New Face of Global Competition

Date: Wednesday, February 05, 2003 9:43 AM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

It's no surprise that Wipro chairman and managing director Azim H.
Premji drives a Lincoln Town Car and is wealthy to the tune of $6
billion. His Bangalore programmers are paid $2 an hour to churn out
code for American companies that are standing in line for his cheap
services. Plantation owners used to be wealthy too.

Keith Hammonds claims that Wipro's developers weren't just cheap: They
were cheap and very, very good. He has a point we must take very
seriously:

"The people at Wipro have seen the future, and it is them.
They are the explosions, brilliant and exhilarating
( and, yes, cheap ). Again, think hard.

How will you compete with that?"

The obvious answer to his question is that the American middle class
shouldn't be forced into this "race to the bottom" bottom for low
salaries. If this trend continues there will no longer be a middle
class. Outsourcing to companies like Wipro are allowed by deliberate
government policy and should be stopped - unless of course we accept
the fact that the United States will lower it's living standards to
that of India, China, and other depraved countries.

Note also that Wipro is one of the largest H-1B bodyshops in the world.
They are involved in sucking jobs out of the United States while at the
same time they are displacing American workers with the cheap young
blood of H-1Bs.

http://www.fastcompany.com/online/67/newface.html

The New Face of Global Competition

Not so long ago, India's Wipro Ltd. sold cooking oils and knockoff PCs.
Now its 15,000 technologists cook up vital software applications and
research for Ericsson, GM, the Home Depot, and other giant customers.
Are you prepared to go head-to-head with the best the world has to
offer?

by Keith H. Hammonds
photographs by Cedric Angeles
from FC issue 67, page 90

There are certain moments when you can see the future with such clarity
it nearly takes your breath away. I went to India and witnessed the
future. I am certain of this, because I saw the explosions. I arrived
in Bangalore at the start of the Hindu festival of Diwali. Diwali is a
four-day-long celebration of wealth and prosperity, of light over
darkness. Strings of colored lights festoon every window; even the
meanest shanty blazes with candles. In Bangalore, a city of 6 million,
children scamper through the alleyways with sparklers. Fireworks burst
randomly from tens of thousands of rooftops.

A thousand points of light? Try a billion. India is a nation of 1
billion people, and, despite enormous challenges, it is on the verge of
something spectacular. Out of its poverty and chaotic decrepitude erupt
a host of small explosions. It is a place crackling with talent and
ideas and ambition. It is where a visitor confronts head-on the new
face of a global marketplace -- and the emergence of a new force in
high-tech competition.

Near the center of this phenomenon is a company called Wipro Ltd. On a
rooftop at Wipro's Electronic City campus one evening, I joined a few
dozen engineers at their team Diwali party. It was like a Silicon
Valley beer blast without the beer: Laughing employees played movie
charades while a portable CD player pumped out tunes. Diwali
traditionally is observed at home with family and close friends, but
it's not a holiday that's recognized in America -- and these engineers
were doing important work for a big American customer. So as the sun
faded, they dispersed to their cubicles downstairs and got back to
business.

They were toiling on a project for CNA Life, a company 11 and a half
time zones away in Nashville, Tennessee. Wipro engineers have been
helping CNA reengineer its business processes and improve
automated-underwriting performance. This hasn't just involved stringing
COBOL code together. Wipro employees have set the strategy, then
designed and architected the system. It's high-level stuff, a "mission
critical" application.

More explosions: From Wipro's rooftop, you can see a string of holes
blown out of farmland nearby. Wipro is excavating the foundation for an
8-acre third phase of its Electronic City facility, the largest of its
10 sites around Bangalore. By 2004, it expects to triple the size of
this campus; 17,000 engineers will take on projects for such clients as
the Home Depot, Nokia, and Sony.

