Motorola CIO and senior V-P Sam Desai talks about sustaining India's competitive advantage in the outsourcing business. Srinivas Rao Konakanchi catches up with him in Florida
Florida: "The United States of America is a land of karma yogis and that's the secret of its success. If India awakens to its long-forgotten Vedanta, it will be much better off." These are powerful words from Samir Desai, successful business management expert, Vedantic thinker and a karma yogi. And he was commenting on what India can aspire to learn from America's road to prosperity and development.
Sam, as he likes to be called in the real world, is the chief information officer (CIO) and senior vice-president of Motorola Inc, a global leader in providing integrated communications and embedded electronic solutions.
Passionate in his quest for spreading the wellspring of knowledge in the Bhagwad Gita and his love for golf, Sam goes quite vocal when he recalls his recent visit to India. He modestly refutes the title of a vedantic thinker and quips in his inimitable style: "Vedic thinkers are not around anymore. All this great knowledge was discovered eons ago by our rishis (sages)."
Srinivas Rao Konakanchi of domain-b spoke to him on the subject 'Sustaining India's Competitive Advantage in the Outsourcing Business' at his beautiful residence that overlooks a golf course in Coral Springs, Florida.
What do you think of India's business potential, especially in IT?
I am very upbeat on what's going in India. I feel India is at the threshold of getting up to $50 billion worth of business in the next five years. IT is a very mature industry in India and I see a tremendous gain the country is going to have in the future. Every Fortune 500 company is looking at India. Many companies are at SEI CMM level 5 and in CMMI. That's a huge advantage in software engineering.
But is this sustainable in the long run?
Let me give it you straight. If we do not figure how to get up on the value chain, we are not going to win against the Chinese, the Irish and others. The climate right now in India is great and the going has been good thanks to the labour cost arbitrage advantage. But I think this cost advantage is a short-lived one.
What do you think the industry should do?
Every company must ask itself this fundamental question. What is my core-competency and does it add its value to the company and the customer? If it does not, then they have to figure out a way to do that in a more cost-effective way. Most Fortune 500 companies are going to figure it out.
Let me take you back into history. When the US manufacturing sector started outsourcing, everything ended up in China. But now many people are rethinking and some in the automotive sector are bringing it back to the US. As long the labour content is a very small component compared to the direct material cost, then the cost arbitrage does not work. But right now the cost of software engineering in India is much lower and at a much higher maturity level than in the US.
So how do companies move up the value chain?
It's simple. Go, figure it out how get there. They need to invest in research and development and find what's happening in the global marketplace. Find out what people are looking and what do they want. They have got to know that even before customers realise what they want. They must be at the forefront of innovation. Hire experts and invest in great marketing and public relations exercises.
Can you be more specific?
They must not only substitute this cost differential, but also add value in a fundamental way. They need to understand the culture and the market dynamics extremely well. They must ask themselves hard questions. Like, how do I go and figure out what's happening in the industry? How do I start doing that before the customers here in the US? Ask that question and provide that value upfront. For example, find out what's going in the manufacturing, services, gaming and banking industries. Find out how to add value - figuring ahead of the customer and developing the module. Work with your outsourcer. Do not steal the customer. Give the outsourcer the advantage.
Are Indian companies doing this?
I do not think anybody is doing that. It's all the low hanging fruit syndrome. Everyone wants immediate revenue in the short term. It's an industry problem not endemic to India alone. People need to have a vision and act up on that vision. A vision without action is nothing but imagination.
Look at China. They have succeeded in bringing manufacturing into their country in large volumes. That happened because American companies found a cost arbitrage advantage there in terms of labour and other costs. Their government capitalised on that and made the system really work. That's why China attracts so much of foreign direct investment and development. They found a way in their democratic communistic government to do business.
But isn't that serendipitous?
But hasn't our government and infrastructure in an improved state today than it was 20 years ago?
Our infrastructure is nowhere near where it was years ago when I left India, its much, much better. But it's nowhere near where it needs to be. Besides, it's still tough to get through all approvals via the government channel. The government and the people need to figure out quickly how to reduce the bureaucracy. It's against the country's best interest to be bureaucratic.
Right now US companies are coming to India just because of the labour cost arbitrage, but it has not been able to attract much manufacturing in the high-tech sector. India has the advantage right now and must learn to use it effectively.
Isn't all this outsourcing to India having a negative effect on the people in America? In the sense aren't people unhappy over the fact that jobs are migrating to countries like India?
