Did Easy Money Derail Indian Software Product Companies ?

Sridhar Vembu, the CEO of Zoho makes an interesting observation in a Hacker News discussion thread, about how easy money during the boom years prevented software product companies from taking shape in India.

"I have a different perspective on this, having built a product company (Zoho Corp) in India for the past 13+ years. Basically India's emerging IT industry coincided with the global credit bubble of the past 2 decades, which simply inflated the IT services industry to monster proportions, in the process sucking the oxygen of talent out of the system. So product start-ups that could have been never got off the ground.

This is the mirror image of the process in the US that funneled talent towards the financial complex, which meant the IT industry had to import talent or outsource the work. A good percentage of the talent came from India, and a lot of the outsourced work went to India. In that environment of easy money flowing into services, product companies found it hard to recruit talent (which the author of the post also alludes to).

This process basically derailed the emergence of product-based IT industry in India. Some of the Indian services giants of today (Wipro and HCL in particular) were product companies originally. They built some innovative products in India (an x86 based Unix well ahead of Linux, an IP concentrator/router for ISPs in early, to quote two examples) in the late 80s/early 90s. But once the 90's boom got underway, they found it far more lucrative to rent out the talent than to build products.

In Economics, it is impossible to argue "what might have been", but I believe the configuration of IT industry in India points to how the bubble massively distorted an industry."

I have been discussing the impact of easy money with friends for a while now and while it's a crucial factor, it's important to keep in mind that countries like Israel have chosen not to take the services route. The availability of easy money must have dovetailed with something else for software services (popularly known as body shopping) to take off in a big way in India. Dharmesh Shah, a successful serial startup guy makes some an great point in his post Why There Aren't More Software Startups In India:

At the risk of drawing stereotypes, I think Indians in general are a little impatient and like to see quicker “payback” periods on their investments; There are a few number of them (than in the U.S.) that are willing to spend the 2+ years it might take to build a product, see how the market responds and “tweak” the business as necessary to get it to a successful state;Product companies are also more “random” and difficult to control the outcome of;They involve a large number of “creative” factors that will largely influence whether the product succeeds or not. I’ve found Indians to be almost overly practical (in the short-term sense) and not passionate about some of the softer things (like user experience, marketing, branding and other things) which in today’s world are large contributors to future outcomes of software startups;They’d much rather work on the “harder” stuff that they can better control and predict;This is a bit of a “squishy” argument, but it’s a squishy issue;I guess the evidence of progress I’d like to see is a cool software product coming out of an Indian startup along the lines of an Adobe Photoshop or even a 37signals Basecamp.

An example of the impatience, inability to tweak the business, and overly practical attitude that Dharmesh talks about, is a Bangalore based company that's not too happy with it's clients for which it is currently developing and testing IPhone and Android applications (They inherited these customers after taking over a smaller company). The US based clients that outsource to them are mostly small to medium sized companies with relatively low billing rates. A lot of people would kill to get into IPhone and Android development now, but this Bangalore based company is very unhappy that they are not able to maintain their 60% plus boom era margins doing mobile application development. No attempt is being made to convert the expertise developed so far into a product making strategy. As a friend who works there observed, "They are only interested in projects that involve billing a hundred people or more".

Fred Brooks On COBOL's Success

(~00:53:00) Question: In your slide on the conceptual integrity examples you made a passing reference to the ones on the left were not the ones with the fan clubs, but in many cases were the successful products. Given that, just how much value is there in the conceptual integrity if the successful products don't need it ?

Fred Brooks: Now, well, look, let's take COBOL - there were very strong forces to make COBOL market successful that had nothing to do with it's excellence. COBOL is a language, it was written, it was designed to be read, not written. It was designed so that bosses could see, could understand the code that people were writing. It is a committee design. It does not have conceptual integrity. But it had the department of defense mandating it, and so talk to me about market success when you have a DOD mandate when DOD is big customer. So there are many other factors other than the inherent excellence of the product to determine the whether it's a market success

(via podcast of Fred Brooks' keynote "Collaboration and Telecollaboration in Design" at OOPSLA 2007 )

Also at around 20:35:

Fred Brooks: How many people ever got delight from COBOL ?