A decade ago, Wipro was an anonymous conglomerate selling cooking oil
and personal computers, mostly in India. Today, it is a $903
million-a-year global company, and most of its business comes from
information-technology services. Since 1997, Wipro's revenue has grown
by an average of 26% a year while profits have grown by 69%. Its 15,000
technologists write software, integrate back-office solutions, design
semiconductors, debug applications, take orders, and field help calls
for some of the biggest companies in the world. They are as good at
doing all of that as anyone in the world. Perhaps better. And they are
cheaper -- on average about 40% cheaper -- than comparable American
companies.

It is an irresistible force, and it's on the rise. Three years ago,
Bangalore was the software world's biggest body shop, offering coders
at $2 an hour. Now Wipro and a few rivals are moving upstream, swinging
into such high-value services as consulting, integration, and
architecture. Increasingly, Wipro is competing with Accenture, EDS,
IBM, and the big accounting firms. And as often as not, it's winning.

Where you stand on all of this, of course, depends on where you sit.
Here in Bangalore, Wipro's growth is a matter of tremendous national
significance, requital for its loss of high-tech manufacturing and a
sign of even bigger things to come. In America, where
technology-services companies struggle with weak stock prices and
uncertain growth prospects, the rise of a tough, lower-cost competitor
is a sensitive subject. That's true even for Wipro's satisfied
customers, most of whom declined to speak on the record. ( How many
American executives want to crow about all of the work they're shipping
to India? )

The emergence of Wipro is inspiring and disorienting, a case study in
strategic possibility -- and a warning of business dislocation to come.
So it is with the unforgiving logic of global competition.

The Rank and File: Big Brains, Bargain Prices

If you are an American technology-strategy consultant making $150,000 a
year, you should know about Ganesh Narasimhaiya. Ganesh ( mercifully,
his business card reads simply Ganesh N. ) is a friendly fellow. He is
30 years old. He enjoys cricket, R&B music, and bowling, and he lives
with his parents in Bangalore. He earned a bachelor's degree in
electronics and communications, and he can spin out code in a variety
of languages: COBOL, Java, UML ( Unified Modeling Language ), among
others.

In the past three years, Ganesh has worked on high-level projects for
Wipro all over the world. He has helped GE Medical Systems roll out a
logistics application throughout Southeast Asia. He proposed a plan to
consolidate and synchronize security solutions across a British
client's e-business applications. For Statoil of Norway, he developed a
strategy for transferring legacy system applications onto the Web.

"I want to be on the cutting edge of technology," Ganesh says. The guy
is sharp. And hungry. He'll work 18 or 19 hours a day at a customer
site. For that, while overseas, he may pull down $7,000 a month. When
he's home in Bangalore, his pay is about one-quarter of that -- $21,000
a year. By Indian standards, it's a small fortune.

Ganesh is part of Wipro's wedge. The company is massing a small force
of high-level strategists, increasingly focused on specific industries,
who can compete -- with anyone -- for any given consulting project.
Once Ganesh and his colleagues work their way past a CIO's door, Wipro
can play its Trojan horse: offshore outsourcing solutions that
dramatically lower clients' expenses.

At that point, your applications developers could find themselves up
against Dilis Antony, 30, and her team of four. Antony, who holds the
equivalent of a master's degree in computer science, manages a project
to build a Web-based customer survey for United Technologies' Otis
Elevator Co. division, part of a much broader Web strategy that Wipro
is executing for Otis. Antony says that she "wants to grow with Wipro."
She has her sights set on bigger management roles. Her programmers
average $8,000 a year. She probably doesn't make much more.

Think hard about that. If you are a strategy consultant working for
Accenture or EDS in the United States, how do you compete with Ganesh?
How does your company compete when Antony's troops can execute Ganesh's
solution for perhaps a quarter of the cost of your staff -- and execute
just as well?

In America's information economy, we have become comfortable framing
our competitive advantage in terms of knowledge and innovation. We
justify charging premium prices because we have the best-trained talent
delivering top-quality information solutions. That's why panic over the
overseas migration of manufacturing jobs in the 1980s was short-lived:
For all of the talk of a "hollow economy," we remained masters of
white-collar brain work. So what happens if brain work can be done
anywhere?