Yes that is the US economy's problem. They are losing out because in order for them to be competitive they need to use this cost arbitrage to their advantage. You see, a free type of market always gravitates towards equilibrium. It's not in anyone's hand. Certain periods based on certain circumstances in demand and supply are always followed by a positive or negative equilibrium. Now it's in India's favour, but it appears to be against the US.
In this particular case, the US needs to figure out how to go further up the value chain and rebound its economy. People in the US are getting laid off because companies are not competitive enough. It's not because jobs are going to India, China and other countries. US companies have to figure out how to get up on the value chain in order to be competitive enough. Likewise, India has to figure this out where it wants to be in the long run. It cannot depend forever on its cost-arbitrage advantage.
How should Indian industry combat the proposed anti-outsourcing bills?
Whoever is behind these movements, it's only because the US is truly a great and free country. The system allows you to do this. But they cannot succeed in passing these Bills. But Indians have to figure out what they got to do and keep building a sharper profile. Unless we do that and make Americans see the enormous benefits that they are going to derive in the longer run in doing business with India, people will try to do these sorts of things. The whole idea is that everyone in this world needs to be competitive enough. It does not matter if you are American, Chinese, Korean, Latin American, African or Indian. Either you compete or go away.
What about NRIs [non-resident Indians]? Why don't they share some of the responsibility?
In my opinion we Indians, I mean NRIs, are at fault for this. We are not united. With a presence of 2 million Indians in the US, we are a microcosm of India and have 5,000 associations. We do not have adequate political representation. During a recent visit by Indian Deputy Prime Minister L K Advani to Chicago, representative from 60 delegations spent 45 minutes in garlanding him. They only way out for us is a united political front.
Do you any plans to do this?
No, but I have a vision with three credos. My vision states that this entity must support anyone supporting India, Indians and people of Indian origin standing for office in the US.
When do you think the US economy is going to improve?
I would say, now is a good time as any. The world is always in a state of chaos and balance. It depends upon which side of it you think you are on. In today's competitive environment, survival is the key. Many times I am asked this question. My answer is as always now. There is no such thing as there were better times or now is a bad time. Its like the Chaos theory which simply states that while everything is in a state of equilibrium on a certain time continuum, just for an infinitesimal amount of time there is imbalance.
Sam suddenly breaks and tells a story about his arrival in the US 20 years ago. "Everyone who knows me has heard this at least once. Every morning in Africa, a gazelle gets up in the morning and starts running, knowing that that very day it has to outrun some lion that is waiting to prey on it. But every morning at the same time a lion too gets up too and begins its day running after a gazelle to kill it. But the lion is a clever animal; it thinks and stalks the gazelle and is mostly successful. But the day it does not, it will have to go hungry. And that's exactly what I tell my managers to do every morning, if they want to compete and succeed in the marketplace, to succeed in life, all you have to do every day of your life is to get up, think and start running.
Is this your recipe for success?
Yes, but its not mine. This knowledge was interpreted for all mankind from the Vedas by Maharishi Patanjali who lived in 500 BC and wrote them in his Yoga Sutras. I merely applied them in my life. My belief is also that everyone must have a strong focus on what s/he wants out of life, and then work long and hard at it. You must also worship these values as you may tire of them over a period of time. Channel your thoughts and thinking process on the end goal. Positive thinking is critical and then only a total personality of a good human being will be developed.
Sam's curriculum vitae
Throughout his Motorola career, Sam held several management positions. In his current position as CIO, he is responsible for aligning IT strategy and technology deployment with Motorola's umbrella business strategy; strengthening Motorola's IT capabilities crucial to the corporation's growth, as well as accelerating e-business strategies and capabilities. Before this, he was senior vice-president and deputy to the president of the personal communications sector (PCS) and senior vice-president and director, office of e-business and business transformation for the communications enterprise (CE).
Sam was responsible for driving common business processes across the enterprise and serving as the CEs' chief information officer. While at the network solutions sector, worldwide supply chain, and iDEN subscriber business, Sam led e-business operations that improved manufacturing margins, resulting in several hundred million dollars of cost savings. During his tenure as senior vice-president and general manager of the iDEN subscriber group, his team significantly grew the business and formed a strategic partnership with Nextel.
Prior to this, he was corporate vice-president and general manager of the iDEN subscriber division. In 1993, Sam was vice-president and general manager of the shared systems division. The father of iDEN, he was responsible for building a 2,500-person-and-strong $2-billion organisation. As he says: "Today's iDEN is one of the most profitable business of Motorola."
Sam holds a bachelor of science degree in physics and electrical engineering from two universities in India, a master of science degree in electrical engineering from Illinois Institute of Technology, and a master of business administration from Loyola University, Chicago. He joined Motorola as an engineer in 1973 and has been with them ever since.