Heads Don't Count... Don't Count Heads!

Much of the IT boom in India is based on "head count." Here is how it works. Say, an Indian IT company gets a $400,000 contract for software or other IT service-related work from an American client. The Indian firm is typically able to hire a proficient IT professional at an annual salary of $8,000. Such an employee, working at normal pace, is capable of producing in a year software or other IT services that have a market value of $30,000 in USA or Europe.

Let us assume the Indian IT firm, with this new $400,000 contract that it just negotiated, has its existing IT staff committed fully to other projects. This means the new project can be done only if the Indian company increases its head count by about 15. Given potential attrition from its professional workforce, perhaps a safer bet is to boost the head count by 20.

So, on any given day, hundreds of IT firms in India are scouring college campuses, classified ads, and job-related websites -- looking for IT professionals with requisite skills. The name of the business game becomes "head count." Those firms that are able to boost and then maintain their head count win out. On top of this, if the Indian IT firm can boost the productivity of the professional IT employee, then it benefits even more.

An IT giant such as Infosys has a head count of over 25,000, mostly IT professionals. Since it is a premier company with excellent working conditions, it is able to pick the cream of the crop from the new IT trained graduates. Its pleasant work campuses and enlightened human resource policies imply that attrition rates are low. Finally, by investing in the best available technology and through intensive training, Infosys is able to push up the average productivity of its IT employee to $40,000 per year or more.

Do the math: 25,000 IT professionals producing over $40,000 worth of project work per year. Presto, you have a billion dollar company!

It is no wonder that every Indian student seems to be chasing an IT degree, or at least a college degree with good English skills. After all, at $2,500 a year, even a Call Center job pays far above the average wage of a college educated Indian working at a typical domestic market-oriented or government job.

The head-count mantra, however, is beginning to attract some smart critics. People at the cutting edge of Indian IT industry are saying that increasing head count is simply the Information Age equivalent of amassing armies of the new economy "hewers of wood, and drawers of water." This new Information Age "plantation laborer" speaks C++, wears designer clothes and drives a Maruti-Suzuki car, but conceptually the Indian IT labor and their Indian IT sector emplyers are no different than economic value-creators slogging away in remote imperialist outposts to enrich the Euro-American multinational corporations...

....Unless, these Indian IT companies stop counting heads.

The ambitious among the Indian IT sector firms are saying "Don't count heads." A business model based on head counts would for ever remain at the poor and frayed end of the global value chain. These new breed Indian IT firms are saying: "Heads don't count."

These visionary managers and business leaders point out that, in their dealings with multinationals, some of the best IT firms in Israel and Ireland are able to garner between $500,000 to $1 million per IT professionals employed. This is the model, they say, the smart Indian IT firms should emulate.

Rather than boosting head counts, these leading managers in the Indian IT sector are trying to boost productivity through innovation, and to create globally marketable products rather than globally outsourced projects.

These new breed Indian IT firms are attempting to join a very tough and challenging global game. The winners of this game on the Indian side, if any emerge in the near future, are well worth watching.

Nik Dholakia