Impressive Success Story!

As I am going through the "From Concept to Hyper-growth" Video on YouTube by one of the Co-founders of YouTube - "Jawed Karim", I thought for a while, after Sanjaya Mallakar, it was time for Jawed to be on my Blog. Below is the Video shared from YouTube



By the way, how did i get onto this Video. In continuation of my thoughts after my last post, there were queries in my mind, how are the other guys doing? That meant to the companies like MSFT, GOOG, APPLE! A brief info based on the Q2 2007 results, and some crude and simple analysis similar to what i posted on Sasken.

• Google with 13748 full-time employees generated US$3.87 Billion last quarter with Profit After Tax (PAT) being 1.1 Billion US$. That meant every employee was contributing US$ 80,011 per quarter which meant 0.32 million US$ profit a year! This is really incredible!
• Apple with 20186 full(and part) -time employees generated US$5.41 Billion last quarter with Profit After Tax (PAT) being 818 Million US$. That meant every employee was contributing profit of US$ 40,523 per quarter which meant 0.16 million US$ profit a year!
• Microsoft with 76000 full-time employees world wide generated US$13.37 Billion last quarter with Profit After Tax (PAT) being 3.035 Billion US$. That meant every employee was contributing US$ 39,934 per quarter which meant 0.16 million US$ profit a year!

These three are currently the best IT Software(MS / Apple) / Hardware(Apple / MS) / Service(Ads - Google / MS) Companies!

When I did end up searching how GOOGLE name was born, ended up on Wikipedia and the page had info about Youtube which topped the list of the highest disclosed paid acquisition by Google. So what is the background of YouTube? Founded by three engineers with an Average age of 28 during Feb 2005 was acquired by Google in Oct 2006 for a whooping sum of US $ 1.65 billion. The fact that 17 month old company being acquired for US $ 1.65 billion is remarkable!

Let us get back to India and lets see the top 4 IT companies and see their story wrt last quarter

• Infy with 75971 employees generated US$872 Million last quarter with Profit After Tax (PAT) being 253 Million US$. That meant every employee was contributing US$ 3,324 per quarter which meant 13296 US$ profit a year! Is this really credible? WIll share my thoughts below
• TCS with 94902 employees generated US$1.3 Billion last quarter with Profit After Tax (PAT) being 291 Million US$. That meant every employee was contributing profit of US$ 3,066 per quarter which meant 12264 US$ profit a year!
• WIPRO with 72137 employees generated US$1.07 Billion last quarter with Profit After Tax (PAT) being 175 Million US$. That meant every employee was contributing US$ 2426 per quarter which meant 9704 US$ profit a year!
• Satyam with 38381 employees generated US$452 Million last quarter with Profit After Tax (PAT) being 93 Million US$. That meant every employee was contributing US$ 2426 per quarter which meant 9704 US$ profit a year!

It is surprising to see how similar the results are wrt Satyam and Wipro though their employee numbers and the Revenue numbers are very different! May be they are operating at a very optimal level by adopting the best practices etc. That is a different story!

Microsoft with US$ 44.2 Billion $ last year (2007) was ranked 49th in Fortune 500 companies. Sunguard with US$ 4.323 Billion was ranked 500th in the list. Here is the Full List! May be this year definitely Wipro and TCS will be qualified to be in the list! But i guess that list is for companies in US. Keeping that apart, since entire work engaged done by these companies is based on outsourcing it would be really worthwhile to see how will they respond to the challenge when the heat is ON! Will it be Cuts, CUts, and more Job Cuts especially because of the fact that IT industry in india has started greying with HIGH Salaries!

I guess a succesful product company like iFlex can be a good example for these folks to focus and be balanced to face the HEAT that might arise tomorrow! With the gigantic Size to which they have grown up to, is the time too late to react?

Remind you, it is not that these guys never tried doing products, both WIPRO and Infy have burnt good money in the process!

Coming to my earlier reference in the above Infy results posting, the only worry is if 25% work is not outsourced (may be

• OBAMA could be the reason if he wins the next election or
• OSAMA - can he still be the reason?) ,

assuming 25% engineers on bench, will Infy, Wipro, TCS be able to retain them their balance sheet would turn RED, RED, RED, VERY RED!

The above video can inspire some minds eventually that could lead to atleast one product (/ service similar to google unlike peanut IT service) out of India that could be bought @ 1 US$ Billion, which might set the change for the new entrepreneurs! :)

BTW I got handful amount of info on ITTIUM which is entirely a out-of-the-box company focussing on IP and their revenue model being licensing and royalty on the IP owned by them!

Is the IT Boom Over?

One of my 'Blog Friends' posted an interesting post on Job Hopping in IT Industry! That inspired me to post this one.

My 2 cents of thoughts based on some facts and my analysis on them is as below:

I feel IT Honey Moon or IT boom period ceases or the correction is due to happen very soon. The reasons being -

• Raising Rupee
• Raising Salaries

The IT Service companies (and the product counterpart which act like IT Service companies) are already feeling the HEAT. The higher attrition rate in the industry makes the situation worse.

