Wednesday, January 28, 2015

Why Obama and why not Putin?

Obama is here in India for republic day celebrations. That is headline news in BBC too. Many countries including neighbors (or rivals?) are taking note and responding as well. And you cannot miss to notice the attention Narendra Modi is getting in the international politics. All this is good news for us Indians. Ours is no more a country of snake charmers and beggars. Our Prime Minister can manage the opposite power poles of this world – Obama and Putin, quite effortlessly because India is no more a country the big brothers can afford to ignore. Also take a look at the show Indian Air force had put up at parade – they combined the aircraft's bought from USA and Russia to make a formation, a rare sight indeed.

The question I was asking myself was, why Obama and why not Putin as chief guest for Republic day celebrations? From business perspective, Obama would come first in the pecking order as we need USA to buy our IT, Pharma and other goods and services. In 2013-14, we exported $39B worth goods and services to USA while our import figures from USA stood at $22.5B. (Link: In net, they are the biggest customer to India. With Russia, we have negative trade balance of $1.7B (we import more from Russia than we export). Russia needs us to sell their arms and petroleum products. We are customer to them. But USA is our biggest customer. We need them to buy more from us to improve our trade balance. In business, customers come first, so there is no wonder Obama would get the first invite under Modi's regime.

Politics is more than business. Politics tries to manipulate business (less effectively vice versa). Politics is more about power, power to stimulate, power to control and power to destroy. When it comes to power to destroy, Russia is second to none. (Remember the missile that brought down a passenger airplane in Ukraine – argument here is not about who launched it but to say it was built in Russia). They are the biggest arm supplier to those countries who cannot produce themselves. India too proudly displays the tankers acquired from Russia. Russian fighter jets are superior so we (Indian defense) have been one of the biggest customers to Russia. History says they won the Second World War. If there is going to be another world war they know how to save themselves and kill others. With two difficult neighbors, Putin too would have made sense as our chief guest on Republic Day.

The recent setbacks for Putin and China becoming closer to Russia would have made Modi to send the invite to Obama. Though business would be a priority for him now, I hope he had a talk with Putin like his guest did. (Obama called Sharif before coming to India). If and when there is trouble with neighbors, I think Modi is smart enough not to let Putin take the other side. Hitler did not read his Tolstoy and paid a heavy price. If cautious, Modi need not read ‘War and Peace’. He has proved himself as a good Chief Minister but state governments do not manage national defense, it is a new responsibility for him. Till now he has played his cards well. India needs more of Obama than Putin, unless our neighbors have a different plan.

Tuesday, January 13, 2015

Hiring fresher and firing experienced: Will this be the model ahead for TCS and Indian IT services sector?

Layoffs are not uncommon in IT industry. But for TCS it was quite uncommon. Theirs was an IT company with Indian values. Whenever things turned bad they always managed well, at least in the past, in retraining the employee and making him/her billable again by re-tooling and showing patience until the employee brought in the revenue. Now the news of layoff in a big scale at TCS shows that they too are running out of options. At the end of the day, TCS too is a business and they too are worried whether they are making desired money on each employee. What TCS is doing would become a new norm and other IT services companies would follow suit over a period of time.
  • When billing rates do not go up but the costs do, higher wage employees become a firing target.
  • Either salaries in the higher band will start tapering out or the number of employees in that band has to come down to keep up the margin.
  • They would also constantly look out for other options to cut the costs of business operations

But the question to be asked is will this be the way forward? Why they are not able to earn on those experienced employees who were the bread winners for the company for so long but redundant now?

First, we need to understand why the billing rate per employee is not going up but reducing. No business or technology remains a taboo for long. IT services too is no more a business only a few companies know and execute. There are numerous service providers now in the market who do it efficiently and willing to do it for a lower margin. That puts pressure on the likes of TCS, they need to become efficient to remain competitive, so shedding fat becomes a necessity. Reducing number of seniors and having more juniors in a team would help deliver the project at a lower cost and help retain profit margin. It would not stop with this but these businesses will explore all avenues to reduce costs such as reducing their employee travel, relocating their offices, cutting down on benefits provided etc. but all of which just provides breather but not a solution to the persisting demand from customers to drive down the costs.

When cloud-based applications become mainstream and software-as-a-service (SaaS) catches up, that would reduce the maintenance activities by a larger extent. It can make IT services a non-mass business leading to firing the seniors but not much hiring at the bottom, a worse situation than now.

If Indian economy catches up and Rupee gains back some of its losses against dollar, let us say it gets back to Rs.52-55 range; it would put further pressure on the margins of the IT services companies which have contracts in dollar terms and cannot hedge completely against currency valuation changes. What will they do to keep their margins up then?

All of this clearly suggests that it makes sense to diversify and not just depend on services as revenue stream. Get into products? No, these companies would lose more money as products business require a different kind of talent management and business strategy which does not gel well with the service business mentality. So what lies ahead for IT services? Resize and reshape in the maturing market. 

And it may be time to sell your TCS stock as the stock may not command the same P/E multiple unless there is a big shift in business strategy which does not seem to be on the radar.

Tuesday, January 6, 2015

Book Review: Journeys in the Night

This is a collection of life stories of those who are affected by AIDS. Sixteen of the best-known authors of India come together and create this anthology with a common goal of exploring the hidden world affected by the epidemic.

