Who’s Good, Who’s Bad after Satyam and Wipro
After
Satyam’s and Wipro’s exposures, most investors and global buyer
companies will be extra cautious in dealing with Indian tech service
providers. Here’s a 5-point checklist of precautions for them that
they can consult while investing or buying services from India.
By
Rakesh Raman
1.
Awards and Research Reports: Never look at the awards that these
tech companies flaunt to grab business orders. Actually, these B2B
awards (a business organization giving award to another business
organization) should always be ignored for obvious reasons. Most of
these are arm-chair awards that lack thorough studies and are just to
promote mutual business interests.
Take
Satyam Computer Services, for example. The company announced just a
month before his arrest on a series of corporate fraud cases that its
founder and chairman,
Ramalinga Raju has received the Frost & Sullivan
Excellence in Leadership award for 2008. God knows how he arranged the
award.
Another example: In September last year, Tata Consultancy Services (TCS),
another leading global tech outsourcing organization in India,
announced that The Wall Street Journal, a leading business
publication, has selected
TCS's mKrishi service as the winner of its
2008 Technology Innovation Award in the wireless technology category. TCS's mobile based crop-advisory service, mKrishi, is claimed to be an
approach to helping rural farmers in India.
A
number of such attempts (including Simputer, NIC’s Agmarknet,
Reuters
Market Light) have been made in the past but the actual benefit to
poor farmers is not yet known. Then why this award? The Wall Street
Journal though clarified that the service is still
being tested and hasn't been launched commercially, TCS chose to sing
about it everywhere. There are many such awards cases, which won’t
tell you the truth about the company.
Similarly, you should ignore the market
research/survey reports favoring these companies’ solutions –
particularly those that are commissioned by the companies.
2. Media Reports: Likewise,
you can ignore the thick PR compilations carrying published media
reports praising the Indian service providers. Like Satyam and Wipro
(and there are many others) offered “gifts” of various types including
shares to win business favors, people in the media also have shares of
listed companies.
Don’t know whether it’s right or wrong. But when
you’re writing on that company, you must explicitly disclose in your
published report that you’ve shares of that company given to you as
gift, on preference, or otherwise – like a few journalists now mention
when they accept free company-sponsored junkets.
That will give a fair idea to the buyers or investors
about the strenths of that company. In the absence of such
disclosures, the media coverage has hardly any significance. Most of
these media articles show the skills of the internal PR departments or
external agencies working for these companies rather than professional
software competence of the service providers.
3. Headcount: It’s really
good that IT companies have given employment to many Indians. However,
as an investor or buyer you should never get impressed by the number
of people in a particular company. Actaully, most are mere pairs of
hands lacking soft skills as well as professional skills. This is
evident from the fact that despite big claims of India being “IT
Superpower” in the world, Indian companies couldn’t produce even a
single good, globally accepted software product like an operating
system, web browser, or even a mobile application.
They still use archaic development and distribution
methods for their services. That’s why some analysts even call them
“techno-coolies” who can only be used as code writers for software
projects and can’t handle end-to-end software projects.
4. NASSCOM Factor:
NASSCOM is a big trade body for software and
IT-enabled, outsourcing companies in India with over 1,200 members.
With economic liberalization that started in the early 1990s in India,
NASSCOM started promoting Indian software service offerings in the
global markets mainly to earn foreign currency. That’s good.
However, soon it started floating figures about the
Indian software exports performance and on other parameters to create
hype in the local as well as global markets. And that exercise is
continuing even today. Instead of guiding the software companies on
corporate governance and new business models, this high-profile
association is busy in just floating some theoretical reports or
figures that have hardly any substance in them. So while selecting a
service provider from India, don’t consider anything that has anything
to do with NASSCOM.
5. Stock Market: The
stock markets have a direct correlation with the market hype. So share
prices can’t be a true parameter depicting a company’s capacity to
perform. Though you can look at them for academic reasons, don’t count
them while selecting a service provider. Satyam’s example is
there in front of you. When all its accounts books were carrying false
data, its stocks were quite stable in the market. But actually this
company was dying. So don’t blindly trust these share prices, as they
conceal more than what they reveal.
These
are a few precautions that can help you separate the wheat from the
chaff. So you can select the right partner in India.
Rakesh Raman
is the managing editor of My Techbox Online.
