Recently Chetan Bhagat ridiculed Narayan Murthy for running a ' body shop'. This one-sided comparison implies that Indian IT companies ( TCS, Infosys and Wipro) are doing something cheap and mediocre as compared to Apple, Google and Microsoft. Some commentators even go far to quote dollar revenue per employee to prove that Indian IT companies are operating at a lowest possible level of innovation.
But this comparison between Microsoft and Indian IT companies is like comparing apple and orange. Or comparing Wayne Rooney, the footballer with Sachin Tendulkar, the cricketer. Or comparing Gautam Gambhir, the cricketer and Fernando Alonso, the F1 formula driver, that I read today in October 30, Times of India. Gautam Gambhir, it is reported, earns 2.3 crore per year for playing 125 days in a year, while Fernando Alonso, earns Rs. 204 crores for driving 60 days a year. Or if you think of Indian games, between hockey and cricket. Why is there so much money in cricket? Commentators also fuel this enmity by making it look that, but for the support of Indian Government, hockey players would have earned more.
Before making such comparisons, it is important to understand that the business model of your industry ( and even game) governs the productivity, revenue and even employee management practices of your industry. For instance, although both companies ( TCS and Apple) are in software industry, both are operating in a completely different niches. While Apple, Microsoft and Google operate in software product niche segment, IT companies such as TCS, Infosys and Wipro operate in software service segment.
These software product companies therefore develop one product (be it Word Package, ipads, or Google Search Engines) for a huge sum, and then sell the same product to millions of customers. For them, product patents, developing a new product quick enough, maintaining that product, and marketing are big bucket items. Indian IT software service companies on the other hand face different challenges. For them every 'service' they provide through their employees to their customers brings them 'equivalent' revenue. Therefore, employee costs is very important for them. Like product companies, their employee cost is not recoverable on 'number of products sold'. They therefore have to get the best employee at a lowest possible cost to be competitive. And yes, belying the pervasive image of software coolies doing rote work, they also face numerous challenges in delivering their services.
IT software service companies have to bring together variety of diverse skills for a specific 'project', manage the costs of delivery to ensure adequate return, develop new set of skills before the market demands it, and manage the 'gaps' between projects where their employees are not delivering any service. In short, they face a completely different set of challenges. They are not inferior to product companies; they are as constrained by their business model as are product companies. While they may not produce sexy products such as ipads, they produce equally good innovations and ideas that help them become as globally competitive as product companies.
As Arnab Ray writes in his article in TOI of October 30, Chetan Bhagat, who called Narayan Murthy's Infosys "mediocre" has himself been accused of being "mediocre". Arnab Ray provides this interesting insight on Chetan Bhagat. He writes, that as compared to say, Milan Kundera, Chetan Bhagat does not blaze any new trail in terms of originality of content in his novels. And neither does he have to, because he uses a different business model than Milan Kundera. Chetan Bhagat is in the business of writing best-sellers.He consistently develops successful novels by crafting stories that strike a chord in his target audience, uses language that does not tax their comprehension skills, and then markets them perfectly to reach his audience. This is a different set of skills than what Milan Kundera possesses, but that does not make it any less worthy of admiration.
It is tempting to dismiss the success of Chetan Bhagat ( or Indian IT companies) with a flippant wave of the hand. It is also tempting to call them "mediocre", but the truth remains that both Narayan Murthy and Steve Jobs, or Chetan Bhagat and Milan Kundera have understood the constraints of their respective business model and developed a unique strategic skill of maintaining their leadership within their respective niches. And, in the market-place of products and services where profit is an important objective criterion for gauging excellence, that's all that matters.
The same holds true for the business model in which your product or service is being sold. Many entrepreneurs make this mistake of comparing their industry with some other industry to adopt certain practices of other industry, or belittle some practices of their industry. Successful entrepreneurs, like Narayan Murthy and Steve Jobs, or Chetan Bhagat and Milan Kundera , above all, must possess one defining characteristic. They must understand the business model of their industry niche and develop specific skills to maintain their leadership in that niche.
