It is not a law of nature that Infosys and its ilk will keep making PAT in excess of 20%+. Even if profits halve in the next 2 years to 10% - does that constitute a death of the industry? Pai's point is is that these are high cash flow businesses, with enough margins and buffer to keep them afloat and going for long. Further it's *my thesis* that these companies have enough strengths they can leverage to turn it around. Yes, there's a lot of pain in the short to medium term and many things will need to get reinvited - such as change of hiring strategies that many have mentioned in this thread, but this is just a bump in the larger scheme of things.
On Sat, Oct 22, 2016 at 1:20 AM, Suresh Ramasubramanian <sur...@hserus.net> wrote: > As for Pai pointing at Infosys PAT .. they're in that moment where wile e > coyote is perfectly safe, only he's stepped off a cliff, standing over thin > air and just about to raise a sign that reads "help" > > I'm sure Deepak Shenoy can poke a few more holes than I can but .. Here > are the rest of the numbers that blowhard / great financial genius missed > out on > > http://www.indiainfoline.com/article/equity-earnings- > result-commentary/infosys-q1fy17-consolidated-net- > profit-declines-4-qoq-to-rs-3436-crore-in-line-with- > estimates-116071500326_1.html > > --srs > > > On 22-Oct-2016, at 12:35 AM, Sriram Karra <karra....@gmail.com> wrote: > > > > So many thoughts on this topic... having spent 8 years in various roles > in > > this industry.... Just a few quick observations here (in no particular > > order) on the specific challenges facing the Indian IT industry and some > of > > the comments in this thread: > > > > - IT Services is not all about server maintenance or routine sysadmin > > work. Application Development & Maintenance (of bespoke systems), > Product > > Engineering, Customisation and deployment of complex packages (like ERP > > systems), and so on cannot be automated with the current state of the > art, > > nor are they dull or monotonous drudge work. I have myself worked as a > > contractor for Cisco, maintained critical parts of their embedded OS > (the > > original IOS), developed thousands of lines of code, and new features, > that > > have powered (in some ways quite literally) the Catalyst 6500, a cash > cow > > for Cisco for nearly 15 years. It was a great experience to see > engineers > > from humble backgrounds perform high quality engineering for Cisco > even in > > its heyday. > > > > - Innovation comes in all sizes and shapes. We romanticise the Google / > > Apple style of innovation at the expense of other forms. When my former > > boss, at age 34, convinced John Chambers and Cisco at its peak (mid > 90s) to > > offshore product engineering work to Chennai, that was business > innovation > > too. The situation now is the Indian model is so well understood that > there > > are few levers left in negotiation, and the downward margin spiral that > > Sikka keeps lamenting about are defining the mood about the industry > (more > > on the margins later). But this is not new either. Even way back in > 2007/8 > > it was clear to insiders that more innovation is required with the > business > > models. We started talking the language of 'Fewer Better People' to > change > > the customer mindset from hourly billing to more outcome based pricing > > models. Many companies have seen success in these endeavours. But no > clear > > industry-level breakthrough has emerged, and that is a worry. Maybe it > > won't, but that does not mean the death of the industry. > > > > - What is certainly lamentable is these companies have gotten left > > behind in the latest technology trends and by not paying enough > attention > > to building scalable businesses. But the threat of automation and "AI" > is > > somewhat exaggerated: the domestic IT demand is just warming up and > you can > > be sure that journey is going to start at the bottom of the pricing > > hierarchy; in technology the next wave is always round the corner and > they > > only need to survive till the next wave comes around; > > > > - Mohandas Pai's response has some valid points. Infosys PAT was 21.9% > > in FY 2015-16, which is very respectable. For comparison: Google's PAT > for > > FY 2015 was 21.8%. Accenture's was 12.5%. There is scope for players to > > change their cost structure, remove dead wood, and change the reward > system > > to make them more competitive viz a viz the MNC biggies. But it is an > open > > question on whether they can pull off the execution. Maybe most won't, > but > > I do hope at least a few will, and we will all be better off for this > > shakeup. > > > > > > On Sat, Oct 15, 2016 at 8:52 PM, Srini RamaKrishnan <che...