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From Services to Products
Before Nandan Nilekani became
known for his work on Aadhaar,
India’s national identity program,
the largest program in contemporary human history that created
unique identification numbers for
over a billion people in record time,
he was best known as a co-founder
of Infosys, one of the top software
outsourcing firms in the country.
He is also the person who gave the
title to The New York Times columnist Thomas Friedman’s best-selling book, The World is Flat, which
argued that access to technology by
people across the world has taken
away the advantages advanced
countries enjoyed during most of
the industrial age.
In India, many entrepreneurs
first came to understand the power
of information technology by looking at the enormous success of
companies such as Infosys, TCS,
and Wipro. They are now multi-billion dollar companies, employ
hundreds of thousands of people,
and have raised the standards of
corporate governance in India.
However, success also comes
with its disadvantages. Investors
and entrepreneurs can become
addicted to the metrics that work
for IT services, but do not work for
products. Due to huge labor arbitrage, IT services were operating on
high margins. They could record
revenues almost as soon as they
started deploying resources, which
was comforting to investors.
To create IT products, on the
other hand, expenses are incurred
up front, which also has its risks.
After investing to create a product,
if the product bombs, the investments sink. Fear of such a situation
stopped Indian IT services companies that had huge cash balances
and literally zero debt from investing in products.
There were some exceptions.
Infosys read the writing on the wall
and built a fairly successful core
banking product called Finacle.
Cognizant rolled out a three-horizon strategy, with its CEO Francisco D’Souza directly focusing on
new businesses.
While their efforts were looked