Are you aware of the business model of your industry niche?
But this comparison between Microsoft and Indian IT companies is like comparing apple and orange. Or comparing Wayne Rooney, the footballer with Sachin Tendulkar, the cricketer. Or comparing Gautam Gambhir, the cricketer and Fernando Alonso, the F1 formula driver, that I read today in October 30, Times of India. Gautam Gambhir, it is reported, earns 2.3 crore per year for playing 125 days in a year, while Fernando Alonso, earns Rs. 204 crores for driving 60 days a year. Or if you think of Indian games, between hockey and cricket. Why is there so much money in cricket? Commentators also fuel this enmity by making it look that, but for the support of Indian Government, hockey players would have earned more.
Before making such comparisons, it is important to understand that the business model of your industry ( and even game) governs the productivity, revenue and even employee management practices of your industry. For instance, although both companies ( TCS and Apple) are in software industry, both are operating in a completely different niches. While Apple, Microsoft and Google operate in software product niche segment, IT companies such as TCS, Infosys and Wipro operate in software service segment.
These software product companies therefore develop one product (be it Word Package, ipads, or Google Search Engines) for a huge sum, and then sell the same product to millions of customers. For them, product patents, developing a new product quick enough, maintaining that product, and marketing are big bucket items. Indian IT software service companies on the other hand face different challenges. For them every 'service' they provide through their employees to their customers brings them 'equivalent' revenue. Therefore, employee costs is very important for them. Like product companies, their employee cost is not recoverable on 'number of products sold'. They therefore have to get the best employee at a lowest possible cost to be competitive. And yes, belying the pervasive image of software coolies doing rote work, they also face numerous challenges in delivering their services.
IT software service companies have to bring together variety of diverse skills for a specific 'project', manage the costs of delivery to ensure adequate return, develop new set of skills before the market demands it, and manage the 'gaps' between projects where their employees are not delivering any service. In short, they face a completely different set of challenges. They are not inferior to product companies; they are as constrained by their business model as are product companies. While they may not produce sexy products such as ipads, they produce equally good innovations and ideas that help them become as globally competitive as product companies.
As Arnab Ray writes in his article in TOI of October 30, Chetan Bhagat, who called Narayan Murthy's Infosys "mediocre" has himself been accused of being "mediocre". Arnab Ray provides this interesting insight on Chetan Bhagat. He writes, that as compared to say, Milan Kundera, Chetan Bhagat does not blaze any new trail in terms of originality of content in his novels. And neither does he have to, because he uses a different business model than Milan Kundera. Chetan Bhagat is in the business of writing best-sellers.He consistently develops successful novels by crafting stories that strike a chord in his target audience, uses language that does not tax their comprehension skills, and then markets them perfectly to reach his audience. This is a different set of skills than what Milan Kundera possesses, but that does not make it any less worthy of admiration.
It is tempting to dismiss the success of Chetan Bhagat ( or Indian IT companies) with a flippant wave of the hand. It is also tempting to call them "mediocre", but the truth remains that both Narayan Murthy and Steve Jobs, or Chetan Bhagat and Milan Kundera have understood the constraints of their respective business model and developed a unique strategic skill of maintaining their leadership within their respective niches. And, in the market-place of products and services where profit is an important objective criterion for gauging excellence, that's all that matters.
The same holds true for the business model in which your product or service is being sold. Many entrepreneurs make this mistake of comparing their industry with some other industry to adopt certain practices of other industry, or belittle some practices of their industry. Successful entrepreneurs, like Narayan Murthy and Steve Jobs, or Chetan Bhagat and Milan Kundera , above all, must possess one defining characteristic. They must understand the business model of their industry niche and develop specific skills to maintain their leadership in that niche.
Are you aware of the business model of your industry niche?
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