It starts with Nikita Lalwani meeting up with a doctor who is HIV positive but his positive attitude towards life has kept him alive. Kiran Desai goes to open fields of Godavari and opens up the world of highly paid sex workers who are in this profession from many generations and those poor ones who can barely earn a living out of this act. Jaspreet Singh telling ghost stories to the children affected by the epidemic in a HIV positive care home for children easily melts your heart. Salman Rushdie explores the world of Hijras and prefers to call them Ardhanarishwar, I too wonder why not. William Dalrymple meets up with the daughters of Yellamma to hear their stories and so on goes every author going to all corners of India and lending the deceased an ear and bringing us their life stories.

Icing on cake is, there is Introduction by Bill and Melinda Gates and Foreword by Amartya Sen.

This wonderful anthology is the result of Gates Foundation approaching Random House in creating a tradition of literary journalism for a social cause.

Monday, January 5, 2015

Movies (of yesteryears) which moved me

I am not a regular movie watcher. I read more books than I watch movies. Movies have an impact of their own. Unlike books, movies are not individual effort but require team effort. When a good team comes together, a great piece of art gets created which reaches a wider audience than any other form of art. That makes movie making one of the biggest industries in this world.

Here is the list of movies I have watched in the last 2 years which really moved me so I keep suggesting them to others. They were made many years or decades ago but I could watch them only recently.


This 1965 Hindi movie has origins in a novel of same name by RK Narayan. Though the author did not like the movie version it went on to be a big hit. Conservative society of those times did not mind the extra-marital relationship of heroine of this movie. Melodious songs are still heard today, “Gaata Rahe Mera Dil” seems to be the songs most liked but my favorite is “Aaj Phir Jeene ki Tamanna” sung by Lata Mangeshskar.

Raju, a guide (played by Dev Anand) is the central character of this movie but it is Rosie (Waheeda Rehman) is the protagonist, she gives twists and turns to the story and shapes the movie. Hers is a role of a dancer. Since Waheeda is a professional dancer in real life, she did not to have to act and just be herself. But more than dancing it is the emotions she exhibits make the movie memorable for long. Her longing for love which she does not find in her husband and her desire to take up a career in dancing find a helping hand in a tourist guide Raju. She goes on to live with him and her dancing career blossoms. In an insecure moment, Rosie hands over Raju to police accusing him of misusing her money. Raju gets jailed but when he comes out destiny has something else in store for him. While he is introspecting his life, people around him make him a saint and he ends his life in that disguise.

This movie is the outcome of a great team coming together. An unusual story, great songs, melodious music, soothing places all make an impact and wonder about many aspects of life.

Schindler’ list

This 1993 movie directed by Steven Spielberg is based on a novel. Set in the middle of Second World War, it documents the horrors of Holocaust. This movie is considered a remarkable achievement by many critics worldwide and had won Academy awards.

I had to watch this movie multiple times and supplement it with reading to get the history and message it is conveying. But it is worth the time spent. You will understand the times of World War II. One gets to see two ends of humanity in the same movie. On the one end is heroic Oskar Schindler, a member of the German Nazi Party, who goes out of his way to save the Jews working in his factory from getting killed in the gas chambers.  On the other end there is Amon Goeth, a lieutenant in Hitler’s SS Army, who is brutal in conduct, shoots randomly at the prisoners, killing humans for him is no big deal but a casual activity. Oskar Schindler loses all his fortunes bribing the Army commanders to keep his Jewish workers alive. In the end Russians defeat German, Amon Goeth gets hanged and the Jewish prisoners are set free.

This documentary like movie recreates the history to its closest reality. It shows how helpless and clueless the Jews were and how cruel were the methods adopted by SS army to wipe them out. After watching this movie, one would surely feel today’s times are far better times to live than 6-7 decades ago.

This movie is on the must watch lists prepared by many around the world and for a good reason.

The Terminal

This 2004 movie is also directed by Steven Spielberg but it is Tom Hanks who steals the show.
A traveler Viktor Navorski (played by Tom Hanks) from Krakozhia (an imaginary country) arrives at New York's JFK International Airport and gets trapped in the airport as there is an outbreak of a civil war in his homeland and as a result of that the United States no longer recognizes Krakozhia as a sovereign nation, and he is not permitted to either enter the country or return home.

Innocent and unable to communicate in proper English, Viktor learns the ways to survive in Airport but does not give up hope of getting out and collect the autographs he wanted which was his mission of travel. Efforts of Airport officials to get rid of Viktor do not materialize, as Viktor fails to pick-up the clues but he does not give up approaching the customs to give him a clearance. Several months pass, war in his homeland ends and Viktor gets the permission, goes out and gets the autographs and heads home back.

Though this a work of fiction and most part of the movie is one location – airport terminal with a limited number of characters, it is Tom Hanks who keeps the movie watchers glued to the screen.


This Kannada movie was released in 1971. It was directed by Puttanna Kanagal and had Kalpana and Gangadhar in lead roles. Kaveri (played by Kalpana) and Satish (played by Gangadhar) are a picture perfect couple, lead a happier life with two kids but their good times come to an end when Kaveri loses her mental balance as memories of her being forced into sex by a relative before marriage resurface and begin haunting. Satish learns about this incident, though he loves Kaveri, he does not accept her like before. He gets her treated in a mental hospital and brings her back to home after a couple of years. But the children who have grown without her during her absence refuse to accept her as mother and one time loving husband maintains a good distance from her. This puts Kaveri into depression again and the surrounding people make the situation worse and all that makes her go insane again as the movie ends.

Kalpana's performance as a traumatic woman was widely appreciated and had made her one of the best actresses of Kannada movie industry. It is the soundtracks with very high quality lyrics provide another dimension to this classic movie.