High-end services, innovation & talent key to IT: Murthy

In an interview to CNBC-TV18, NR Narayana Murthy, founder of Infosys Technologies, while discussing the aspects ailing the Indian IT industry and initiatives required to meet the future, explained that the IT sector has to offer high-end services, innovate constantly and continously hone talent. 

  Below is the edited transcript of his interview to CNBC-TV18 Also read: Infosys may trim forecast again as US clients cut back Q: What was the vision when you and your co-founders decided to embark on this technology journey? Do you believe that where we stand today is far exceeded your expectations? A: We were all highly enthused by an extraordinary bureaucrat, N Vittal. He gave a rousing speech at NASSCOM in 1990. He said, you can do it, I will provide all the help, go ahead and do it. Reach for the sky. When you have such people in the government encouraging you, a huge market opportunity, a huge talent base in India then you can do certain things which are considered almost impossible. That was what the industry did. Q: How do you see the role of the government in shaping where Indian IT can be? A: Thanks to an extraordinary confluence of the government, both at the centre and at the states, that the industry, individual companies and NASSCOM have done an extraordinary job. We have gone from USD 100 million in 1991 to USD 90 billion today. That is an extraordinary journey. We have created jobs for 2.8 million people directly and perhaps another 8 million people indirectly. No other industry has done this in this short period. So, there are lots of good things that the government has done, but we need a lot more to do. I must say the golden period of the IT industry in India was really between 1997 and 2004. Then the industry grew by leaps and bounds. There were lots of encouragement from both the central and the state government. On the issue of how do we reconcile what is happening, I would say that this whole cash transfer programme is wonderful. Using the Aadhaar mechanism to ensure that the money goes into the bank account of the right people and that the right people use it, is a masterstroke. I congratulate Prime Minister and the finance minister on this idea. Q: Do you see this as a revolutionary idea that will change the way Indian subsidies have been delivered? A: I have spoken about the need for direct cash transfer in the absence of a voucher system for the last 12-15 years. This is nothing new for me. Therefore, in some way I feel that my stand has been vindicated. I personally believe that such a cash transfer system into the accounts of the below poverty line families and their ability to use it for the right purposes. I think it is indeed an extraordinary idea. Q: Do you feel more excited and more confident about the success of this idea because one of the co-founders of Infosys is sphere heading this initiative? A: We Infosys people have kept away from Aadhaar initiative. We have not even bid for any project. We said we don’t want him to be put in an embarrassing situation. So, we said lets not come in the way of his success. I don’t think we have had anything to do with that. However I am very happy that somebody who played an important role in the history of Infosys is now playing an important role in making the lives of the poor better. All of us at Infosys wish him best, we want him to succeed. We want his idea to be a part of an initiative that brings financial inclusion, equitable growth and makes the lives of the poor and the down trodden better. _PAGEBREAK_ Q: You talked about golden period for Indian IT between 1997 and 2004 and the governments approach to nurturing this industry. As we look ahead what would you like to see from the government by way of creating a more enabling policy environment? Is there really room now for the government to do much more to help this industry? A: There are several challenges as we move forward. First, is talent development. The quality of the talent that comes into the individual IT companies has to be nurtured, retrained and re-tooled and that’s why Infosys has a six-to-eight month-long training programme. Second, our brand has to be enhanced from being order-takers at the low end of the revenue productivity and margins to higher-end margin services. That means the IT industry has to move from being problem-solvers to problems-definers. It has to be ensured that friction to business both in India and overseas is reduced. Therefore there is lot of attention on to what initiatives the Indian IT sector is taking by foreign governments. Importantly, the IT sector in India has to work with the government to make sure that there is no friction. Q: You talked about the evolution of the Indian IT industry from being problem-solvers to being problem-definers. Do you believe that we are on the cusp of making that transition and do you believe that it is likely to be a seamless transition? A: One of the positive aspects in the ‘golden period’ between 1992 and 2004 was the reduced friction in the IT sector’s interface with the government of