Paradigm Shift: Issues top IT cos are stuggling with

For the Indian information technology (IT) sector, it appears to be the best of times and the worst of times, contradictory as it may sound. The best because after the subprime crisis, the world is relying on the outsourcing capabilities of Indian IT firms like never before to transform businesses and stay competitive. And, the worst because the sector is gradually waking up to the fact that not all the top players are on an equal footing when it comes to business momentum.

Some of these firms are grappling with serious issues pertaining to either lack of strategic focus or able leadership or both. This week, ET Intelligence Group takes a closer look at the changing dynamics of the employee-driven sector to identify the ones among both the large and smaller companies which will perform well in the long run.

THE JUGGERNAUT CALLED IT

The IT-BPO sector has been one of the fastest-growing sectors in terms of revenue, exports and employment generation. Data from trade body the National Association of Software and Service Companies (Nasscom) shows that the export revenue of the sector grew at 28% in the past 10 years when compounded annually.

Its share in the country's total exports grew to over 26% from less than 10% during the period.What also makes the sector unique is the rate at which it has generated employment. Unlike most other sectors in the manufacturing industry, the IT sector has been at the forefront in terms of adding jobs. In FY11, IT companies are reckoned to have added 2.4 lakh jobs to take the total headcount to 25 lakh, according to Nasscom estimates.

OLD GAME, NEW CONTENDERS

The sector faced a sharp slowdown due to turbulence on the macro-economy front twice in the past 10 years - once after the dotcom bubble in early 2000 and then in 2008 when the subprime crisis hit the global economy. It, however, bounced back on both occasions.

The rebound was much faster in the aftermath of the global financial crisis twoand-a-half years ago. But it is less secular this time around compared to the post dotcom era wherein most IT companies took advantage of the demand recovery.While demand has improved in the past six-eight quarters, it has not benefited top companies in equal measure. While Tata Consultancy Services , Cognizant and HCL Technologies were at the forefront of the demand uptick, traditional contenders, including Infosys and Patni, looked constrained due to their own strategies adopted in the past.

Take for instance, the comparative growth rate among top three peers, including TCS, Infosys and Wipro. Infosys and Wipro grew their respective net profits at a compounded annual growth rate (CAGR) of 21-22% in the past four years. The growth was much faster at 28% for TCS. A starker picture emerges if we take into account a two-year horizon. Between FY09 and FY11, the net profit of Infosys rose by 4.5% compared with the 11% growth in Wipro's bottomline and 18.6% in TCS's (see graph).

THE DIFFERENTIATORS

What has separated the performance of these companies is the difference in strategies, which each one of them followed over the past five years. Infosys largely focused on margin-driven organic growth with a greater thrust on improving business efficiency. Wipro paid more attention to embedded technologies and infrastructurerelated segments. TCS made investments in increasing onshore presence across Europe, Latin America and Australia. It also acquired a few companies to enhance its vertical presence.

The strategy seems to have worked well because TCS could take advantage of the revival in outsourcing demand over the past six quarters. It commanded the biggest share of the incremental revenue and operating profit during the period. The company also pruned its operating cost structure to improve profitability of its business.

How to get your own unique identity number

With a mammoth exercise on to issue an Aadhar number to each of India's 1.2 billion citizens and interested residents, here is a look at the process involved for getting what will become a unique identity for people in India to access all public or private services.
The Unique Identification Authority of India (UIDAI) - under the chairmanship of Nandan Nilekani - is the nodal agency, which had appointed registrars across the country to facilitate the enrolment process.

Nilekani was one of the co-founders and previously headed IT bellwether Infosys. He enjoys cabinet rank in his present status.

Registrars are typically government departments and public sector organisations. They in turn appoint the agency to collect data. Currently, over 200 such agencies have been named including Wipro, Comat Technologies, Alankit and Virgo Softech.

