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in the face of a continuing Global
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financial crisis companies are finding
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it more important than ever to both
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adhere to their core values and to
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emphasize the importance of innovation
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in their products and services emphasis
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is no exception ESOP palar Krishnan CEO
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and managing director of the
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bangalore-based it giant was on campus
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last week to deliver a Wharton
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leadership lecture shortly before his
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presentation he spoke with Wharton
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management Professor Scott chodor about
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a range of issues including the impact
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of the credit crisis the role of
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Acquisitions in the company's overall
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strategy the nature of the competition
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and the ways in which Indian
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multinational corporations are making
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unique contributions to the global
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[Music]
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Marketplace thank you very much for
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coming here Mr gopalakrishna it's a such
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a pleasure to have you here at Wharton
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and my personal pleasure to be able to
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have a conversation with you about
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infosis and the Dynamics growth
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strategies the world and uh how you
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might see yourself uh I hope you've had
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a pleasant visit so far and uh I thought
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of just first starting by asking you
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what is your vision for infosis see the
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vision for the company has not changed
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from when it was started uh the vision
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was to create a respected coroporation
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operating in global markets providing
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the best of breed solutions to our
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customers using best-in-class people so
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that Vision has not changed and uh that
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will continue to be the vision for the
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company uh for us um you know the the
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notion of a respected corporation uh is
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what is driving um all the things we do
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it allows us to focus on um you know
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being world class it allows us to focus
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on on providing the best return to our
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investors being the best employer there
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is and and and providing the best
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services to our clients and how do you
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achieve that I mean that's a a Grand
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Vision a very multifaceted one how do
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you plan to achieve it so every aspect
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you know every aspect of the company is
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touched by that Vision um so I'll give
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you just one example you know every year
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you know you have uh budgets being
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prepared for the company and things like
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that and now as part of that exercise we
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ask every single Department within the
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company to actually come up with two
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ideas which will which will change the
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way they uh do things it will have to
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have an impact on let's say uh the
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growth or the cost efficiency the brand
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the positioning so they must come up
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with two big Ideas every Department um
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for example in the annual report we ask
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what are the changes you're going to
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make to the annual report so that it
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continues to improve or in terms of
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infrastructure and Facilities what are
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the things you're going to do
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differently this year than last year so
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that forces uh the entire company to
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think of continuous improvement enti
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company to continuously innovate and
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look for better and better returns and
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things like so that's one of the ways
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you know we we make sure that um we
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implement this so Innovation obviously
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is very much at the core and uh of this
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whole thing both in process but also in
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product perhaps right innovation um
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being seen as a leader um trying to come
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out with um um best practices or you
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know next practices so all that is part
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of this where do you see your company
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going in terms of the products and
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services that it offers I mean I know
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that beyond the it and it enabled
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Services we've seen a 4A into Bo that's
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slowly becoming uh knowledge process
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Outsourcing but we also see you dabbling
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in Consulting and in R&D e Services
