

Batsman's career summary

Longevity

Tendulkar has played the most number of test innings and the only one who is even close is Ricky Ponting. It is a phenomenal feat for both batsmen to achieve with averages in the mid to high 50s . Tendulkar a child prodigy, started his career at the age of 16. He has played the game and performed at such heights for more than 20 years which makes one wonder if he is a man or machine. Ricky on the other hand started the game at 19, which is a testament to his batting genius, as most Aussies don’t serve their country until their mid 20s.. Having played the game for 16 years he has clocked as many as 251 games since Aussies play more test cricket in a year than the Indians. What is most noteworthy is that he has shouldered the burden of captaincy and yet did not let his performance drop, something that Sachin found hard to handle.

Success Rate

No surprises here again, Don is unarguably the most successful batsman of all time with a 53% success rate. Through the 80 innings he played, he has scored 50 or more runs in 55 of them. What is mindboggling is that 29 of those were hundreds. Tendulkar is second at 38% but leaves very little to chose between him and the likes of Ponting and Gavaskar who are at 37%, or Dravid and Lara at 35%. Making them all seem like mere mortals when compared to the Don.

Conversion rate

Bradman’s individual batting brilliance stands out yet again. He had a phenomenal conversion rate of 69%. In a short career span of 80 innings he has scored more triple and double tons than any other batsman. Sehwag is a close second with a conversion rate of 52% with very similar readings to the Don. As he too has more 100s than 50s 23/21.Much like the Don Sehwag has 2 triple tons and 6 double hundreds. That makes Sehwag, in this respect, close to being bradmanesque.

If we assume that the Don to be the god of cricket there is no clear second. Lara was the biggest team contributor, Dravid was the most reliable in the hour of need, Sehwag the most prolific and Sachin the longest playing batsman.

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