Update (18'Aug 2009): The question seems to be motivated by a slide that has a table from the twentieth anniversary edtion of 'The Mythical Man Month'. Quote from the book (page 202):

A little retrospection shows that although many fine, useful software systems have been designed by committees and built by multipart projects, those software systems that have excited passionate fans are those that are the products of one or a few designing minds, great designers.

Fig. 16.1 Exciting Products (page 203)

Yes	No
Unix	Cobol
APL	PL/1
Pascal	Algol
Modula	MVS/370
Smalltalk	MS-DOS
Fortran

IT Startups And The Immature Indian Market

There's lot of hand wringing over the lack of "real" startups in India. Most of the arguments totally miss the point that the market for technology products is barely incipient in India. Ashish Gupta nails it:

Ashish Gupta, Managing Director, Helion Advisors Pvt Ltd, feels it is difficult to sustain a company that sells technology because there isn’t a good enough market for technology in the country. Also, customers often prefer to buy solutions from established multinational companies rather than from an indigenous start-up.

‘Why should I buy IT from a start-up and add more risk to my business,’ is what many buyers ask, says Gupta. However, companies that sell services based on technology have far better chances of success in the Indian market, he adds.

(via The Hindu Business Line)

Related: Why Developing Software for Indian Companies is Not Easy

Why Google Owns Wave

If you make it so complicated nobody else understands what you're doing, you own it.
- Dave Winer during a discussion of Google Wave during a 'Bad Hair Day' podcast

Compensating Users of Social Networking Sites

It's amazing how little discussion there is about compensating users of social networking sites for user generated content, community activity, the free marketing via blog posts, tweets, etc - the primary response generally is to point out that the people running the site are not the only ones benefiting from it; Why would the user stick around if it was not a gainful or enjoyable experience in some way ?, and so on. I still remember feeling a bit peeved when reddit was taken over by Conde Nast - I was an early user and though my contribution was nothing earth-shaking , I couldn't help feeling that it was unfair. Dave Winer wonders why user's can't be compensated during a 'Bad Hair Day' podcast (~26:35) :

Take a guy like Scoble who pours his heart and soul into these products when when he really gets into it, why didn't a guy like that not get any upside. Why only employees of the company ? Why can't a user gets some stock ? I don't actually see why not.

Paul Graham On Two Kinds of Programmers and Painters

In the world of painting there are some people who are just fabulously talented at drawing. They can sit down, these are like the kids who could draw in high school age fifteen they can sit down with a pencil ... sit in front of you ... wow, it looks just like me. But then when you say to these guys, "ok, use this amazing skill to just produce anything, just put it on the wall it's going to look great and then they lose". And within programming there is this distinction too. There are some people who are really really good at implementing code like if you give them a spec for a programming language and man, they will just implement it; The hardest stuff as long as you tell them precisely what to do, they will just do it. But you say, "ok, make up a product, make up some kind of new product that people want", and they are just utterly lost. This is actually a big mistake that companies make. There's a lot of companies who think that the programmers are basically implementers, that products are supposed to be designed by product managers. They are supposed to be designing what the products do. And they make mockups or something like that and they hand it to the programmers and the programmers translate their ideas into code. Like this one way process, no loopback - that loses! The best programmers are the ones that combine in one head both the ability to translate ideas into code and having the ideas. Just like the best artists have both the ability ... (have) a great hand. They can make their hand do what they want. But they also know what to tell it to do and actually between the two, I would take the Cézannes. Cézanne could not draw, he makes the same drawing mistakes that every one makes in introductory drawing classes. Occam's razor said he couldn't draw, not that he was trying to transcend three dimension ... But what he was good at was sort of the other half - deciding what to produce. He was terribly frustrated he was like this guy who had all kinds of ideas, but he couldn't articulate them with his hand. When you put the stuff on the wall in a room full of other paintings, it looks like there's a spotlight shining on his paintings and other ones have been sprayed with a light coating of mud. It's just amazing when you look at side by side paintings. So I will take the Cézannes actually and one interesting thing that has been happening is because programming languages have gotten so powerful you don't have to be that good an implementer to get something built.