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obviously much more higher end types of
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services that you're targeting uh and
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increasingly complex ones I imagine ones
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where you need closer interaction with
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your clients what do you think will be
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the focus of your efforts um so in one
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dimension the focus is to expand the
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footprint broaden the set of services it
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allows us to have larger relationship
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with our clients it allows us to cross
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sell multiple products and services to
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our clients and create new engines of
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growth it all also uh expands um uh the
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addressable market so you know um
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clearly you know we we we have much
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larger market to address and so create
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growth in you know growth opportunities
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and things like that it also allows us
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to um engage with the customer earlier
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and earlier on with for example
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Consulting it allows us to engage with
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the business side of our customer
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through our business process Outsourcing
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and things so you know that that that is
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the one uh one uh one um let's say one
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level of uh growth in uh services and
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things that the second um level of uh
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growth in Services is to make sure that
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um um you know we we we continuously
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look at um um multiple entry points
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multiple know it it enhances our sales
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capability and things to that and over
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time I see um you know enforces having
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three different uh let's say line of U
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business or Services uh one is um uh the
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ability to help our clients transform
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change um look at their um um new
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initiatives and things like that so
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that's the Consulting the development
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and things like that uh it will be more
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transactional um it has a separate uh
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you know um business model the second is
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helping them in in their business
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operations um so maintenance BP uh
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infrastructure management long-term
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relationships long-term contracts um
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maybe um you know price is a a a major
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factor in uh determining you know the
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the the service and things like the
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third is uh intellectual property based
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U Solutions products and things like
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that finle is an example of that you
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know finle is one of the leading uh core
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banking or Universal banking solution in
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the world today and we're selling it to
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Banks around the world so there are
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three sets of uh businesses sounds like
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a fascinating Vision because uh what
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you're also doing is uh covering both
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peripheral but also gradually getting
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towards the core of activities that
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companies provide and perhaps helping to
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redefine how corporations even think
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about themselves and operate um as you
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go for this you know if I hear you
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thinking about these areas both the
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backend types of operations which are
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sometimes more peripheral in nature but
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then also some of the key intellectual
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property driven Innovation type of areas
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which clients might want to pursue uh
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tapping into expertise that you might be
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able to offer in that process very very
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fascinating um how do you see yourself
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differentiating yourself um from the
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other competitors either Indian
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providers or the uh providers uh more
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globally and and which do you see if I
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may ask as the primary competitors in
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that uh in that endeavor so today we
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have two sets of competitors one is the
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global system integrators um you know
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the the Consulting companies or the the
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you know the larger players out there
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today and second set of competitors are
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other Indian companies especially the
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larger Indian companies and and and what
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is happening in the industry is because
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the models are converging all of us are
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actually converging to the same space
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and U you know the competition is
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amongst us actually um by and large now
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you know we we we see probably five or