"Aadhaar guarantees uniqueness and a universal identity. At its core is a centralised online identity verification process," said Atul P. Anand, director at Virgo Softech, which is one of the enrolment agencies involved in the process.

"Biometric information like iris and fingerprints ensure this uniqueness. This is also embedded and hence tamper proof. The authority uses data de-duplication process, which also makes sure that only unique data is stored," said Anand.

Officials explained the enrolment is done in four stages -- verification of documents including address proof, on-the-spot capture of photos, iris and fingerprint scanning -- after which people are given acknowledgment slips at the time of enrolment.

A 12-digit unique identification number is then delivered in 20-30 days at the person's address through speed post after verification of biometrics and demographic data. Data verification is done by the authority under a centralised system.

The system ensures duplicate data is deleted, leaving only one copy to be stored.
"If you try to enrol yourself for the second time by using some different demographic information or data, you cannot do it. That's also because you can't change your iris and fingerprint. So duplicate data automatically gets deleted," said Anand.

There is also no age bar to enrol for the number.But the unique number of a child up to five years of age is linked to that of his or her parents or guardians. On completion of 15 years of age, biometric data is updated, but the number remains the same.

The people who don't remember their date of birth and have no documents to back it can provide approximate age. Transgenders have also been included; so under gender options, there are three categories -- male, female and transgenders.

"The number can be issued to even a new-born and it remains the same throughout the life. The system is also versatile. Both biometric and demographic data can be updated," a Virgo official said. But the authority has not started the updation process.
On concerns over security and privacy issues, officials said it was, indeed, a rather big challenge and that the authority was trying to make sure that the unique identity number is not misused.

Many analysts have raised concerns that the number can be misused by anti-socials such as terrorists, since they can get it issued through fake identities during large-scale enrolments.

And once it is issued, a person can easily apply for a passport and open bank accounts.
The authority issued the Aadhaar number in September 2010 and targets 600 million people over the next four years. It has to issue every resident a unique identification number that can be used to establish the identity of the person anywhere in India.
Currently, on an average 150,000 enrolments are done each day. The number of enrolments is expected to reach six million per day by October. The task, therefore, is daunting, since the latest data places the country's population at 1.21 billion.
 Some frequently asked questions answered on "Aadhaar":

What is Aadhaar:
A tool for social empowerment and inclusion, Aadhaar is a 12-digit number being issued to all residents by the Unique Identification Authority of India (UIDAI). This number is stored in a central database and linked to some basic demographics and biometric information -- photo, 10 fingerprints and iris -- of each individual.

Why Aadhaar:
For applicants, Aadhaar, over time, will be recognised and accepted across the country and become the basic, universal identity of residents for all public and private services. Once enrolled, service providers will no longer face the problem of performing repeated 'know your customer' checks.

Genesis of Aadhaar:
Inability to prove one's 'identity' is one of the biggest barriers preventing the poor from accessing benefits and subsidies given by the government or private agencies. Aadhaar promises an identity to every resident - children, differently-abled people, tribespeople, unorganised workers, the poor and the marginalised can also secure a unique identity.

Who can get Aadhaar:
Every individual, from infants to seniors, who is a resident in India and satisfies the verification process laid down by the Authority can get an Aadhaar.

How to Get Aadhaar:
The resident needs to go to the nearest enrolment camp and register for an Aadhaar, along with certain specified documents. Upon registering, residents will go through a biometric scanning of 10 fingerprints and iris. They will then be photographed. The 'Aadhaar' number will be issued within 20-30 days.

How to track Aadhaar application:
Every resident seeking enrolment is given a printed acknowledgment form with an enrolment number that enables her/him to make queries through any of the communication channels - phone, fax, letter or e-mail.

What use can Aadhaar be put to:
Aadhaar means foundation. It can be used in any system that needs to establish the identity of a person seeking a service. It will particularly help the delivery of programmes on food and nutrition, employment, education, inclusion and social security, healthcare, and other services such as property transactions, election card, tax card and driving licence.