- Paul Graham in an interview with Russ Roberts (~45:30-48:25)

The Pinnacle Of PR Success

The pinnacle of success, as far as PR is concerned, is getting your marketing material into the NY Times, disguised as journalism.
- Owen Byrne

Owen Byrne is the guy who originally built Digg. Owen Byrne's comment is part of a Hacker News discussion thread about to an article N.Y.T piece "Spinning the Web: P.R. in Silicon Valley". Paul Graham's essay about how PR works, 'The Submarine' , is also insightful.

All honourable men

Deccan Chronicle: You have, of course, resigned from Infosys. But have you had time to think about conflict of interest issues that might still arise?

Nandan Nilekani: The only time issues of conflict of interest will arise is during procurement. I will ensure that the UIDAI’s procurement is open and transparent. If need be, I will recluse myself from the decision-making process on procurements.

- From a Deccan Chronicle interview with Nandan Nilekani

The same day PTI reports that Infosys will bid for UID project:

Gopalakrishnan said Infosys would bid for projects under UIDAI like any other e-governance projects, but saw no conflict of interest though the authority would be headed by a former company top executive.

- From PTI report carried by rediff.com

Of course there is no conflict interest ! Why ? Because the MSM folks have told us repeatedly that Infosys executives are a bunch of demi-gods. Look at the amount of genuflection that's happening in Infy's neck of the woods. Yuck!

As the good old days of inflated head counts and billing rates comes to an end for Indian outsourcing companies, the big outsourcing companies will bid for, and push for huge local government projects. It's been happening for a while - the passport seva scheme of TCS is one such example.

Excessive 'Head Count' And 'Billing' Days Over For Indian Software Companies ?

I was chatting with a friend at a mid-sized software company in Bangalore; he said that foreign clients were increasingly insistent that they would pay a fixed amount (typically $20/hour) for the projects he had been working on in the last year or so, regardless of the project member being a developer, manager, or tester. We were joking that software billing rates in another year's time would fall to McDonald's hourly wage. Anecdotal evidence from friends and ex-colleagues working on software projects for foreign clients in India seem to indicate severe reduction in hourly rates and head counts due to client pressure in the last one year.

Well everybody knew that it was a scam - the software boom in the nineties meant easy money for most outsourcing companies. I remember a cousin of mine mentioning the case of a Japanese client who was charged $8000 for changing the text on a dialog box. Not a single project ever ran without being overstaffed and the client being fleeced. There is enough schadenfreude to go around. While computers and software are supposed to make us more efficient and reduce unnecessary man power, Indian companies ironically used the software boom to increase the number of people employed. A person's worth at an India software service company was typically measured by "How many people report to you ?". Incidentally Sloka Telecom founder Sujai Karampuri also wrote "Why do we have so many jobs in Bangalore ?", which explains the dynamics of outsourcing quite well, though it's not comprehensive. The less said about the daylight robbery that went on in the name of ERP, the better.

A recent issue of Forbes (Indian Ed) covered the changes the management at Indian IT services bellwether Infosys is considering in the face of falling revenues. There seems to general agreement among the top executives that revenues based on project head count are getting squeezed and the company needs to find alternate ways of generating revenue.

...

Some indications of the emerging, new Infosys are already coming in. Ask Dhar. His elevation to the EC came just a year before the worst downturn in living history hit the world. It has been baptism by fire. And the decisions he has been taking have been unlike any at Infosys of the past.