@gmail.com> > > wrote: > > > >> Comments? > >> > >> > >> http://www.livemint.com/Opinion/737W8zcjPA6lGWIajRCd6K/Indian- > >> software-dies-at-17-from-failure-to-grasp-future.html > >> > >> > >> Indian software dies at 17 from failure to grasp future > >> The Indian software services industry died on Friday after a short > >> battle with newer digital technologies > >>  > >> A slowdown alone wouldn’t have stopped the Indian industry if it had > >> been able to embrace ‘smac,’ or social, mobile, analytics and > >> cloud-based technologies. Photo: Abhijit Bhatlekar/Mint > >> > >> Singapore: Seventeen years ago an Indian man from New Delhi mesmerized > >> the technology departments of global corporations with a doomsday > >> story many times more puffed up than the luxuriant crop of hair he > >> sported. > >> The latter was a wig, and the former was just bad science fiction > >> packaged by consultants as a $600 billion hair-raiser. But Dewang > >> Mehta, the chief lobbyist for India’s fledgling software services > >> industry, carried off both with aplomb, convincing businesses that at > >> the stroke of midnight of the new millennium, their computer systems > >> would crash because old programs measured years in two digits instead > >> of four. The solution, he persuaded them, was to let a horde of > >> techies from Bangalore and Hyderabad go through each line of code and > >> fix the Y2K bug. > >> > >> That was the birth of India’s massively successful software services > >> industry, which died on Friday after a short battle with newer digital > >> technologies. At the time of its demise, the business was worth $110 > >> billion in annual export revenue. > >> The first hint that the end was near came on Thursday when Tata > >> Consultancy Services, the biggest Indian software vendor by market > >> value, announced a virtual stalling of its business in the September > >> quarter from the previous three months. After Infosys followed up by > >> slashing its full-year revenue guidance for the second time in three > >> months, it was time to turn off the ventilator. > >> > >> > >> #Infosys revenue growth pre-Lehman > >> > >> A coroner’s inquiry unearthed three signs of decay, the first of which > >> shows how Indian companies’ cheap-talent-fueled growth ran out of > >> breath. In the four quarters before the collapse of Lehman Brothers, > >> Infosys saw revenue increase an average 29% in constant-currency > >> terms. Back then, Dublin-based Accenture’s growth was just half as > >> high. But there’s nothing exceptional about Indian companies’ > >> expansion anymore. All that investors have heard from managements this > >> year is gloomy commentary on how challenging it’s become to get > >> clients to open their wallets. When the companies do make news > >> nowadays, it’s more often for dodgy business practices, regulatory > >> slaps on the wrist, and senior-level exits. > >> > >> A slowdown alone wouldn’t have stopped the Indian industry if it had > >> been able to embrace “smac,” or social, mobile, analytics and > >> cloud-based technologies. But the vendors wasted so much time > >> defending their legacy business of writing code for and maintaining > >> purpose-built enterprise applications that they failed to make a mark > >> in the new digital world. > >> > >> As an analysis from Mint shows, the dominant trio of Tata Consultancy, > >> Infosys and Wipro between them had 1.5 times more workers doing > >> digital stuff last year than Accenture. But the revenue they garnered > >> was 40% less than what the latter chalked up from newer technologies. > >> That makes the typical digital-tech employee of an Indian vendor 25% > >> as efficient as his counterpart at the global consultant. This gap > >> sets the clock back on Indian companies, which have taken years to > >> narrow the productivity differential: > >> Maybe it’s just banking clients and their inability to pay like they > >> once did. Or perhaps it’s a combination of weak global growth, Brexit, > >> protectionism and Donald Trump’s vacillating stance on US visas for > >> Indian technology workers. Hoping that turbulence is temporary, > >> investors are still paying a hefty premium for future growth. They may > >> get lucky for a while. Still, a dead-cat bounce from delayed orders > >> coming through would hardly count as proof of life. > >> > >> The millennium scare got Indian software a foot in the door at global > >> corporations. But now the shoe is on the other foot. Robotics and > >> artificial intelligence are putting the vendors’ labour-intensive > >> business at risk of obsolescence. Even if the concern is as puffed up > >> as Y2K, with plenty of growth candidates in the Indian start-up world, > >> at least for some investors it may be time to back new horses rather > >> than flog dead ones. > >> > >> >