The Strategy: The power of "power consulting"

Well, no, it can't be done anywhere. That would understate the enormity
of what Wipro is pulling off. The company has been canny enough to
understand that peddling a low-cost service can't lead to sustainable
growth and profitability. This is the oldest, harshest lesson of the
global economy: If what you do can be done by anyone, there will always
be someone willing to do it for less.

Wipro knew that long-term prosperity depended on providing services of
increasingly higher value. A decade ago, like dozens of other Indian
companies, it supplied technical labor on demand. Then it realized that
piecework is fine, but relationships are better. So Wipro created
development centers within its offices, each dedicated to a single
important customer. The idea: to promote relationships that would
create annuity revenue.

Today in Electronic City, Wipro hosts development centers for
Hewlett-Packard, GM, and dozens of other huge global companies. Lumber
company Weyerhaeuser's three centers -- one in Bangalore, one in
Chennai, and one in the United States -- house more than 200 engineers.
The engagement began in 1999 with two Wipro employees conducting a
modest on-site analysis at Weyerhaeuser's U.S. headquarters. Now Wipro
develops, maintains, and supports a broad array of Weyerhaeuser
applications from Bangalore.

At the same time, Wipro has embraced quality. In six years, it has
trained 7,000 employees in Six Sigma and completed 1,000 quality
projects. Six years ago, Fast Company profiled a team at
Lockheed-Martin that wrote nearly perfect code ( "They Write the Right
Stuff," Dec : Jan 1997 ). The team's claim to fame: It was one of only
four outfits in the world to achieve Level 5 certification from the
Software Engineering Institute. Wipro has Level 5 certification in
three different categories. It's eye-glazing stuff, but an amazing
achievement.

Such accomplishments confirmed that Wipro's developers weren't just
cheap: They were cheap and very, very good. It was enough to
distinguish them from every aspiring dollar-an-hour coder in Malaysia,
Russia, and South Africa. But it wasn't enough to allow them to take on
the big American firms. To do that, Wipro had to become more like them.
"The company has had to let go of the Indian brand and create a global
company while maintaining the cost advantage associated with being
Indian," says Stephen Lane, research director for IT services at
Aberdeen Group.

In 1999, Wipro hired Vivek Paul to run its small technology subsidiary.
Paul, an executive with Bollywood-movie idol looks, is Indian by birth.
But he made his mark in the United States, graduating from business
school at the University of Massachusetts at Amherst and thriving at GE
Medical Systems. Among other things, he negotiated one of GE's earliest
IT outsourcing joint ventures in India -- with Wipro.

Paul headquartered Wipro Technologies not in India but in Santa Clara,
California. He saw "a great opportunity to be a player at a company
that had a shot at being global." But he also saw a workforce in need
of a spark. "The whole ethos was rooted in execution," he says. Indian
workers had been raised and schooled to respect authority. They did
what they were told to do very well. What they didn't do as well was
tell clients what needed doing.

There is a slangy Hindi word, jugaad, that describes what Paul was
looking for. It implies the ability to think assertively, and work
creatively around unexpected problems. "How does one move from being a
good pharmacist to being a good doctor?" asks Ranjan Acharya, Wipro's
vice president for human-resource development. "A pharmacist cannot add
value to a prescription. He can impress with his service but not with a
decision."

Wipro needed more doctors. Some of them, it could hire. In fact, it had
to. To compete with the big firms, it had to offer expertise in
specific industries. If you want to solve a commercial bank's
technology problems, you should understand how the banking business
works. So Wipro lured Ramesh Subramanian, a McKinsey & Co. veteran who
had focused on financial-services clients. It found Aswatha Amarnath,
an energy-finance specialist with high-level relationships at big U.S.
utilities.

But such high-profile hires still left 15,000 engineers and managers
who were thinking like pharmacists. For them, Acharya rolled out a
wide-ranging training strategy called Power Consulting. In the United
States, a corporate initiative by that name might well be laughed out
of the company cafeteria -- especially since some elements seem almost
insultingly basic. Engineers who are to meet customers, for example,
prepare by dressing for a formal lunch and learning to use silverware
properly.