Dhar found himself in a rather awkward spot with one of Infosys’ oldest customers — a telecom giant in midland Europe. The client was under serious pressure to reduce costs and the Infosys contract was in peril. Dhar knew he had to act fast. He was aware that a host of rivals had already offered to cut their price by 25-30 percent. If Dhar did not respond on time, Infosys would be edged out of other juicy contracts that were on the table.

He then did what would have been once unthinkable inside Infosys. Rather than reduce his per hour billing rate (which would have hit revenues and profits), Dhar decided to change the way the client was billed.

For a third of the value of the contract, he promised the client an upfront cost saving. Infosys would now charge the client on the number of technical problems it would solve instead of charging for the number of hours it worked in doing that. In sum, he was proposing an outcome-based model.

Now, the risks were considerable. To ensure that they still earned a profit from the account, Dhar had to bet on far fewer engineers than usual to use their native intelligence to pull off the job. But there was no guarantee that they would be able to accurately predict the rhythm of the job. In fact, in the first six months, the company might even lose some money working this way. But in the long run, Dhar believed it was the best thing for both the client and his company. “It’s always been at the back of our mind to move to this model, but we never had the incentive to do it. This downturn has given us the reason,” says Dhar.

...

Gopalakrishnan has put together a five point plan for getting Infosys ready for the next stage. This includes increasing the share of higher value services like consulting, delinking revenue growth from staff addition, pursuing large deals of above $500 million, improving efficiency and finding new locations for talent.

Update (23'June 2009): Hacker News reader edw519 makes a great observation in a comment on this post:

“It’s always been at the back of our mind to move to this model, but we never had the incentive to do it..."

You may have the incentive, but do you have the capability?

Fixed or value based contracts not only require better expertise, they require different culture. Even your good people have become do indoctrinated with the concept of fleecing the bill that they may have actually forgotten how to compete by simply getting the work done efficiently and effectively.

Good luck. Better yet, good luck to your customers.

Statisticians

A couple of jokes about statisticians from Oxford mathematician Peter Donnelly's TED talk.

Someone, one of my senior colleagues told me when I was a youngster in this profession rather proudly that statisticians were people who liked figures, but didn't have the personality skills to become accountants.

And there is another in-joke among statisticians, and that is, how do you tell the introverted statistician from the extroverted statistician ? To which the answer is, the extroverted statistician is the one who looks at the other person's shoes.

Techie Spin

It's always a shame when technologists, who have to answer precisely to the computer, use political spin when talking to users.
- Dave Winer

Rams' Law Of Enterprise Software Sales

Never attribute to stupidity that which can be adequately explained by corruption.

Jim Coudal Interview (transcript)

Jim Coudal (JC) in his interview with Ryan Carson (RC) offers valuable insights especially on the importance of being able to write well. Since it's a very short interview, I made an attempt to transcribe it, but couldn't make out all of it. Here it is anyway with the gaps marked with two red dashes '--'; words that I am not too sure about are indicated with a question mark (?). You are welcome to use this on your site/blog. If you can help me fill in the gaps that would be great.

RC: We are here with Jim Coudal from coudal.com and nice to have you here Sir

JC: Thank you, how are you (? )

RC: So why don't you tell me just a little bit about what's inspiring you right now

JC: It's sort of interesting. I have three children and the youngest of them is Spencer, he is seven and he has a kind of voracious appetite for re-living my childhood with star wars and everything else. So I don't know, maybe it's just the nature of the beast . But I am sort of inspired by childish things lately -- Spencer and my two daughters . Other than that I have been sort of wrapped up in vintage American agricultural design artifacts from the thirties and forties.


RC: How did you come across that ?

JC: Well we've this project called field notes, we sell these note books called field notes which is sort of based on that and one thing led to another and I started getting really into these(?) odd -- seed companies.

(1:05)

RC: Are you obsessed?

