Premji and Aron - II

In one of my previous posts, I had talked about an interview between Premji and Ravi Aron of Wharton. This is the concluding part of that session. I must say that it is no wonder that Wipro is one of India's most successful brands. He is extremelely knowledgeable and current, and his replies are incisive, thoughtful and very cogent.

I had remarked earlier that one of India's challenges would be to transition from a service oriented model to a product oriented one. Premji and Aron discuss the very same issue in this concluding session.

Excerpts:

"...one reason why India has focused on services is that products require an intimate, ongoing understanding of the customer. This requires a strong localized presence in countries where these products are going to be used, which has not been India's global delivery model. Second, most product companies have to invest a lot of resources in brand-building and marketing and you need to have the scale to do this. Many Indian companies could not afford to do this. Third, the service business has provided clear-cut, strong positioning, good profitability and tremendous growth for Indian companies. So these companies chose a path where it was easier to succeed rather than one that was more difficult."

"...let us look at the way our business is distributed. About 75% of our people work in India or India-equivalents, by which I mean low-cost centers. In contrast, if IBM has 50,000 or even 80,000 people in Asia, that is just about 20% to 25% of its total employee base. This is a distinct cost advantage that we will continue to enjoy. Even if companies like IBM move to global delivery models, it is unlikely that their employee base in low-cost regions will go beyond 30% to 35% of their total headcount. This is because their execution model -- which is primarily based on consulting -- does not permit them to do that. The kind of work they do requires a much deeper onsite presence..."


Aron is, of course, not the everyday interviewer. His questions are on the money...

"...the proposition they (consulting companies) make to the customer goes as follows: "We will come in and diagnose the problem," which is management consulting. "We will find a solution," which is management and process consulting. "We will design, develop and maintain the solution," which is technology. And finally, "We will operate the solution," which is BPO. So the promise to the customer runs the gamut from diagnostics through formulation, design, development, maintenance and operation..."

"...consultants earn about six to eight times what the technology delivery people do. As a result, they (a company Aron consults with) are trying not to have a two-caste system form within the company, where higher-earning, suit-wearing, laptop-toting, airport-hopping consultants lord it over the geeks who write code in C-plus-plus and Java. This is proving to be a much bigger challenge than expected... "

Get the whole interview at K@W here