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India Vision 2010: What Driveth IT ?

India Vision 2010: What Driveth IT ?. Keynote Address By Dr. Lakshmi Mohan School of Business, SUNY at Albany (e-mail: l.mohan@albany.edu ) February 3, 2007. 1. Based on my research of global business trends What is the impact on IT in India? Where are the latent opportunities?

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India Vision 2010: What Driveth IT ?

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  1. India Vision 2010:What Driveth IT ? Keynote Address By Dr. Lakshmi Mohan School of Business, SUNY at Albany (e-mail: l.mohan@albany.edu) February 3, 2007 1

  2. Based on my research of global business trends What is the impact on IT in India? Where are the latent opportunities? … Apart from the 4 Key Areas To Be Presented by Leading Experts My Perspective 2

  3. Medical Tourism: $2B by 2012 - Apollo Hospitals: 7 locations Caters to international visitors with foreign language interpreters, specific regional meals and travel arrangements down to the airport transfer Antwerp’s Diamond Industry - Cutting & polishing diamonds outsourced to Surat - Big diamond traders in Surat outsource, in turn, the low-value diamonds (worth Rs 10,000 crore) to small units in villages surrounding Surat, Saurashtra and north Gujarat Globalisation is Here to Stay- For Example 3

  4. Employment in Indian curry houses in England is greater than the combined employment in iron and steel, coal and shipbuilding industries. Source: Times of India, 28/1/07 A Telling Example- Cited by Shashi Tharoor 4

  5. Ver. 1.0 – Body shopping model of the 1990s Ver. 2.0 – Global Delivery Model Ver. 3.0 – Move Up the Value Chain … Grow without adding pro rata bodies & costs … Reduce the linearity between revenue and employee numbers The Game Changes 5

  6. Revenue/EmployeeProfit/Employee FY02FY06FY02FY06 The Linear Business Model- Revenue Growth in Direct Proportion to People Employed • Decline in Productivity Wipro 36L 20L 9.2L 3.9L Infosys 24 18 7.5 4.7 TCS 21 20 5.7 4.5 Source: Business Today, Feb 11, 2007 6

  7. Assumes that the supply of cheap and skilled labour is endless 2. Can lead to a crisis should a downturn occur – Not just a loss of productivity due to benching – Actually, a loss due to salaries to be paid to bloated workforce Implications … 7

  8. 3. Managing a huge workforce (> 100.000) – “ There will come a tippling point when handling scale itself will become an issue.” – Global IT Giants Have Vast Workforces IBM – 190,000; Accenture – 133,000 – An Important Difference: EBIT: Low-to-Mid $20,000 (Rs 9L) vs $10,000 to $12,000 (Rs 4.5 – 5.4L) for TCS, Wipro & Infosys Implications … 8

  9. “ For every $ spent on ERP software, Andersen Consulting made $4 - $10 in services to implement the software in a company.” – CEO George Shaheen i-flex Plans to Grow Services Business – Accounts for over 40% of revenues – Wants to become a full-service player in the financial services space … Solutions, IT Services & BPO Infosys Investment to Grow High-Margin Consulting Business – $20M (Rs 90 crores) to jump-start the consulting arm – “We needed to get the ear of CXO-level executives.” Sources: Businessworld, Aug 28, 2006 & Business Today, Feb 11, 2007 Where is the Money ?… In Implementation & Consulting Services 9

  10. India Prized in the Global Economy Will overtake the U.S. by 2050 – Goldman Sachs Report Foreign exchange reserves: $176B S&P’s “Investment” Grade Rating – first time in 14 years IT Market ($ billion) FY03FY07 Domestic 6.3 15.9 Exports 9.8 31.9 SMB Segment: Fast Growing 1.7M strong; spend Rs 3,400 crore in IT Supply chain of large enterprises SAP & Oracle are targeting this segment The Domestic Market- SMB: A Gold Mine Waiting To Be Tapped 10

  11. Saw the Value in Application Software Acquired Great Plains, Vendor of Accounting Software for SMBs in U.S. Next: Navision, a Dutch ERP Vendor Developed Microsoft CRM $800M in Revenues & 275,000 Customers by 2006 400 Customers in India Asian Paints Subsidiaries in 9 overseas markets Orient Ceramics: Initially considered J.D. Edwards Microsoft Is Already There !- Microsoft Dynamics ERP & CRM Solutions 11

  12. JetBlue Airways Case Example Low Cost … Like Southwest But High Touch … Unlike Southwest Skies Ahead of Competition JetBlueAmericanSouthwest Airlines Revenue 1.2B 18.50B 6.4B Gross Margin 36.62% 21.18% 29.01% Operating Margin 9.46%-0.09%7.56% The Aviation Sector- Ripe for IT Solutions 12

  13. A Late Arriver and an Early Adopter • “Last-Mover” Advantage • Costs and risks of adopting technology decline over time • Systems are integrated from the start • Aggressive and Early Adopter of IT • Innovative IT is the key to JetBlue’s low cost strategy • Voice over Internet Protocol (VoIP) for Customer Support VoIP interacts seamlessly with other Internet-based data and systems. As a result of not requiring a dedicated line for telephone service and the hardware used for the same, VoIP telephony is much cheaper. 13

  14. JetBlue: Low-Cost, High Touch – How? High Tech! • CEO’s mandate to CIO: “automate everything” • Focus with IT is not ROI, but reducing Cost Per Available Seat Mile • Paperless cockpits • Pilots get laptop computers, reducing time for pre-flight load and balancing calculations also eliminates costs of printing updates to flight manuals • 100% Ticket-less Travel 14

  15. JetBlue: Low-Cost, High Touch – How? High Tech! • Home-based reservation agents using VoIP • 600 home-based reservation agents use VoIP lines • Travel agents cost $14 per ticket; JetBlue reservation agents cost $4.50; Website reservations cost $0.50 per ticket. • Highly automated back-office processes • Flight planning and reservation systems • Maintenance software tracks spare parts and parts life • Other digital processes: expense reports, payroll processing, training management 15

  16. Pharma Contract Research & Manufacturing • Projected Growth by Assocham 20052010 CRAM $532M* $900M Clinical Trials $100M $1B * Manufacturing – 84% • Outsourcing by MNCs of Clinical Trials • Cost is almost half of that of U.S. • Abundance of genetically diverse patient pool in India who is “drug naive” (not taken other drugs for their condition in the past) • Many qualified doctors available with expertise to supervise and conduct clinical trials according to “Good Clinical Practice” 16

  17. Finally … Automated Decision Technologies • Expert Rule-Based Systems • To “manage by wire” • To extract “ news” from data • Capital One Credit Cards • Intelligent Call Routing • Birla Sun Life Insurance • Automated Underwriting & Risk Analysis • Premier U.S. Universities Set Up Dedicated Schools to Meet Growing Demand • Berkeley School of Information Studies • Pittsburgh School of Information • Penn State School of Info Science & Technology ………. 17

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