JC: I am constantly obsessed -- you know that about me (?). But this too shall pass, it will be something else. Yeah then you know we are doing the layer of tennis thing at Coudal, stuff that artists are coming up within fifteen minutes blasts is beyond me. I try to keep ...Yeah I know what's inspired. On Tuesday night we hosted Gary Hustwit's Objectified. Gary made Helvetica.

RC: Oh, wow !

JC: This new movie is about industrial design.

JC: He's on a kind of world rock and roll tour , London is coming up soon ...

RC: How wicked !

JC: In Portland -- and then I don't don't know and then maybe ... I don't know where he is playing. It is playing here in London and it's a great movie - Johnnie Ive from Apple, Dieter Rams from Braun really great movie really inspiring. These guys working inside of the industrial-manufacturing profit process and are total artists dedicated to details. Really well received.

RC: That was Objectified ?

JC: Objectified, that's my latest --

(2:06)

RC: How do you make time for creativity ? I mean you are a father, you have a successful business When does that happen ?

JC: For me I have sort of farmer's hours.I don't exactly know why. I get up early and once I get up I can't go back to bed. So generally I go to work in very early. I am there a couple of hours, before anybody else gets there. I find that couple of hours when I just spend that time working on something designy or creative writing, I am happy. So I might be setting a headline, I might be doing the layout for our website, I might be writing an essay - whatever it is, it's quiet, phone is not ringing, I am not answering email and then the rest of the day is pretty much acting and reacting. You know how it is, you know that I have things to do but there are things that I don't know I have to do (?) So I try to do that and then building light goes out.

RC: Cool. So if you can give a sort of a tip or an idea to a -- emerging (?) web designers either for their career, or probably for their career what would you say that is important ?

(3:11)

JC: I will give a tip for web designers in general is that (?), you know we are in an era where everybody is talking about sustainability and using only what we need to use. So leave a little white space . Don't use all the -- For a career tip I will just say this. When we are interviewing two designers for two creative positions and they are equally talented in every way and they will cost us equally as much and they are both friendly and happy and smart. But one of them can write and the other one can't, I will always hire her.

RC: -- (Got it ?)

RC: Good writing is a sign of an organized mind. As digital as we become writing is even more key than ever whether it's email, for writing copy for the web we find that we have done much better with even purely visual designers who have some writing skills. And I think it is under appreciated by the visual ...

RC: Agreed ...

JC: There's a day in the UK and in the USA as well where a creative ad agency was an art director and a copy writer together. Those days are gone

RC: Yes --

(4:26)


RC: -- you've to have the personality (?)

JC: I think you have to have the skills -- But I think you have to have both of those skills .
Maybe There's a third skill too and that's being able to write a little bit of code.

RC: Yeah.

JC: It's a sort of interesting time.

RC: So our designer Mike he seems to be an -- wrote all the lyrics - and I find that he is very
good at copy -- because he basically can, he used to write lyrics - there's something about
that ...

JC: Right

RC: Right

JC: I could see that, especially lyrics is generally trying to be as succinct as possible, succinct
and dramatic as possible . So it's probably good direction from -- copy -- succinct and
dramatic -- to get to the point -- keep people interested --

RC: Thanks for talking, see you soon.

JC: Sure.

How Chad Fowler Found Good Programmers in India

In his essay GreatHackers, Paul Graham annoyed the industry with the assertion that Java programmers aren’t as smart as Python programmers. He made a lot of stupid Java programmers mad (did I say that?), causing a lot of them to write counterarguments on their websites. The violent reaction indicates that he touched a nerve. I was in the audience when his essay was first presented, in the form of a speech. For me, it sparked a flashback.

