Policy Talk | Startups need to define their vision as an industry – Moneycontrol

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Yatish Rajawat – What was your objective in writing the book and what do you think is its impact?
Harish Mehta – I’ll go back to say, 3 years, when I was reading books of RBI governors, IAS officers, politicians, etc. I have been involved with NASSCOM from the beginning and have seen how NASSCOM and the IT industry have evolved and how India has changed, I’m very proud of what everyone has done in this process. However, I didn’t see any of those books giving any credit to our industry – NASSCOM is not even listed anywhere, leave alone its contribution. There is an African proverb you may remember or know, “If lions had historians the tales of hunting would be different.” So that drove me to write the book about the story of how the IT industry changed. Like Dr. Sumant Rao Bhosre used to say, 1000 years of the downward spiral of India was arrested by the IT industry of India. NASSCOM was the sutradhar driving it. So that is what I used as a theme in my book. We have put our stake on the ground, let the reader decide whether the claims we’re making are right or not.
In terms of the outcome today, we’ve received a fantastic response. I was frankly expecting several challenges to come from different sources. I’m not an author or an economist or a historian. So I had to put a team together to bring in different aspects of the book. I’m very happy so far, very good response.
YR – This was very important, it had to be written. One of the roles that NASSCOM played was representing the industry and it did that quite remarkably, particularly in the early 90s when so many of these technology companies that had exited India in the late 70s and early 80s wanted to come back. What was the role NASSCOM played in that period to allow them to come in as competitors to the Indian IT industry?
HM – Very interesting question. We were providing services to let’s say Fortune 500 low-end services, let’s say some of the best of the best engineers deployed in doing this work. When the customer saw the work our people were doing, they were impressed. They would say, my god, what takes our engineer, let’s say one month, these guys are doing in one week and not asking many questions and they understood. I mean phenomenal performance by our engineers. And, of course, the lower cost was very attractive, So they said why don’t we shift some of our back-office operations to India. When the proposal came to us we were a bit zapped. On the one hand, the global market was about USD 500 billion but what was exposed to us was only USD 10 billion because of so many roadblocks in the policies within India and also in the country that we were to offer our services to.. But we could see massive opportunities for us out of USD 500 billion. At least USD 100 billion was accessible provided we had a pipe and we had a Reserve Bank to cleanse up the money and allow us to set up subsidiaries. Some 100 regulations were strangulating us Now to earn their respect and their confidence, should we allow back office or not. Frankly, all of us were afraid that if they came to India they would take away our best people by paying double the salary.
YR – You were inviting competition…
HR – Exactly!  And then we say even our work which we are doing will classify under the back- office operation so should we allow it or not. But some of us were very confident that the market is so big. First of all, we were not familiar with all the quality processes. MNCs were way ahead of us in terms of setting infrastructure with the best practices and setting quality processes with the best practices. HR practices were very outstanding. Many of us had worked in the USA and we had seen that and were very proud of those practices, I would say. So we thought we could learn a lot from them if they were in India. And, who knows, if the market can expand overall in the process but we were still not able to take a call on it.
YR – It’s interesting. Typically, Indian industry associations have always lobbied for preventing the entry of foreign companies. Here NASSCOM was doing the reverse.
HM – Exactly. I’ll tell you how It happened. At that point somebody, I don’t know who that individual is, made a remark saying whoever develops the human capital of India is us and even an Indian company who doesn’t develop the human capital of India is not us, because our primary focus overall as you put it is to continuously develop the human capital of India. So that clinch you can say NASSCOM We talked to Mr. Kohli, Azim, Murthy, all the existing players, ‘do you have any serious objection?’ and everyone supported us frankly. And then we approached Dr. Manmohan Singh at that time saying that we will recommend allowing 100% ownership. And, of course, the bureaucracy was unhappy like the East India Company entered India again where they are allowing MNCs to come to India and take away whatever. Somebody said, ‘Tum Kiske Dalal ho? Finally, they saw, because we were ready with data, facts for what kind of potential exists for our business and they agreed and that’s how they were allowed to come in and today that business is 1800 R&D centers in India 100% owned, employing more than 1.1 million people.
YR – So it is very rare that industry associations move out of their so sectoral interests and start looking at the larger interest, especially  of developing human capital that if people get trained overall quality will improve. But this outlook doesn’t happen often. And why is that it happened then, but it is no longer happening now you know.
HR – Even in 2000, when the Satyam crisis happened, the industry looked much beyond. When Raju’s letter came out, within hours Som Mittal had a meeting with CEOs of NASSCOM, the top 25-30, and said what do we do, should we save Satyam or not, and most of us said by and large you know why should we save Satyam. It’s an individual company, it has shareholders, auditors, and it has a board of directors’ job to worry about it. It’s not NASSCOM’s job. But when we started discussing and debating we realized it is not saving Satyam, it is Satyam that has customers who have millions of other customers like a bank or telecom company.. If Satyam goes under, millions of customers would be on the road and that will hit India Inc’s brand badly.
All of us will lose business, nobody would like to do business with India then. So we said we must save Satyam, and Som called the then corporate affairs minister, Mr. Gupta, and he said we would like to share a proposal to give to you. We called other ministers and said that we should save Satyam. Again they had a similar reaction. Why should we try to save Satyam? But they all saw the value, they talked to the PM and others and came back to us and said yes, we would like to save Satyam but for us to take over it will take 3 to 4 weeks. They talked to SEBI’s Mr. Bhave, saying what would it take for us to do. So there were certain changes to be done, the Cabinet had to approve and it’s a process that had to be gone through.
