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Infosys chairman touts rise of India

Posted by iTech - 2005-10-17

Twenty-five years ago, N. R. Narayana Murthy co-founded Infosys Technologies, the software services giant that has come to symbolize India's rise as a tech powerhouse.
Murthy, 59, is now chairman of the Bangalore-based company that has some 46,000 worldwide employees, including an office in Fremont.

Infosys, a subcontractor for many Western companies, provides an array of services, ranging from back-office support to consulting and software development. Infosys stock is traded in India as well as on the Nasdaq Stock Market in the United States.

The company is growing quickly: In the first half of the current fiscal year, it reported $1 billion in revenue -- the same amount it had for all of the previous year. For fiscal 2006, Infosys forecasts revenue will grow 34 percent.

In its most recent quarter, it hired more than 8,000 employees.

Murthy, who stepped down as Infosys chief executive in 2002, is India's tech guru and evangelist. He will retire from his chairman position next summer, when he turns 60.

He recently discussed India's rise in technology with the Mercury News at the company's 70-acre Bangalore campus. Here are edited excerpts from the interview:

Q Across Bangalore, you see sprawling new tech campuses, from SAP to Intel and Infosys. Companies can't seem to hire engineers fast enough. Is this boom sustainable?

A Yes, it is sustainable as long as we deliver value to our customers, as long as we attract the best and the brightest professionals, as long as we use speed, imagination and excellent execution -- and improve that. The day we stop doing that, we will disappear like dew on a sunny morning.

Q Is India benefiting from the global economic and technological shift that is occurring?

A Yes, and I define globalization as sourcing capital from where it is cheapest, sourcing talent from where it is best available, producing where it is most cost-effective and selling where the markets are -- without being constrained by natural boundaries. Today, the era of global corporations has arrived, whether we like it or not. You have to be competitive, not just with corporations in your own country, but you have to be competitive with corporations on a global scale. And this is the shape of things to come.

Q In Silicon Valley, nearly 150,000 jobs have been lost in five years. Meanwhile, companies in India are adding to their engineering ranks at dizzying speeds. Infosys alone plans to hire 5,000 more workers this year. What do you say to those in the United States who fear massive job losses to India?

A The U.S. has created more jobs than those that have migrated (overseas). (Economist) Paul Samuelson made a famous statement about how the U.S. may lose jobs. What he said was, if innovation were to be relegated to the second or third place, then the U.S. will be in danger of losing jobs. But as long as it is alive and kicking, as long as the companies are focused on the marketplace, I don't think there is any risk of the U.S. losing jobs.

Q The young engineers in Bangalore are brimming with confidence. Many talk about Bangalore surpassing Silicon Valley one day as the center of innovation. What do you think?

A I don't believe that. I think Silicon Valley will be the pre-eminent place for innovation in the world. The U.S. attracts the best talent from all over the world. You have created a system where you have an incentive for the best people in the world to come. You are also the most open society. You are a society that believes in competition, that believes in market forces. These are all the strengths that can't easily be surpassed. You have created such a monster. I am not sure that any other place can surpass Silicon Valley.

Q I am told by executives at Bangalore start-ups that stock options have not taken hold in the tech culture here.

A At Infosys, there is no problem with that. Everybody has seen many people make lots of money (through stock options). The problem is explaining why we have suspended them (in 2004) because of the expensing rule. (Accounting rule-makers in the United States are requiring companies to subtract the cost of stock options from profits for fiscal years that begin after June 15.)

I'm not very happy with that ruling. To me, stock options were instrumental in the democratization of wealth. They were instruments for leveling. For someone who is a capitalist in mind and a socialist at heart, these are all good things. We had to go by what the community decides. I accept that.

Q As India and China emerge as significant markets for new technology, what challenges do U.S. companies face reaching those new consumers? Must companies offer products at different price levels for these new markets?

A There is a considerable fortune to be made by corporations that focus on the bottom of the pyramid. You have something like 5 to 6 billion people in the world who are at the bottom of the pyramid.

I would say that if companies like Microsoft, Oracle and SAP were to come out with a pricing formula that will appeal to the people in India and China, they will make money. I would say that India, China, Brazil -- all these countries will become major markets for these companies, and I think the piracy rates will go down once they do that.

Q But will these companies have to use a different model than what they use in U.S. and European markets?

A You are right. For example, all support could be through the Net. Perhaps you could download the software. There should be no installation expertise required. It should be very, very, very low manpower. There is a tremendous opportunity.

Q Do you see the next Oracle or SAP coming out of India?

A I think it will happen. It will definitely happen. I believe that as we move forward, there will be Indian companies that will (use) the strength of India's development talents and the United States' strength in market focus, innovation and customer focus.

Q What's your time frame?

A It will definitely be in my lifetime, no doubt.

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