Thursday, April 18, 2013

Blasts in Boston and Bangalore . Time to end the cycle of terror

Like most of us who live in the US, I was shocked by the recent blasts during Boston Marathon. Though we don’t live anywhere near Boston, the incident certainly touched a nerve.

And then early this morning, I got a jolt while checking my emails with my bed-tea. My dad, who lives in Bangalore, had sent a note saying everything was “oaky”. Reading a few sentences ahead I realized he was talking about the blast in Malleshwaram, Bangalore.

The market area in Malleshwaram also happened to be my favorite hangout during college days years ago. My parents continue to frequent Malleshwaram, given the convenience of shopping and proximity to dozens of ancient Hindu temples.

I could go on with the blog, but at this time would stop with a simple appeal: Like most digirati and global citizen, I feel it is time to end the cycle of senseless terror and return to more innocent times in Bangalore, Boston and everywhere!

Friday, April 12, 2013

No Surprise behind Infosys’ Big dip in stock price: Reading the tea leaves

Scanning the news headlines on offshoring giant Infosys’s big dip this morning, I was reminded of the old Phantom "jungle saying" from Phantom comics I used to read growing up: “Biggest tree makes most noise when it fallsEmploying 155,000 people, with revenues of over $7.23 Billion, Infosys is certainly a large tree. Though it has by no means fallen, a dip of 20% for a public company in a day is no small matter.

It has been more than a year since I moved from Infosys to the buy side of offshoring, taking on the role of an Enterprise Architect for a multinational organization. I continue to watch for trends and developments in the sell side, primarily on the state of offshoring firms. I have also been reflecting on the sustainability of the offshoring business model that hinges on recruiting fresh talent (“resources”) and operating on ever thinning margins. Two recent books "That's I.T" by Ramesh Revuru, a former Infoscion (my review) and "Offshore: India's Services Juggernaut" (my review) by Basab Pradhan who heads Global Sales & Marketing at Infosys provide contrarian bottom-up and top-down views on the business of offshoring. Basab’s views analyze the business model and potential "opportunities" while Ramesh takes a hard look at some of the operational challenges. (hyperlinks are to my reviews)

Not so long ago, Infosys was THE bellweather for offshoring, enjoying larger margins and client bill-rates by promising consistent, quality delivery. "Infosys is considered a bellwether for India’s outsourcing industry, which has been hit by weakness in the world economy. The industry provides information technology and business support services to companies from Europe to the United States." – WashingtonPost

The internal focus would be on maintaining high operating margin on every project/program/contract while trying to increase footprint at existing client locations. The intent of moving towards new revenue models and consulting continues to be aspirational while the bread and butter still comes from vanilla application development and maintenance (a.k.a ADM). All this while other service firms continue to grow their share in an increasingly limited global offshoring pie.

Although I was surprised by the INFY news and market reaction to it this morning, I guess there is not too much to be surprised if one were already reading the tea leaves. Just a sampling of the recent theme in the media:
  • Questions on Business Model: A few months ago, there was an interesting piece in Economic Times analyzing “Will the last promoter-CEO S D Shibulal succeed in creating a new Infosys?” The answer so far has been no. And if one reads the tealeaves on today’s stock market knockout taking 20% off the value of the firm, it is a resounding No!
  • Rumbling on slowdown in hiring, a canary in the offshoring coalmine if you will. (Hiring activity in IT sector may be muted this year: Infosys - Ref Business Standard)
Bottomline: Infosys and other offshoring firms “trained” the market to aspire for a 15-20 percent growth rate which was certainly practical when they were smaller. As offshoring firms get larger and less nimbler, the rate of growth (obviously) is not sustainable. When Infosys “forecasts” revenue to grow between 6 percent and 10 percent for the fiscal year ending March 2014, it sends shock waves in the industry. Should it shock those reading tea leaves at all?

Wednesday, April 3, 2013

Mid-week musing on age and id

Every now and then WSJ runs topical pieces examining social trends. The article “White Hair, Wrinkles Aren't Valid ID at These Drinking Establishments” is one such fascinating piece.

I was surprised to read that there are states in the US that made “universal ID checks mandatory in package stores (not bars)” and in some locales, "If you're 90 years old in a wheelchair, you're checked"

Just the other day I was reflecting on how store clerks just look at me, and do an automatic override when checking out the bottle of wine or some beer I occasionally have in my shopping cart. Is it my stray gray hair or the way I carry myself I wondered. Especially since I would routinely be asked for an ID for such purchases, even a few years ago. I am surely not in my twenties and have started looking my age I guess. There again, if I were to be asked for an ID, I could echo the thoughts of Alex Marshall who is quoted saying “I love it. My ego is soothed.”

The article also says some states and locales are repealing the law on ID check for those who look over a certain age, say 40 years and older. "It didn't work the way we thought," says Bill Davis, Republican chairman of the public-policy committee in the Indiana House of Representatives. Scott Pelath, the Democratic minority leader, says, "All it did was set folks off. We forgot that there's a fine line between clever and stupid."

Well put!