In good times, no long ago Indian IT companies are icons for business ethics and good governance. N R Narayana Murthy, Azim Premzi, S Ramdorai, Ramaliga Raju are household names. They are role models for budding entrepreneurs, college students, street smart investors, college professors, car drivers, canteen workers or in a nutshell- from Dalal street to main street. Each one of them have seen something with in these icons to get instant motivation and think positively about their own future. When Narayana Muthy or someone at Infosys quoted "my (NRN's) car driver is worth a crore in stock options", it was not a joke at at all.
All the Indian IT companies have grown rapidly. The growth was so strong and convincing that - at one time, for most Indians there was nothing beyond Information Technology.
Beneath this hype, there was lot criticism against these companies. To name one, Dave Gowda questioned Infosys acquisition of huge lands around Bangalore for throwaway prices in the name of job creation and the using them as in house hotels or guest houses. He even went to the extent of criticizing that the children of the displaced farmers ended up in local Bangalore hotels as cleaners - not getting even two meals a day. Very few backed Dave Gowda, the maverick Kannada politician. But what he said cannot be denied. NRN was hurt, and then he decided to locate future "growth" out side Karnataka. Andhra Pradesh, West Bengal laid red carpet and rest was a different story. Infosys got huge land bank - probably on par with a large real estate company. It will be put to use - in some way or other in coming years.
Information Technology and BPO sectors would not be same again even if US and Europe recovers from the severe downturn. India is going to face huge challenge from other countries in this area. There was two options for Indian IT companies - either to face the challenge or diversify.
Ramalinga Raju did the second. He found diversification into real estate and infrastructure is good for Satyam in long run. He was correct. With IT growth slowing - as a natural businessman, he spotted next gold mine. But the selection and execution did not go well on par with reputation and image of Raju.
Diversification for companies to sustain growth is not new. For example - Tata in India, Siemens and Germany and GE in US are highly diversified companies.
This incident clearly tells us couple of things. IT companies are not in a position to show 30% + YoY growth. Secondly, the promoters of these companies (except in case of Wipro) have off loaded most of the initial investments and looking aroud for the next big thing.
Now for all those budding entrepreneurs, college students, street smart investors, college professors, car drivers, canteen workers - blind following of their role models would put them on wrong foot.
It is wake up call for all!
1 comment:
It is stupidity of Raju to have even thought of such thing as diversifying into infrastructure. Infra sector is even in far worse position than IT and it is going to be for some time to come. That's besides the matter, but the ulterior motives of Raju put every Andhrite in disgrace. As one of the FIIs said, it is the question of faith in management of Indian companies. And Raju seems to be having amnesia. He forgot how he got punished 8 years ago for similar mistakes. And he now talks of learning from mistake. Shame on him!!
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