But at Wipro, employees accept the training as competitive weaponry.
They learn to "understand the context of the relationship," as Acharya
says, and to home in on customers' problems. In small groups, engineers
practice asking pointed questions about clients' companies, their
businesses, and their people. "Our people are accustomed to speaking
from Wipro's view," says Acharya. "They must learn to speak from the
customer's view."

Employees are taught to analyze situations and to define the scale and
scope of a problem. They learn to "prewire" a presentation, talking to
everyone involved ahead of time to prevent nasty surprises. And they
are instructed in the fine arts of negotiating and closing a deal.
Every new engineer -- and Wipro hired 2,200 engineers in a six-month
period last year -- has some consulting perspective built into his
45-day indoctrination.

Where does all of this lead? Up the food chain. Teach engineers to
think like consultants, make them experts in their clients' industries,
and you forge a workforce that will keep pushing the business forward.
Wipro expects that strategy consulting will ultimately account for just
10% of its technology revenue. But those slivers, such as current
consulting gigs at General Motors and Nationwide Insurance, will drive
long-term relationships with clients, producing steady streams of
outsourcing revenue.

Wipro hopes to win more high-level contracts like the one from Storage
Technology Corp., which this year agreed to outsource the design and
engineering of a line of tape-storage devices. By 2004, Wipro employees
will take responsibility for the products' development, supplanting
Storage Technology workers in Minneapolis. And in September, Wipro took
over a whole R&D facility for Ericsson. Beyond accepting the financial
risk, the 120-person Wipro team will manage the research process.

Here, then, is Wipro's challenge. New business will come, because in a
global downturn, everyone is looking to slash costs. For Wipro, Power
Consulting is all about turning that opportunity into an inflection
point. It's about restructuring straightforward commodity work into
high-value partnerships. It's about selling something that no one in
the world can replicate.

The Boss: Outsourcing as a way of life

Some 8,300 miles from Bangalore, Wipro chairman and managing director
Azim H. Premji slides into the front seat of a Lincoln Town Car for the
journey into Manhattan. He is a courtly man, silver haired and
impeccably dressed. This morning, he is pitching some of Wipro's
biggest clients and prospects. He has run late with Verizon Wireless,
and he worries now about making an important appointment at J.P. Morgan
Chase.

Premji's story is near legend in India, largely because with a fortune
estimated at $6 billion, he is by far the nation's wealthiest
individual. In 1946, his father founded the Western India Vegetable
Products Company to manufacture and distribute cooking oils. The elder
Premji died suddenly in 1966, obliging his son to cut short his studies
at Stanford to take over the family business. ( He finished his
electrical engineering degree in 1999. )

Premji proved to be a shrewd opportunist. He diversified into
personal-care products and then into lightbulbs. In the early 1980s,
after India walled off its economy and shooed away foreign technology
companies, Wipro ginned up an R&D lab and produced a passable knockoff
of Digital Equipment's PDP11 minicomputer. Within a few years, having
concocted its own operating system and semiconductors, Wipro was the
leading manufacturer of personal computers, printers, and scanners in
India.

When India reopened its gates in 1990, Premji acknowledged that Wipro
could not compete with PC imports. But he had his R&D lab, filled with
some of India's best talent. So Premji began renting it out to the rest
of the world. His engineers designed semiconductors for Texas
Instruments, phones for Nokia, and switches and routers for Nortel.
Then they started tinkering with software.

Here's what he will tell the executives at J.P. Morgan Chase: "What's

happening now in services is what happened 15 years ago in
manufacturing. It started in software, in application development. It's
moving to software-enabled services. Call centers, legal services,
medical. Wherever work can be removed and done somewhere else, it will
be done where it's most cost-effective.

"Take a large law firm. The clerks and paralegals could be trained in
India, serving partners and associates in the U.S. Salomon Smith Barney
has a big research staff here. Why can't 60% of its reports be done
from India? Why should they require everyone to be in the United
States?" Wipro just signed a contract to interpret radiology images for
a major American research hospital. Indian radiologists will, in
effect, provide the hospital's second and third shifts.