Already the Tier-1 Companies Infy, Wipro, TCS, Satyam are looking for cheaper destinations like Bubaneswar, Mangalore, Coimbatore etc. They have even looking options at China, Malaysia and lesser known countries with Skilled Human Resource. Thus claiming they are multi-ethnic whatever shit name they use just to have good returns for their Investors!

What does this mean to us (IT Labour)? Our Jobs could be at stake. There could be correction which will see Layoffs, We might not see the consistent Salary Hikes (negative salary growth could also be foreseen). Why am I sounding like a very negative person? It is just a thought, based on some analysis. Let us dig in.

Raising Rupee / Salaries - How will it affect us, the later part (Raising Salaries) should make us 'HAPPIER'. Isnt IT?

Let us do some analysis on one of the Tier 2 companies, say Sasken.

• Sasken Q1 FY08 Revenues declared on July 20 stand at Rs 128.4 crore up 41%;.
• Consolidated Profit After Tax (PAT): Rs. 6.39 crore - decreases 31% vs Q1 FY07 .
• Employee strength stands at 3,513 as on June 30, 2007 .
• Utilization on the services side stands at 72.5% (am not sure what this means, but am assuming bench of around 28%)

(Source: http://www.sasken.com/newsroom/press/2007/20_Jul_2007.htm)

Let us take PAT which is 6.39 Crores, i.e. US $ 1.59Million. By crude and simple calculation, every employee is contributing around US$452 profit per quarter to Sasken, which is INR 18,104. Should this raise an ALARM! Definitely it would have, for me if i was working there! More over this number is a laughing stock for me. I dont consider this as a profitable business! The analysis for other Tier-2 companies could give similar results! If so, then it is a matter of worry for IT Service industry employees in general.

To add little optimism into the post, couple of days earlier Airtel anounced their results and the net profit is US$ 375 Million! Though we cannot compare head-on-head these two companies, but this information is just to highlight on the fact that what are profitable businesses doing currently.

As an employee (of any company), this little analysis could help us to identify / analyse how good my company is doing and what would my future hold in there! Whether current salary i am drawing, or current hike i am entitled to, 'is it eternal?'!

Let us get little more pessimistic, let us assume next quarter, a company (having 2500 employees) encounters a loss of US$1.59 Million. What would happen? The pressure from investors would lead the senior management to shave non-billable labour to save their ass and show lesser loss the coming quarter!

If I or You is part of that shaved labour, my or your salary cease, it would not be very easy to get a job (especially if you have more years of experience, or a big lot of around 500 employees get sacked, or recruitment not happening for my skillset etc. or may be lesser experienced and lesser cost and smarter guys can do my job).

If you have a car on EMI, it would cease to run, if a FLAT on EMI, the cheque might bounce back, if not on the first month, may be 4-6 months from the time of getting shaved! Then the Man Handlers (like Bouncers to keep the unruly crowd in Pub) from bank would appear at my home!

If this happens for an account having 500 ppl working in, this would result in a lot of unrest amongst the IT crowd and the society! If the things get worsen, either by US economy slowdown or change of decisions to outsource to lesser cost country, the possibility of more job cuts and more work less pay would be a certainty. The situation could be no different than Farmers when the crops or rain gods fail, if you have too many loans! Would this lead to a situation like Mass Suicides by IT employees (on the current lines of Farmers suicides like in Vidarbha region, Some parts of Karnataka, Andhra) etc. Though comparison might appear very silly today, it could be a reality tomorrow!

Some more analysis - the tier-1 companies offered the Cost Advantage to US companies creating a new industry a little while ago - the IT industry. In the process, created Brand Bangalore across the Globe, and loads of money to their investors and lesser but relatively better money for working ppl like us (knowledge labour). But they got us tagged with 'Cheap IT Labor', which actually showed in the work too. As of today, < 10% of the IT Work force i guess would be doing real quality work on similar lines to their teams working in High Cost Centers!

What do we need to do, for the existing customer not to cease giving us our bread through our organization is.

• It is assumed we are entitled to do our work very efficiently without any annoyance to the customer (does it really happen).
• Give Value Add Service along with the Service being offered
  - It is left to one's field of work .
• Stop exploiting the customer by over billing, shadow billing etc.
  - Time and again i have seen customer being billed for 2 resources when the work could have been done by one resource.
• Create IP for the customer, I have hardly seen, ppl doing this.
  - The mantra has been focus on the work assigned, do it and get out.
  - This would no longer work in Future.
• Innovate - Out Of the Box Thinkin, for yourself, your organization and your customer to maintain the Supply Chain for your Bread and to your Bank Needs for Car, Flat EMI or Fatty FOOD [:D]
  

Thus, to conclude, the question you need to ask you think, act WISEly to have a Safer Tomorrow for yourself and your loved ones!