Q&A: Som Mittal, NASSCOM
(The National Association of Software and Services Companies (NASSCOM) serves as a chamber of commerce for India's booming IT and services industry - "representing and setting the tone for public policy for the Indian software industry". Formed in 1988 and headquartered in New Delhi, the organization now has over 1200 members - making up over 95 per cent of the industry in India by revenue. President Som Mittal has held his role since January 2008, having previously served as chairman in 2003-4; formerly with Hewlett-Packard, Digital-Compaq and Wipro, Mittal has spent nearly two decades in the IT industry as well as having worked with numerous public bodies to improve Indian educational and infrastructural standards. In an exclusive interview with SSON, Mittal outlines the major challenges facing his organization and India's BPO industry in general, as well as looking forward at his ambitions for the remainder of his term in office.)
SSON: Som Mittal, you’ve got one of the highest-profile jobs in one of the most dynamic industries on the planet. What are the biggest challenges you face on a day-to-day basis? And what are the most satisfying aspects of your role?
Som Mittal: For us the expectations the industry has of NASSCOM are pretty high. We have a very wide range of members from the very small to the extremely large; from Indian to multinational; people in products and people in services; and we all work under one umbrella, so the biggest challenge is how we can add value to them, with the industry being as diverse as it is. That also in some regard answers the second part of your question: working with these challenges makes it very interesting. Even more so, because you have the chance to work with governments across the world and, as I said, with a very wide range of customers as well as member companies.
SSON: The growth of the BPO sector in India has been astonishing. What do you think have been the biggest contributing factors to this boom, and do you think such growth is sustainable?
SM: If you look at BPO these were essentially business services which were very much embedded in organizations, and the BPO industry in India - riding on our experience with what we have done in IT - actually globalized these services. And with that companies could not only shift processes to a country like India - where of course there were some cost advantages - but I think we could transform them; so in most cases when people have outsourced their work transformation has been an integral part of what has been done.
To the point of what is contributing further, and the future, I think it is being driven really by the changing demographics of the world. Two things are happening: we’re seeing that in the developed world the population is an inverted pyramid, and every study shows there are going to be fewer people available to do jobs the way they are currently done. So most companies are saying they will focus upon their core competencies and business services - which were an integral part of their operations but more ancillary in nature - are something which they can have somebody else do, who has shared services and more expertise.
While many companies have outsourced their supply chain and accounting and transaction processing, we keep seeing they are getting more end to end, and more and more services keep getting added to the same customer every year. So, I would think that it is sustainable. Of course there are other questions about where India still needs to work hard: I’m talking about infrastructure and growth and concentration in a single country – issues and concerns that a customer would have.
SSON: What would you say are the biggest challenges the Indian BPO and IT industries face over the next, say, five years?
SM: I think for us it’ll be harder to get employable resources coming into our industry. We have a huge talent pool in the country, people who get a light level of education, but the current education system in the country has produced employees we have to work on making employable; this means the industry puts an enormous amount of effort getting this so-called raw material from colleges and making them people who can deliver to customers. And while they’ve done it at this level it’s an enormous challenge scaling it up. We need to find remedial action, organizations like finishing schools. We can share this responsibility with them.
So that’s one. The other challenge is that today almost 90 per cent of the work is done out of seven cities, and that happened because international clients wanted access to airports and these are by and large near the large metros we have. If you overlay the footprint of colleges and where people come from, our growth will get stunted if we only limit our growth to these seven cities. So how do we develop other cities? We as NASSCOM have developed a pool of about 50 cities - which include this seven - which we have ranked, and we have identified the gaps which exist today in terms of the social infrastructure, and we are working with the various state governments here to ensure that they get excited about developing these cities. That would be the second challenge, I would think.
The third that we have spoken about is that the aspirations of many other countries have also gone up as India has boomed with this outsourcing model, and we need to keep ahead of the curve with more and more value-add for our customers, and ensure there is more stickiness because of the way, and what, we serve.
SSON: Many in the industry see the next decades as being a grand tussle for economic supremacy – at least in the outsourcing and IT sectors – between India and China. Do you go along with this, and what advantages does India possess over its neighbour?
SM: You know, China I believe is already placing pressure on the competitiveness of its manufacturing, and with their large population and their own education system clearly see IT BPO as a growth engine, and they are building a suitable infrastructure. Currently the focus of their IT BPO is to service themselves - and China itself is a large market.
Second, because of their natural affinity the Chinese are working more with Japan (as you may know China has about 60-70,000 students in Japan today, studying in Japanese universities. We had that benefit in the US and the UK at one stage); China has that natural advantage and they are growing that business. We also see many of the multinationals that have set up operations in China wanting IT support; the market has started opening up for even Indian companies, saying "you’ve already done work for us in the US and Europe, now you can service us in China", so Indian companies are setting up those operations – and as we set up our operations we also transfer some of the know-how. So we would believe that over time China could become a scalable model.