Why should everyone be in the United States? In his understated way,
Premji delights in this question. "I have had meetings in the past year
with the top partners of a U.S. accounting firm. One year ago, they
thought that the Indian model was not important. Six months back, they
raised their target for outsourced jobs to 2,000. Now they're talking
about raising it to 25,000. They will get to that number. If they
don't, they'll be out of business."

Of course, this is a fair bit of bluster. But a few blocks away,
executives at Accenture's New York offices are struggling with exactly
the dilemma that Premji proposes. Accenture is more than 10 times
Wipro's size. It can take on huge outsourcing projects, such as running
a global company's data center, that Wipro won't be able to touch for
years, if ever. Still, when Lattice Group wanted to outsource systems
integration for its fiber-optic network in the United Kingdom, it
awarded the $70 million contract to Wipro.

So Accenture has upped its Indian outsourced workforce eightfold, to
800 this year, even as it has fired partners and cut bonuses in the
United States. In November, troubled EDS boasted that it would have
20,000 employees working offshore by 2004. It will spend $100 million
to open a new business-process outsourcing center in India by spring
and to build up similar capabilities in Argentina, Hungary, New
Zealand, and other countries.

Wipro, in other words, is charging upstream into consulting and other
high-value services while its bigger American rivals are rushing
downstream. Vivek Paul argues that "both ends of the spectrum are
racing for the same point. Neither strategy is easy. It's not easy to
build a strong global-delivery model, and it's not easy to rent real
estate in India and hire engineers. But ultimately, the center point is
where the big players will play."

As it nears the center, Wipro is taking pains to seem less, well,
Indian. A true global company, Premji reasons, appears to be local
wherever it does business. That's one reason why he's sharing his
limousine today with Richard S. Garnick, a 20-year technology-sales
veteran who joined Wipro last year to head its American field
operations. In July, Wipro hired Steve Zucker, a former top U.S. sales
executive for EDS, to lead its push into total outsourcing deals.

Within two years, Wipro says, three-quarters of the employees its
customers see will be local nationals: American, European, or Asian. It
will hire local talent and buy companies that give it instant industry
presence. In November, for example, the company paid $26 million for
the energy practice of American Management Systems, buying not just
credibility but 90 consultants and 50 existing client relationships.
And within two years, Wipro will likely begin shipping development work
to locations where workers are paid even less than in India. It will
itself look offshore, perhaps to the Philippines or Vietnam. This is
what a truly global company does. It operates close to its customers,
and it constantly seeks opportunities to arbitrage labor markets.

Back in Bangalore, the folks at Wipro are paying close attention to
this. Not just Premji and his top executives, and not just the
marketing department. Every Wednesday morning, Paul emails his "weekly
highlights" to every Wipro Technologies group employee. He recounts
each contract win and loss, assesses the state of the industry, and
lays out Wipro's near-term strategy.

And amid the blonde-and-gray cubicles at Electronic City, in the
massive lunchroom where servers fill steel trays with rice and curries,
employees digest every word. They know all about Accenture and EDS,
about the accounting firms and IBM Global Services. And they're not one
bit daunted. "We are getting confidence that we're world-class," says
Vinayachandron P S, a 35-year-old program manager in Wipro's Oracle
practice. "It's a fact now. We know we can beat them."

The Mission: "We should be world-class"

On my last day in India, I flew to Mumbai ( formerly Bombay ). Mumbai
is one of the world's biggest cities: seven islands in the Arabian Sea
land-filled together and crammed with 16 million people. There are
slums, of course, with people living on top of one another amid mud and
garbage. There is wealth too. Or at least the remnants of wealth:
spiraling buildings, many now in decay, built during India's two
centuries under British rule.

India won its independence in 1947, yet its people are still coming to
terms with the result. Arguably, the second most-populous country in
the world has little to show for the past half-century. It has
forfeited leadership in manufacturing to its Asian neighbors, exported
many of its brightest minds to Europe and America, and grown poorer.