They all had to figure out how to keep Satyam alive for a month. Som came back to all of us and said what do we do? We finally agreed on saying that none of us would proactively recruit senior managers from Satyam for 30 days and none of us would pro-actively go after Satyam’s customers for the next 30 days. Nowhere in the world has the industry come forward and saved a company. That’s again a unique characteristic of the Indian IT industry.
YR – It was a unique moment. A company was saved by the intervention of the industry. Now the same situations exist in start-ups, a lot of whom are firing people; some are likely to fail. Further, a funding winter is coming and a lot of start-ups will likely shut down because of this, not because of their business models being wrong. The second is that there is always a cloud of corporate governance more and more frequently in start-ups. There are organizations like the Indus Entrepreneur and other places where they can raise funding but there is no organization like NASSCOM which could maybe offer a safety net to their employees or tells them of best practices for corporate governance. What is your view on this?
HM – First of all, they should read my book, so that will hopefully give them an idea of what happened historically. By coming together and collaborating and competing and keeping India First as a strategy, how you can minimize the damage that you just referred to. Unfortunately start-ups have grown without any umbrella in that sense. There is a desperate need for a group of people to come together who are highly respected in the start-up world and frame certain processes and ways of doing things, like in NASSCOM we had appointed a committee under Narayan Murthy for coming up with a Code of Ethics that the industry should follow. It was not compulsory for NASSCOM members to follow. Start-ups need to come up with many such interventions to bring them together under one umbrella. They absolutely must first define the vision for start-ups as an industry. If you don’t have any direction, you are just looking at it from your narrow perspective. When you change the industry, you can change the world, and those ideas are what’s needed. Again, going back to our example of “who is us” as a basic question, these kinds of questions should come up amongst start-ups and I am sure they will find answers.
YR – And I think people like Sridhar, Vembu etc. should lead this initiative. I’m sure they will find a Dewang Mehta to evangelize it and a Harish Mehta to stitch together the various constituencies and egos that exist. I think the fundamental role is bringing a lot of big people together and making them focus on the larger interest. I mean a Narayan Murthy sitting with an Azim Premji at the same table and thinking not about their own individual companies but thinking about the country. I think that was what was different about NASSCOM in the first two decades of its existence.
YR – But do you think start-ups think of ‘India First’ at this moment?
HM – They don’t right now, there is nothing wrong, but they will not because they have not been mentored that way. Right now they have been mentored to keep valuation as the focus because they are driven by valuations and not values and that has to change .
All that has got to change, I mean all that. And if that’s the environment they are in – Angels and the VCs and the other communities, the press, and media, all talk about Unicorns and valuation as a big thing – naturally they also get tempted that is the way to go about it. There has to be a counter-force to explain what, where – now we may not even know how we have to learn over time. Start-ups will learn, they are very smart, I see them as very fearless, imaginative, and very enthusiastic entrepreneurs, they just require that spark to change their direction a bit.
YR – I don’t know whether you remember the roti, kapda, and bandwidth slogans. He had a very interesting knack for capturing a problem into a political slogan, typically something that politicians do very well. It’s rare that you have a president or a front of an industry association doing what politicians do. Now there is an interesting change and shift which is happening in the landscape. A lot of policy change is not coming out of Nasscom or coming out of or any other associations anymore. Digital public goods are coming out of one organization and are being adopted by the government.
HM – I don’t think it is very frankly our cup of tea to drive that, again if you look to get people like say Nandan and others who come up with these ideas. And it is only the young people, bright people who come up with these ideas and do it. It is their job really to do it.
We provide umbrella support. Nasscom provides umbrella support. We are fully 100% behind what they do. We don’t care where the idea is emerging from, as long as it helps the development of India we will go all out and support it. It doesn’t have to be from our stable. Again, who is NASSCOM? It isn’t owned by anybody, so the public owns it in some way so it doesn’t matter.
YR – Over the last 3 odd decades, what is the change you’ve seen while dealing with policy makers or with people concerned with technology-making policy. Is there any difference in the way they look at technology associations or is it the same?
HM –  No, it has changed, in many areas it has changed dramatically in a sense that in the beginning, our challenge was how do you increase the pie from USD 10 billion to USD 200 billion? That was the objective behind the policy-making process to ease the friction in doing business which involved 18 different departments to work with. The industry was USD 50 million then. Now we are USD 200 billion. Of course, the challenges are different. Today digitization has changed the world. It’s like a hockey curve and would also look flat. I mean phenomenal change has taken place now. It has opened a massive opportunity for our industry. Now our challenge is how do we make this our natural strength, and convert this competitive advantage into a sustainable advantage. How do you economize the ecosystem’s synergies? How do we push the innovation boundaries?
YR – Is the policy helping you in any of those areas?
HM – We don’t need the policy, it is more frankly internal in terms of companies having to fend for themselves and drive it. We can only act as a funnel or as what you call to create awareness of what the opportunities are and wherever we find the plugs we will plug that in. Like if you see when the lockdown came, suddenly we had to ship 3 million laptops from offices to home, NASSCOM moved quickly. It got declared as an essential service. The circular went to all 600 district collectors. 300+ districts where we operate, and each district collector has his way of interpreting the same. And then we worked. We had something like 180 volunteers and within one week these 3 million laptops were shifted home.
YR – It’s the largest shift in the history of the IT industry. Industry level pivot.
HM – Absolutely, so NASSCOM jumped in where it had to be done at a policy level to work both on policy change as well as the implementation of it. It happened that way.  But you can say that right now NASSCOM is more about ease of doing business and different, different points and, of course, aligning ourselves with global regulations. Tax-wise and aligning ourselves with global data, for example. That is the process we are working on right now.
YR – Wonderful! It was an interesting and enlightening conversation. Thank you.
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