Tuesday, March 27, 2007

Why Developing Software for Indian Companies is Not Easy

I was reading an article Indian IT biggies losing out to MNCs, when I came across a very interesting and insightful comment by Chanakya. Yet another instance where a comment on an article is far more interesting the article itself. A couple of years back, I quit my job since I couldn't not handle the irrational pressures involved in developing for certain Indian customers - I quit even without having another job in hand. I know of a very idealistically motivated software company that had created a great ERP product for the SMB market - the last I heard, they have stopped trying to sell to Indian customers and were focusing their sales efforts mainly on the US and Europe. It's not for want of idealism, or lack of technical competence, or domain specific competence that you find very little serious software development work targeted at the Indian market. Most of the the fine folks who have tried are suffering from Indian IT market burn-out, for the reasons for which are so eloquently explained by, Chanakya:

It is very true that the Indian IT companies are failing to corner big deals in the domestic market. Both the IT companies and the domestic clients are to be blamed for that.

Let us first start with the Indian clients. Their IT awareness is quite poor. Their business processes are also not very much IT-dependent. In fact most of them view computerization as an additional burden - a sort of necessary nuisance. The business processes of those companies are so non-standard that it becomes rather difficult for them to get the real benefits of IT. Today's well evolved softwares require clearly defined and standard business processes and, most important, discipline as pre-requisites. For example, to get the optimum performance out of a Merc you need proper roads and disciplined traffic. Otherwise its high costs of acquisition and maintenance seem to be unnecessary burdens on the owner.

With the exception of banks, telecoms and a few Indian pharmaceutical companies, almost all other Indian companies across the sectors have those inherent problems. So when they do not get tangible returns from their IT infrastructure they tend to pay substantially less for the same. That is the root cause of all the problems. The Indian IT companies focus mainly on the application development side with a distinct bias for manpower intensive projects. For them the earning per employee - or 'billing rate' in the industry jargon - takes precedence over everything else. Indian clients do not pay more than one-third of what an international client would pay. Add to that the inevitable delays associated with the domestic projects due to various reasons like unavailability of proper infrastructure, stiff resistance from the middle and lower management levels who see IT as a source of extra work load, erratic payment schedules etc.

Instead of staying away from such messy, low-profit (often loss making), difficult to manage projects the Indian IT companies - with the exception of Infy - have been systematically exploiting the Indian clients for training their freshers. The domestic projects are known as visa factories. Because of the strict regulations against import of cheap labour in most of the developed countries, visa / work permit applicants need to have a couple of years of experience as a pre-requisite. How do the fresh engineering graduates get that experience? Mostly through the domestic projects!

So how the MNCs are making money out of the Indian clients? Hardware supply is the key. They make enough money from hardware components - like storage devices, PCs, servers, routers etc. - to be able to cross-subsidise the application software. Indian clients - thanks to their great IT awareness - are very reluctant to pay for something intangible which they cannot touch and weigh! Software is such a component. Hardware, fortunately, does not suffer from that bias.

Before I end this post I want to share a funny but real story of an Indian client with the readers. Around ten years back one of my friends used to work as a free-lance developer. One of his many clients was a typical Lala-type trader. After making big money in trading, he wanted to add some class to his business. So he wanted my friend to develop a software for his company. After toiling for a couple of months and bearing with the paan-chewing, gaali-spewing Lala he finally delivered the software in the form of two floppy disks. The installation and the subsequent setup went off smoothly. The bill of twenty thousand gave the trader a big shock. "Bees rupiya ka floppy de ke aap bees hazar rupiya maang rahe hai? Sharm nahin aati?", he said. It proved to be rather difficult to convince him. My friend tried to educate him first. Then only could he hope to convince him! Finally he gave up. He settled for five thousand. Last couple of years the same friend of mine is in US. He is still a free-lancer. He never goes near any client whose skin colour is even vaguely brown.
BTW, don't take that last line too seriously, I am pretty sure he just forgot to add a smiley ;-)

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