Imagine, then, that you are a young Indian engineer working for an
Indian technology company that is successfully starting to challenge
some of the most established service providers on the planet. Yes, you
want to make good money and buy a home. But just as likely, your work
isn't solely about personal achievement or even your employer's market
cap: It's a statement of national identity. "There is the same feeling
that I found in Japan many years ago," says Gurcharan Das, the retired
head of Procter & Gamble India, now a writer and venture capitalist.
"In the 1970s, I visited a factory there; it may have been Toyota. And
a worker told me that he was working for the greater glory of Japan.
It's the same sense of destiny that is partly driving these people
today in India."

There is a young marketing strategist at Wipro named Anupam Mukerji
whom I came to know during my stay. Mukerji works tirelessly. He has
the Indian equivalent of an MBA, but he could have gone to Wharton and
joined an American consulting firm. In one of our first conversations,
he revealed some of the emotion that I later heard echoed in different
ways throughout the company: "All of us were brought up with the
thought that India was once great. We had such a rich heritage. Under
the British, we lost a lot of that. Now we're rebuilding.

"Indians are proud and patriotic. Many people feel that we're superior
in math and science. We invented the sundial and the numeral zero. So
we think that in anything having to do with technology, we should be
world-class."

Wipro won't soon stand shoulder to shoulder with Accenture or EDS or
Deloitte Consulting. It will struggle to create a brand that truly can
compete with those of the big boys. But there is some powerful passion
at work here. Wipro's employees are intense and brimming with
confidence. They know how good they are. They are enjoying themselves.
And really, how long has it been since we could say that about most
American workers?

The people at Wipro have seen the future, and it is them. They are the
explosions, brilliant and exhilarating ( and, yes, cheap ). Again,
think hard. How will you compete with that?

Sidebar: Boom times in Bangalore
Bangalore has the neglected feel of any number of developing cities.
Overstuffed trucks vie with motorized rickshaws and mule-drawn carts
for control of the few paved roadways. Ragged children chase dogs
around corrugated-aluminum slums, and women sweep the streets with
straw brooms.

It lends an eerie cast to Bangalore's technology-driven building boom.
The skeletons of new buildings are visible everywhere around the city's
dusty suburbs. They are gangly affairs with cement floors propped up by
raw tree limbs and the odd scarecrow dangling from a beam. Soon,
though, they will teem with technology workers.

"Yeah, it's weird," says a manager from a big U.S. media company sent
here to oversee his company's nascent outsourcing operation. "It's like
we're training our own replacements." IBM has a big development center
in Bangalore. So do Dell, Fujitsu, and Siemens. Motorola just announced
it will spend $13 million to build a 280,000- square-foot R&D facility
in Bangalore.

Can this explosion be sustained? In a study commissioned by an Indian
tech trade group, McKinsey & Co. estimated that the IT-services
industry will continue to grow at a rate of more than 30% a year,
reaching $77 billion and accounting for 7% of India's GDP by 2008. That
growth, McKinsey & Co. predicts, will create more than 4 million jobs.

Even so, that many jobs would make just a dent in the nation's poor,
uneducated population. While Bangalore's streets are packed with
students in prim uniforms, very few rural kids make it past primary
school. Just 6% of the population get to the university level.

To extend the boom's impact, India must educate more of its people. And
therein lies the conundrum: As schooling and employment improve,
incomes will go up. But it's the nation's poverty, in essence, that
makes it so appealing to IBM, Oracle, and other companies as a source
of low-cost labor. A higher standard of living, so desirable on one
level, will threaten India's competitive advantage. That's why the next
decade will pose a delicate dance for India. The country could fashion
itself into an enormous economic power. Just as easily, though, it
could price itself out of the outsourcing business.

Keith H. Hammonds ( khammonds@fastcompany.com ) is a senior editor
based in New York. Learn more about Wipro on the Web (
http://www.wipro.com ).

Help to Keep ZaZona.com Online

Donate to the Cause at
http://www.zazona.com/Donations.htm
To Subscribe or Unsubcribe send an email to

Back to archives