India. Unfortunately, ever since, the IT sector has faced a lot of hurdles to growth. It is not prudent for an industry that has the opportunity to create huge number of jobs to face hurdles in the very country that is based in. I have requested several successive finance ministers to abolish initiatives about tax exemption. It doesn’t make sense to exempt companies that make Rs 6,000 - Rs 8000 crore from paying tax in India while they pay tax outside India. These are some of initiatives that can be easily implemented. I hope the Rangachary Report will be accepted implemented without further delay because the IT sectors has already lost too much of time. Q: The IT sector has evolved to level rendering the low-cost arbitrage game obsolete. What will be the next big theme or trend as far as the industry is concerned? A: The themes evolving in the wings are gaming, healthcare and public governance systems in emerging markets particularly in the BRIC nations, Internet-based opportunities in terms of e-tail, mobile payment systems, Internet services, Software as a Service (SaaS) and embedded systems is another area. So, there are lots of opportunities. I don’t think we will be short of opportunities as long as we innovate constantly and as long as we train our talent to be ready for the market. Q: The trend of consolidation in the Indian IT sector has been talked about for several years, but it hasn't really translated into much on the ground. Do you believe increase in  challenges from the external environment will trigger the trend of consolidation in the Indian IT space? A: There will always be opportunities in such a market but it is important to conduct proper due diligence, ensure a strategic fit and plan on building complementary strength from such acquisitions. Q: How does Indian IT reposition itself at this point in time from going beyond being problem-solvers and exploiters of low-cost arbitrage advantages? Is the hour opportune for the Indian IT industry to reposition itself? A: I think the Indian IT sector has to do that whether it likes it or not because by-and-large, a majority of the sector’s revenues come from services which are not considered truly up-market. Therefore, the IT sector has to work hard towards preparing talent to face the boardroom. In fact, about seven or eight years ago I started a programme at Infosys called 1000 Boardroom Consultants. We invited McKinsey to help us on training executives go to boardrooms and convince chief executive officers (CEOs) and chief operating officers. So I think we have to do more of such initiatives. I think our challenge is to prepare our talent to face the board and can make very confident presentations argue and convince them of the best solution. _PAGEBREAK_ Q: Do you believe it is easier today for young entrepreneurs to startup? For young entrepreneurs to create a sustainable technology business than it was when you started over three decades ago? A: The opportunities are more. Venture capital is more easily available. The market size is bigger. So, therefore it is easier. But today's entrepreneurs will not succeed if they try to do what Infosys did 31 or 32 years ago. They have to look at different and niche opportunities. They have to look at different ideas. If they did that I have no doubt at all that they will succeed, absolutely no doubt. Q: If you were to hold out advice for a young entrepreneur who is getting started in the technology business. What would you say to them and also to the government what do you think should be the biggest priority to nurture this industry further? A: First of all our youngsters will have to look at areas like SaaS, embedded systems and public governance systems. They have to be provided counselling and help by venture capitalist, not just in terms of money, but in terms of talent acquisition, in terms of customer acquisition etc. The government will have to make sure that there is absolutely no friction to these people because lots of youngsters tell me that even today the factory inspector, the income tax inspectors and all those people they create so much of hassles and that has to go. If we did all of that - like it happened in late 1980s and early 1990s, during Rajiv Gandhi's time and during Narsimha Rao's time when the government was a catalyst, when National Association of Software and Services Companies (NASSCOM) was the mother that helped all the Indian companies. If we can do that I have no doubt at all that our youngsters will do things much smarter than we did, they will reach a level of revenues, a level of employment opportunities, which is several degrees higher than we did. Q: How long do you think it will take the Indian IT industry to break into the Accenture-IBM league? A: It is entirely upto us. If the leadership has a long-term orientation, it invests a lot in research, talent development, brand-building, has aspirations to train youngsters to become more problem-defining mindset and create offices that attract the attention of the large customers outside then I am sure it will happen, but it is all upto us. It is all upto the leadership.