However there certain areas in which India would always have a lead. One, I think that as a result of the last 15 years of handling delivery - and that, too, mission-critical delivery - I think Indian companies and Indian service delivery is far more mature, and that maturity will only continue to increase. And that maturity is not only the quality of delivery which is supposed to be given, but issues relating to data-security, data-privacy, IT-management, things that are getting of greater and greater importance to our customers.
Furthermore our education system is in English, and while I think the Chinese will pick up English as well they will still go to one level of translation in their minds. And from everything we have seen, the concept of service as distinct from the concept of product, India would have a hard lead; service ability is built into the Indian ethic.
SSON: Do you think the Indian government needs to be more interventionist in decelerating the appreciation of the rupee against the dollar?
SM: You know, we would like them to be interventionist to have a stable rupee. It moved from 45 to 39 [rupees to the US dollar], and now it’s gone back from 39 to 46. And this has all happened within a year. We know that we’re part of the world economy – but I think that the government could surely intervene by making it more broad-based. Today our dependence on the US is very high; I think we need to ensure we have investment coming in from other parts of the world as well, so we don’t go through a similar cycle. But I don’t think the Indian government and the few intervention instruments they have can play a very large role. We need a more stable currency more than anything else.
SSON: How much of an impact on the sector is being made by high oil prices? This could be both a positive and a negative, in some ways…
SM: I think there has been an impact with inflation… Oil is dollar-denominated, we are net importers; in a downstream a lot of things get impacted including our own inflation. At this point of time the pressure is clearly on margins, that we see, because everyone’s cost-structures have gone up – but it does have an inflationary trend.
SSON: Let’s talk about NASSCOM for a moment. Its role is profound and multifaceted: what do you think are its most important tasks?
SM: I think at this point in time the main drive for us is on building a long-term model for skills development. And the needs that we have are very diverse, from BPO and various kinds of services to tech - and within tech, our higher-end products to servicing. So if there is one major point I would mention it would be on education and skill-building.
SSON: How closely does NASSCOM work with the Indian government?
SM: Very closely; we have a seat at the table. NASSCOM is a member of the skills development board that the Planning Commission has set up; we are working with the Ministry of Human Resources Development on the curriculum; we’re also working with the state governments on ensuring that soft skills and so on are integrated into the curricula of graduate colleges. So it’s a multi-faceted approach that we have on education here.
SSON: How successful is NASSCOM at the moment in terms of its fight against software piracy? And in terms of ensuring good levels of data security among Indian firms?
SM: On data security we’ve done a lot of work. We established a separate body called the data security council of India, which has members from our customers, members of people who deliver; many external bodies are participating with us. The government is participating with us. Since we work with many countries and every law is different we need a body like the Data Security Council. Our real job there is to engage with people, educate them, create awareness; we have helped the government make some amendments to their act, and now we are working with them on enforcement: we have already trained over the last two years over 6,000 cops on cybersecurity and cyber-crimes.
Have we made progress? I would say it’s a much larger issue; from what I hear from people like Microsoft the piracy has gone down and it’s been a function of both enforcement on one side and pragmatic pricing on the other, so I think a combination of that has helped. A lot of awareness programs have been run jointly by the industry and NASSCOM. But I think we still have a long way to go to meet the standards that the west has.
SSON: What can western firms do to assist in these fights?
SM: They are already participating with us very closely but in terms of data privacy I think it’s constant education, better pricing - and also helping train the judiciary in disposing of cases that we get. Our record has been that any time there was a piracy issue the people were apprehended but it took a longer time to get the thing put through the judiciary. We do not have special courts so at this point the government has requested NASSCOM to put together an awareness program for the judiciary as well, which we’re now undergoing.
SSON: Although it’s not specified in its objectives, it seems that NASSCOM plays a social role in terms of encouraging education in India. How important a part of NASSCOM’s operations is this?
SM: It’s a case of getting the skills built up; as I said India has a surplus in the sense of having a pyramid structure to our population and demographics. We have a big opportunity ahead with that, and I think we have to work on ensuring these people are employable - and also worthy of servicing the world. So I think that’s a big responsibility.
We also think that our social responsibility doesn’t end at education; there is still a divide – but I think we need to return the benefits of ICT to our villages. We as NASSCOM have set up the NASSCOM Foundation which runs our Knowledge Network; in about, now, 190 villages, we have a center, with about four or five PCs, and these are very actively being used by the villagers and we’re pumping through a lot of content. We are also connecting up NGOs with our member-companies so we can leverage all our members to do programs which are scalable, and help the society using technology. There are many of those initiatives which we have at this point.
SSON: Finally, what would you hope would be your legacy when you finally come to step down from your position as NASSCOM president?
SM: As I said, our task on education is pretty large; I took on this role earlier this year and have a five-year term here, and hopefully by the end of the five-year term I’d hope the needle had moved substantially, and we will measure it by looking at the attrition rate we have in the industry, and also the easy availability of resources that we would have.