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six companies um you know whom we
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compete most often and and that's the
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set we're looking at um what is
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happening in this industry is that um uh
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there's a new leadership being created
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and all of us are actually competing to
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be seen as the leader in the
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industry um it it it it actually gives
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us an opportunity uh for for uh
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positioning and for is um very
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differently now the way uh we compete
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you know at the at the you know there
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are several uh several uh levels at
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which we compete um the knowledge we
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have of a particular industry the uh
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Solutions we have for that industry know
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that's one level of competition uh the
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second is the quality of service we
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deliver the predictability the ability
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to um deliver uh Solutions on on budget
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on time Etc so that's a second level of
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comp you know differentiation of comp
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you know how do we compete the third
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level is the quality of the people who
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are put on engagements Etc and how
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knowledgeable they are and you know how
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they're able to um how they're able to
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provide value to the clients because
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it's it's it's it's a knowledge based uh
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service and things that and uh the next
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level is um is you know the Investments
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we make in building um um in Building
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Solutions tools um techniques the models
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we bring so for example the global
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delivery model itself is a clear
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differentiator uh in this space so uh
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similarly in the software engineering
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the cmmi you know model we have adopted
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Etc so um the tools the techniques the
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models Etc so those are again uh you
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know uh how we compete so there are
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multiple ways in which we can compete
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and iate and of course the other Indian
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competitors like the tcs's and Whos are
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also trying to do the same right but uh
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no how do you say yourself setting
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yourself apart see every company of
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course you know tries to position itself
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along these Dimensions Etc now how you
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deliver on these things how well
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positioned you are uh that's clearly uh
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you know how we differentiate and uh we'
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have tried to make sure that um in all
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these Dimensions we we we lead and or we
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try to lead that's how we differentiate
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ourselves oh fascinating and uh of
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course you know the big three
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competitors when always talks about on
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the international realm are the ibms the
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eds's accent for instance now how are
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you going to build these capabilities uh
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because that was implicit in your in
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your comments how are you going to build
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those capabilities that you do not yet
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possess um of course the ones you have
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you can incrementally improve but the
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ones that you don't yet possess how do
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you how do you go about building those
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capabilities um
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typically we would uh build new
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capabilities organically so we would
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recruit the relevant people with
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experience conceptualize the solution
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maybe conceptualize the solutions
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slightly differently because everything
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we do we want to embed the global
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delivery model we want to um deliver the
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work from the best possible location
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with the best possible people you know
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that's a underlying idea behind Global
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delivery model so we want to embed the
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global delivery model in everything we
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do once we have understood once we have
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established a a delivery model then we
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can look at acquisition as a way to uh
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accelerate the growth of a particular
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service uh typically we will not enter
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into a new service or a solution through
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an acquisition because uh the acquired
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entity may not have the desired model or
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where we want take the model to if we
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find somebody like that maybe we can
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start with an acquisition so typically
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you know you will find that we start