When I was in India weeding through hundreds of candidates for only tens of jobs, the interview team was exhausting itself and running out of time because of a poor interview-to-hire hit rate. Heads hurting and eyes red, we held a late-night meeting to discuss a strategic change in the way we would go through the candidates. We had to either optimize the people (or both). With what little was left of my voice after twelve straight hours of trying to drag answers out of dumbstruck programmers, I argued for adding Smalltalk to the list of keywords our headhunters were using to search their résumé database. But, nobody knows Smalltalk in India, cried the human resources director. That was my point. Nobody knew it, and programming in Smalltalk was a fundamentally different experience than programming in Java. The varying experience would give candidates a different level of expectations, and the dynamic nature of the Smalltalk environment would reshape the way a Java programmer would approach a problem. My hope was that these factors would encourage a level of technical maturity that I hadn’t been seeing from the candidates I’d met so far.

The addition of Smalltalk to the requirements list yielded a candidate pool that was tiny in contrast to our previous list. These people were diamonds in the rough. They really understood object-oriented programming. They were aware that Java isn’t the idealistic panacea it’s sometimes made out to be. Many of them loved to program! Where have you been for the past two weeks? we thought. Unfortunately, our ability to attract these developers for the salaries we were able to pay was limited. They were calling the shots, and most of them chose to stay where they were or to keep looking for a new job. Though we failed to recruit many of them, we learned a valuable recruiting lesson: we were more likely to extend offers to candidates with diverse
(and even unorthodox) experience than to those whose experiences were homogeneous. My explanation is that either the good people seek out diversity, because they love to learn new things, or being forced into alien experiences and environments created more mature, well-rounded software developers. I suspect it’s a little of both, but regardless of why it works, we learned that it works. I still use this technique when looking for developers.
- From Chapter 4 of Chad Fowler's book 'My Job Went to India: 52 Ways to Save Your Job'

Thanks to Pragmmatic Programmer for permission to use an excerpt from the book.

Proto.in 2009 - Striking the Right Notes

I attended Proto.in, the two day event for startups in Bangalore in Jan'2009. Bangaloreinc has a couple of neat posts in their weekly roundup for 23-30'Jan.

Overall it was an useful and occasionally inspiring experience. For me the most heartening thing was how there are still people who care about ethics in the startup community, people who still think that the ends don't justify the means. At least they made all the right noises ... well, I shouldn't be really so cynical; watching some trends and hearing some of these folks does make one a bit more hopeful about the future of startups in India.This is important for me, having wasted my time in two startups that were out to game the system; I learnt at the conference that there is a term for this - 'lifestyle businesses' - startups that exist solely to enrich the founder(s). Another great thing was the remarkable absence of corporate drones at the event - there is something about about open source and startup events that makes them adopt a low profile despite their prominent sponsor banners.

A number of presenters struck the right note by honestly sharing their real experiences:

• Allwyn of Pagalguy.com asked about the number of the huge number of Web 2.0 businesses that took money and produced nothing.
• Ashsish gupta from Helion ventures gave a great talk that emphasised the need for founders to be intellectually honest
• Atul Chitnis pointed out changed conditions, the economic downturn, the unworkable VC model, etc. Atul is the organiser of India's largest open source event foss.in and he seems to have begun his career by making DOS software.
• Ashwin Mahesh with his tongue in cheek explanation of the IIM Bangalore incubation process easily made it one of the most entertaining presentations. It's so nice to see people from academia not take themselves very seriously. Oddly enough one of the organisers kept pointing out some government programs to help entrepreneurs - oxymoron and all that.
• One of the most interesting facts that came out was the number of successful startup founders without an engineering or computer science degree. Suresh Sambandan said he had never been to college. Shalin Jain of ten miles has a B.Sc in Maths or Statistics. Looks like startups are relatively free of the tyranny of degree and pedigree that plague larger companies.
• Bob Young gave a great talk - Ashish Gupta admitted it was a tough act to follow. Bob explained the history of Redhat and how he got started working from his wife's closet. I asked Bob what the big idea behind Lulu was. Bob explained that at Redhat he always had the nagging feeling that the contributors to the various pieces of open source software that Redhat was shipping were not being compensated properly. With Lulu he said they hoped to have a fairer compensation system for contributors.
• The amount of soul searching that was evident in the panel discussions, the frank admission of mistakes, etc was remarkable. You don't get to hear this kind of honesty in vendor dominated software events or in internal meetings at larger companies.

