At Infosys, The Canteen Manager Is A Millionaire
Ratan: Check this out.
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The Guardian (London)
Tuesday, February 29, 2000
By Randeep Ramesh
Drive along the dusty four-lane highway towards Chennai from India's computer capital, Bangalore, and about 10 miles out you will be struck by the sight of gleaming towers and concrete curves of Electronic City.
Home to some 80 companies, Electronic City is the centre of India's silicon plateau. This patch of land - most of it encased in walls and littered with banners for commercial giants such as Oracle and NTT - is the epicentre of an economic earthquake that is shaking the subcontinent.
Polite conversation revolves around how to make, when to make and who is making money from the internet. The big banks, like ICICI, have plans for online customer services. All the advertising in the pages of mid-market Delhi tabloids have been bought up by a financial website, sharekhan.com. The upstarts and corporates target the new, moneyed, consuming class of some 200m - more buyers than live in any one European country. And a sizeable number of them are becoming rich on the back of India's new economy.
Software is modern India's spice. The industry will be worth pounds 2.5bn in exports this year - and in three years should top pounds 12.5bn, making up nearly a quarter of the subcontinent's output.
The country's most precious resource is its people. The pool of highly educated, English speaking IT professionals so impressed Microsoft's Bill Gates in 1997 he proclaimed that India would be a software superpower and promptly awarded the first Microsoft professorship outside the US to Delhi's Indian Institute of Technology. The stock market values each employee of Wipro Technology, one of India's computing darlings, at pounds 1.9m.
Foreign companies have rushed into silicon plateau: Novell opened their R&D centre at Bangalore nearly four years ago; the operating system for Oracle' s NC was written in Bangalore; European software company Baan has headquartered its R&D operations at Hyderabad.
The tide of colonisation of the Indian computer industry is now over and a generation of home-grown talent is emerging. Most have taken their cue from California's silicon valley - where a quarter of start-ups are run by Indians. Others have read of the exploits of Pavan Nigam, rated by Netscape's Jim Clark as the 'best programmer he had ever met".
And none have forgotten the entrepreneurial buzz created by software engineer Gururaj Deshpande, the data communications expert who offered shares in his third start up, Sycamore, last year for $ 38m ( pounds 23.9m). They closed on the first day of trading at $ 184.75 and Mr Deshpande is now worth $ 3.7bn.
But Sycamore is a US-based company. The hottest stocks at the moment are those with roots in Indian soil but have imported the lifestyle and entrepreneurial get-up-and-go of American capitalism.
Take Infosys. This software services company has its own 25-strong fleet of buses, runs generators to avoid the power cuts that plague Bangalore and built basketball courts and a Domino's Pizza to re-create the relaxed, campus feel of an e-venture in silicon valley.
Formed in 1981 on about pounds 200 by seven software engineers and run from their homes, it offered software services around the globe. The first 10 years of the company saw revenues grow to about 90m rupees ( pounds 1.3m).
The company's big break came when the it developed a computerised distribution package for Reebok France, which then referred clients to Infosys. Last year, the it became the first Indian software firm to list on a US stock market. Big customers now include Sainsburys, Visa, Lucent and Nortel networks. About 3% of the company was floated, rais ing pounds 44m. The current US valuation tops pounds 8bn - on nine month earnings of pounds 87m.
'The stock has performed well in the investor market," said Narayana Murthy, the chief executive and brother-in-law of Mr Deshpande.
The 46-year-old Mr Murthy is himself something of a legend. He won a place at the best university in the country, IIT Kharagpur, in 1962 but could not take it up because his father, then an education official in the state government with eight children to support, could not afford the hundred rupees a month in accommodation fees. A man of great modesty, Mr Murthy lives in a small three -bedroom bungalow in downtown Bangalore.
The original seven founders are now worth nearly pounds 2.5bn - on paper. Out of the com pany's 5,000-strong workforce, some 200 are dollar millionaires and a further 1,800 are rupee millionaires - including the canteen manager and company chauffeurs.
Paternalism seeps into aspects of Infosys' corporate life. It has set up a charitable foundation which receives 1% of the company's total profits and distributes the cash for social causes. 'We see wealth creation as essential to spanning the divide (between rich and poor). Wealth should be shared out and we are involved in wealth distribution," says Nandan Nilekani, Infosys' managing director.
But the ambition at Infosys is to become the hothouse of technological talent on the world stage. It maintains offices in California, Tokyo, London, Frankfurt and New York. More than 98% of the group's income is from outside of India. With the dollars raised on the US markets, Infosys is planning to snap up a US software company.
In 1997 the company made pounds 6m, two years later pounds 20m. In the past nine months it has already taken 10% more than it did in the whole of last year.
Wages are rising fast. At present computer programmers start on about pounds 300 a month - small in western terms but nearly 10 times the average Indian's income.
'It is a very competitive market for talented software engineers," says Mr Murthy. 'But these wages in India, which are increasing at 30% a year, are containable. Indian wages only account for 15% of total revenues. Therefore we only have to enhance productivity at a rate of 4.5%. Part of the reason for the Nasdaq share issue was to be able to offer overseas employees competitive share option schemes."
The software company has its detractors - many saw the millennium bug as an irreplaceable revenue. The explosive growth of the net economy has meant the opposite has happened. 'Every business is now under siege. E-commerce has dramatically changed the business model and we are perfectly placed as providers to offer new solutions," says Mr Nilekani.
With dot.com clients such as Amazon and CBS Sportsline as well as work for internet infrastructure companies, Infosys has picked up plenty of e-commerce experience. Revenues from net-based work has risen from 1.3% in the first quarter to 15.6% of total sales in the last quarter of 1999. This has almost made up from the shortfall in 'Y2K", which fell from 24% to 5.8% of total sales in the period.
Infosys likes to think of itself as in India, but not run by India. Mr Murthy says: 'We don't rely on local telephones, we have our own system. Our customers should not notice that the infrastructure is any different to their own - no matter where they come from." |