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something we establish ourselves and
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then we look at acquisition now uh when
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it comes to intellectual property of
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course we can look at acquisition and
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finle has acquired um IP from outside
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you know smaller uh smaller companies
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Etc it makes sense to me I mean given
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your emphasis on building a model and a
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process around it it's very hard if
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that's not very well aligned with a
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potential Target to just bring in a
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Target into that fold you know so if you
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have established let's call it a
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platform in a certain space to compete
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in it then you can add on certain
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competencies in order to be able to
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leverage that platform further it's very
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hard to bring in that platform and then
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get it to mesh with the existing
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Corporation especially because you have
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a unique culture you have a process
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orientation such a disciplined Focus um
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and blending that especially if it's a
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foreign company is not very easy and so
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we of course hear all these wild rumors
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every once in a while about potential
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targets that are not doing well and
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larger firms but uh infosis in
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particular I think has been very
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cautious in this in this thing but
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doesn't this slow down uh your ability
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to grow to some extent you know and uh
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and find new avenues for growing at the
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Double Digit type of rates that you're
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accustomed to uh so when you look at um
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our growth rate and compare that with
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other companies we have not um um we've
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not been behind you know we have
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actually had industry leading growth
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rates uh on an average we've grown 35%
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over the last several years compound
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annual growth rate of 35% which is an
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leading growth rate for companies of our
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size uh the reason why that is feasible
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on one side you have the market our
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market share is still less than 1%
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overall when compared to overall it
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Services spending and on the other side
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we have figured out how to create a
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supply chain you know how we can recruit
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people bring them um uh into the company
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you know bring them up to speed train
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them Etc and then then make sure that
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you know they can fuel this growth Etc
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and all this is done uh using you know
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an excellent um uh business uh planning
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um you know mechanism we have uh so uh
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we have we have we have actually
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grown um you know grown over the years
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you know using an organic model now
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acquisition we see as a way to fill
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strategic gaps if there are
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um Acquisitions we see as a way to enter
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new markets and because the service is
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there but in order to enter a new market
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you have to create some local delivery
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capabilities for example Consulting
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capabilities or local language cap frend
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capabilities and that can be accelerated
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through acquisition so that's probably
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one of the one of the uh goals for um
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for uh acquisition we've done one in
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Australia which fits this model so
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customers uh Geographic perhaps uh
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expansion maybe even some domain
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expertise yes that's also possible so
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for example you know we can look at
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let's say Healthcare or energy utilities
00:15:08
so those are the um those are the
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targets we would look at typically
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speaking of the market of course the
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credit crisis and financial crisis is
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weighing heavily on everyone's minds and
00:15:18
I'm sure on yours as well to some extent
00:15:20
what do you think the impact will be on
00:15:22
infosis uh on the Indian economy um do
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you see much of an impact clearly there
00:15:27
is an impact in last year we grew 35%
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this year we looking to grow you know
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our projections are about 13 to 15% so
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growth has uh slowed down uh the IT
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services industry has slowed down in
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India uh so that there has been an
00:15:42
impact overall Indian economy also has
00:15:45
seen an impact from a GDP growth rate
00:15:48
projected GDP growth rate of 8 9% it has
00:15:51
dropped down to 78% and maybe next year
00:15:54
it'll be somewhere around 7% so GDP
00:15:57
growth rate has slowed down
00:15:59
Capital has flown out of India which has