The Indian Software Exports Scam

The 12th Feb issue MoneyLIFE magazine has published a letter from an unnamed head of an Indian IT company. The letter does a great job of explaining why the whole software export business is a scam. About seven or eight years back, I was arguing with a friend that this whole 'Software Technology Park' (STPI) idea was not a good way to encourage software companies. A software company that's part of a government anointed STPI gets various concessions.

(Note: The letter is not online yet. I will update the post with a link later.) Done.

The letter:

This is with regard to your cover story “The Truth about Satyam” (MoneyLIFE, 15 January 2009), and other reports on Satyam’s most recent adventures, which are not really new. Actually, the truth behind Satyam was well spelt out at the end of your report – what Satyam did was not way out of line – inferring that most other companies in India would be guilty of similar creative accounting and governance methods. But, with IT companies in India, there seems to be some justification trotted out by a variety of fellow-travellers, who bring in national prestige and credibility as an excuse for daylight robbery of the national exchequer and the public.

So, what’s at the root of this? How is it that companies that get the benefit of tax exemption worth thousands of crores of rupees now appear to be getting more money in thousands of crores from the government for, of all things, reviving the possibility of even more tax evasion? Never mind the diversion of profits that may also occur again. The answer is simple: a scheme called Software Technology Parks (STPI). This is a ‘scheme’ that has outlived its usefulness as far as real IT industries are concerned. But it seems to be around only to permit such scams. It is a fact that the STPI scheme, used by Satyam and misused by so many others, is at the root of the large number of IT companies in India, declaring huge tax-free profits and then going under or simply vanishing. By modest estimates, over 96% of the companies registered under STPI came in, took their tax exemptions on imports, took some more tax exemptions on export profits, and then disappeared. A simple analysis of the top-20 lists with NASSCOM over the last decade will provide evidence for this. A slightly more complex examination of the way the STPI scheme is actually performing will give an even better indication that things are going terribly awry.

From being a facilitator and an incubator for IT companies, the STPI scheme has become yet another den of inspectors and officials who, in league with other government bodies, are there simply to permit all sorts of duty-free imports and tax-free exports. Since real IT exports don’t really need this exemption any more, it is only the scamsters who increasingly benefit. Simply put, buying computer hardware is now cheaper if done directly, without using import duty exemptions. The real game here, as always, is in over-invoicing; and non-existent imports followed by equally non-existent exports.

The second important parameter which needs to be brought out is the way headcount is multiplied, for assorted benefits especially towards showing and booking higher expenses on payroll, allied expenses and more – the more employees you show, the higher these can be. And, in the corresponding billing as well as dummy profits, more fictitious employees mean higher billing and, therefore, higher paper profits. A simple double-check would involve finding out how many employees such IT companies have registered with the EPFO (Employees’ Provident Fund Organisation); but that’s often not easy to do because the EPFO’s own records are in tatters too. Just one number should suffice. Satyam claims to have 53,000 employees; but, at their second largest centre in Pune, they have just about 4,500 employees. Where are the rest? It simply doesn’t add up.

Satyam is not a one-off or stand-alone scam. There are many like them and one would have presumed that those in charge at NASSCOM would have taken action against such members of their association well in advance. The fact that they haven’t, makes one suspect that all is not well with NASSCOM too. And, therefore, it is all the more amazing that elements from NASSCOM have been put in charge of Satyam’s revival. To fix such problems, one has to go deep into the roots and pull out the rot. That will happen only when tax exemption of expenses as well as revenues for the IT sector is done away with. Otherwise, like the fertiliser sector, the tax-exempt IT companies will simply be like addicted sucklings not being weaned off the mammary of the State.

The writer heads an IT company and does not want his name to be disclosed. – Letter by email