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“The intellectual asset that you have created is going to be a key differentiator.” - Views on News from Equitymaster
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  • Nov 8, 2000

    “The intellectual asset that you have created is going to be a key differentiator.”

    F C Kohli is associated with the country’s biggest and most profitable software service company, Tata Consultancy Services (TCS). From humble beginning in 1969, he has built a software giant over 30 years. Mr. Kohli, an electrical engineer from MIT and a double doctorate was with Tata Electric Company during the period 1951-69 when he was entrusted with the job of building TCS. Mr. Kohli is still at the helm as Deputy Chairman of TCS, shaping the future, laying foundations and directing new IT practitioners towards a better future. Kohli is determined to add to the intellectual capital base of India. He is also lovingly called ‘the grand old man of the Indian Infotech industry'.

    In an interview with Equitymaster.com Mr. Kohli spoke about the software industry and what lies ahead. We also learnt of his fondness for paintings by B. Prabha.

    EQM: Which domain areas do you see as important for Indian companies? Where do you see most of the growth coming from?

    Mr. Kohli: If you look at the industry and the growth segments on a global basis, very clearly banking, financial services and insurance are adopting technology at a faster pace. The requirements in these segments are high and they will only be increasing in future. Utilities and energy sector is another area where we are going to see growth.

    EQM: Do you think the Indian companies will be able to build products on their own?

    Mr. Kohli: Indian software industry will remain service-oriented atleast for the next 2 to 3 years. There is no risk for software product development also, but you need to have knowledge in the particular field. If I am trying to build a product on international banking, I should have enough experience in that field and technology. I should also have domain knowledge. You need to have knowledge before you come out with a product. So far, the Indian companies are not actually developing any products. They are just doing improvisation and providing components to the existing products.

    We at TCS have a banking product called E.X., which has been launched recently. Our retail-banking product is a very successful product. We have launched a wholesale banking product in Switzerland called Quartz. Then we have other retail industry products, healthcare products and global custody products on the international scene.

    EQM: Currently revenues from the US constitute a higher proportion to total software revenues. Is there any risk in this excessive exposure to the US markets? Which other part of the world presents good opportunities to grow?

    Mr. Kohli: Although US markets contribute more than 60% of software revenues, I do not see any risk in the US markets. In fact if the US economy slows down companies will spend more on IT to cut down the costs and improve efficiencies by using technology. Apart from the US, I believe China, Europe and the Middle East markets offer good opportunity for the software industry.

    EQM: How will the manpower cost difference (in India and abroad) impact the domestic software sector and its prospects?

    Mr. Kohli: The manpower cost difference is diminishing, very correctly. The training, continuing education and expertise are all going to make a clear difference. Also the intellectual asset that you have created is going to be a key differentiator. The key focus area however, is productivity per employee.

    EQM: In the IT sector, which are the new areas that will spur growth, domestically as well as internationally?

    Mr. Kohli: For the next few years the software sector will continue to grow at the current rate. There will be some products coming under software and engineering segment. There will be no domain type of products like ERP because that needs a basic experience in domain. But I am sure after 2 or 3 years we would start building products in the financial sector because demand for finance products is growing rapidly.

    EQM: There is a recent trend wherein global giants like GE and Nortel are setting up R&D centres in India. Also Visa quotas are increasing to countries like Germany, USA and China. Will there be any intellectual capital left for India to become a global software giant?

    Mr. Kohli: Very clearly, India is the destination to hire high skilled labour. As you know recently Nortel, GE and Cisco announced the setting up of their research and development centres in India. These international companies are coming here not only due to lower costs but also because of the value proposition. People work better in their own environment. And from this point of view it is better that companies set up their bases in India. There is no need to be skeptical of this development. Global companies are now creating value in India and the people skills are remaining in the country.

    EQM: You have been able to retain people without being listed. But in the software industry it is very essential to have stock options to retain intellectual capital. How have you been able to do that?

    Mr. Kohli: With regard to the retention of employees, it is a continuous process. We need to understand a couple of fundamentals. We need to understand that there is a demand-supply in-equilibrium. It's a global phenomenon. Therefore, for talent there is a worldwide search. Here the key challenge is how you motivate your people in addition to the compensation. The motivation of people comes in the form of inputs you give as professionals to them - the continuous upgradation of their skills and their ability to relate to very challenging work. At the end of the day, the computer professional looks for very challenging work. Where an environment is provided for them to do some of these things they are going to stay with the organisation to build on their intellectual capabilities to full potential.

    Although, we (TCS) do not have any stock options we have made cash payment of approximately Rs 400 m, which I feel is good enough to motivate the employee. Here again you do not have a lock in period of 3 to 5 years. We are in fact making outright cash payment, called as performance incentives.

    EQM: Which 3 persons have influenced you the most?

    Mr. Kohli: It is an unfair question. In my life there are innumerable persons who have made an impressions through brief meetings. So it is not fair to name only 3 persons. If you ask me for a list of 100 then I could respond!



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