00:16:01
had an impact on the uh stock market and
00:16:04
things that so overall you know this has
00:16:06
had an impact in India also so you do
00:16:09
expect that growth will be a little slow
00:16:11
over the next year year and a half
00:16:12
perhaps um growth would be slower uh at
00:16:15
least you know this year it depends on
00:16:18
how long it takes to recover and how
00:16:20
long you know the recovery will take um
00:16:24
once I think stability comes probably
00:16:26
you will have a better um understanding
00:16:28
of the situation uh we feel that um once
00:16:32
stability comes once companies feel
00:16:34
confident to um look at um let's say new
00:16:38
projects new initiatives Etc then again
00:16:41
we will see a an opportunity to grow
00:16:45
even in this environment we are seeing
00:16:46
opportunities to work with companies on
00:16:48
M and integration type of work etc
00:16:51
because lot of companies have changed in
00:16:53
terms of
00:16:54
ownership a lot of companies have merged
00:16:57
and things like so that again gives us
00:16:59
an opportunity for uh services and I
00:17:01
noticed that you haven't uh certainly
00:17:03
resorted to layoffs but you're also not
00:17:05
slowing your hiring really that much and
00:17:07
it makes sense to me if this is a
00:17:08
temporary phenomenon and there's always
00:17:10
a battle for talent may as well take
00:17:12
advantage of the situation and continue
00:17:14
um bringing in and grooming those
00:17:16
individuals so that when things pick up
00:17:18
again more aggressively you can deploy
00:17:20
them accordingly right uh it's a longer
00:17:22
vision is that what how do we so we
00:17:25
we're still growing right you know um 13
00:17:27
15% is still um growth that's one aspect
00:17:31
of it second is um you know in in places
00:17:34
like India um you know there is a a a a
00:17:38
challenge from a society perspective if
00:17:41
you look at layoffs and things like it's
00:17:43
not um you know not seen very well um
00:17:48
and then the pressure from society is
00:17:50
significant the pressure from government
00:17:52
you know it's
00:17:53
not you know the labor laws are not you
00:17:57
know not the constraint but definitely
00:17:59
the pressure from the government is
00:18:01
there to say that you know don't resort
00:18:03
to layoffs and things like because that
00:18:05
creates impact on society and you know
00:18:08
in and and the perception of people
00:18:10
about business and things like that so
00:18:13
typically you will find that Indian
00:18:14
companies do not resort to layoffs Etc
00:18:17
and in our case um because the business
00:18:20
model is such that um we're able to um
00:18:24
able to sustain our margins to a
00:18:27
reasonable extent
00:18:28
uh in spite of higher uh bench lower
00:18:31
utilization you know we've decided to at
00:18:34
least for the time being um you know
00:18:38
lower the utilization but not you know
00:18:41
not worry about layoffs and things and
00:18:43
we still recruiting certainly and I
00:18:45
think you know new opportunities in the
00:18:46
domestic Market perhaps in other uh
00:18:49
Geographic uh areas and and the like and
00:18:52
as you keep on growing into new value
00:18:54
added Services they might be able to
00:18:56
absorb those as well so I can definitely
00:18:58
see how uh you would still be able to do
00:19:00
it so for just a shortterm thing you
00:19:01
would not never risk even the ill will
00:19:03
that might come as a result and we saw
00:19:05
Airlines in particular trying to attempt
00:19:07
to do something like that in India with
00:19:09
push back very quickly and it makes
00:19:11
sense I mean you don't need a long-term
00:19:13
if there were such a drastic situation
00:19:14
where you would expect for the next 10
00:19:15
years the situation would reti then it
00:19:17
makes sense to think about those things
00:19:19
but you can take a little bit of a
00:19:20
short-term uh concession in this regard
00:19:23
and and still uh have longer term impact
00:19:25
fascinating um just to close I wanted to
00:19:27
ask you what do you think will be the
00:19:30
Hallmark of the emerging Indian
00:19:33
multinational if any I ask because we
00:19:36
see when the Japanese companies made
00:19:37
their presence felt globally in the 80s
00:19:40
it was through uh a Rance focus on the
00:19:43
supply chain on just in time systems
00:19:45
that was one of the things they were
00:19:46
known for is there anything you think
00:19:47
that the Indian firms will be known for
00:19:50
can contribute to in terms of capability
00:19:52
building um and how corporations operate
00:19:55
management practices and the like so
00:19:58
indan companies have focused on
00:20:00
globalization of services so that's
00:20:02
definitely one of the contribution from
00:20:05
um uh Indian companies you know we have
00:20:08
um we have uh worked on it fine-tuned it
00:20:11
and made sure that you're getting higher
00:20:14
quality at lower cost and things like
00:20:16
that um and and and at you know lower
00:20:20
risk and things like that you know High
00:20:22
predictability um high quality and
00:20:25
things like that so that's definitely
00:20:26
something Indian companies have G
00:20:28
contributed today the same principle is
00:20:31
getting applied across multiple service
00:20:34
lines multiple business processes and
00:20:36
things like so that's one the the focus
00:20:38
on process discipline and processes
00:20:42
themselves again is something which
00:20:43
Indian companies have contributed um uh
00:20:46
just like you know Japanese companies
00:20:48
focused on manufacturing Indian
00:20:50
companies have focused on fine-tuning
00:20:53
Services you know we were one of the
00:20:55
first to uh take up the CMM model
00:20:58
and and and accept as an industry best
00:21:02
practice and things like so that's
00:21:03
another you know contribution from uh
00:21:05
Indian companies the third um um you
00:21:10
know third third focus is um really you
00:21:15
know um I think bringing in the concept
00:21:18
of um
00:21:21
um concept of efficiency to a different
00:21:25
you know level cost to a different level
00:21:27
and then how you can leverage that cost
00:21:30
as a growth driver or a growth engine
00:21:33
now this I think is just starting to
00:21:35
happen um when Indian companies compete
00:21:38
let's say a bank from India or a a
00:21:42
telecom company from India um because
00:21:45
they have figured out how at much lower
00:21:49
price points they can actually be more
00:21:51
profitable they can scale up and things
00:21:53
like and then when they go International
00:21:55
and start competing um other other other
00:21:58
companies in the same industry will have
00:22:00
to drop down to the same cost levels and
00:22:03
figure out how to do that so that I
00:22:05
think is going to have a significant
00:22:07
impact in the global um you know
00:22:09
economic environments around the world
00:22:12
um if if if others do not bring in the
00:22:16
same level efficiency what happens these
00:22:18
companies will have um higher market
00:22:21
caps and these companies will start
00:22:23
acquiring right and you have seen some
00:22:25
of that also starting to happen so you
00:22:28
know these are some of the things which
00:22:30
come to my mind uh from from an Indian
00:22:34
uh perspective fascinating and it really
00:22:37
if I may summarize those comments it
00:22:39
really seems to be that companies like
00:22:41
infosis are enabling the emergence of
00:22:44
the modern distributed uh virtual
00:22:47
corporation that operates and leverages
00:22:49
upon Global expertise 24 hours a day
00:22:52
seven days a week whether internal
00:22:54
expertise or external expertise and uh
00:22:56
you of course personify embody that in
00:22:58
how your organization is structured but
00:23:00
even for your client companies that is
00:23:02
how they're emerging and growing as they
00:23:03
increasingly take on globalization and
00:23:05
uh operate more as a as a cluster of uh
00:23:09
centers of expertise as opposed to a
00:23:10
centrally driven uh Corporation and I
00:23:13
see that very much being enabled by
00:23:15
companies like yourself thank you very
00:23:18
much I enjoyed the conversation thanks
00:23:20
very much for being here Mr
00:23:23
[Music]
00:23:26
gopalakrishna
00:23:31
[Music]
