Focus on building EQ

Emotional intelligence (EI) refers to the ability to perceive, control and evaluate emotions. Some researchers suggest that emotional intelligence can be learned and strengthened, while others claim it is an inborn characteristic. Most commonly accepted belief is that EQ can be acquired over time and comes to most with age.

There is also lot of discussion on what is more important – IQ or EQ.

Whereas academic success is largely attributed to IQ, professional success is largely attributed to EQ. In fact, psychologists generally agree that among the ingredients for success, IQ counts for roughly 10% (at best 25%); the rest depends on everything else—including EQ. (Bressert, 2007)

• "…a national insurance company found that sales agents who were weak in emotional competencies such as self-confidence, initiative, and empathy sold policies with an average premium of $54,000. Not bad, right? Well, compared to agents who scored high in a majority of emotional competencies, they sold policies worth an average of $114,000." (Cooper, 2013)

• "Research carried out by the Carnegie Institute of Technology shows that 85 percent of your financial success is due to skills in “human engineering,” your personality and ability to communicate, negotiate, and lead. Shockingly, only 15 percent is due to technical knowledge. Additionally, Nobel Prize winning Israeli-American psychologist, Daniel Kahneman, found that people would rather do business with a person they like and trust rather than someone they don’t, even if the likeable person is offering a lower quality product or service at a higher price." (Jensen, 2012)

All of this leads us to believe that the most important attribute that a leader can have is EQ and EQ is simply an ability to perceive, control & evaluate emotions.

A leader who often loses temper at her people has low EQ and such leaders typically lead by their power or position and rarely by influence or persuation. Leading by power rarely builds loyalty or self motivated teams and hence most EQ deficient leaders often wonder "Why can't my team get it?" and are therefore often found to function at levels far lower than where they must operate, which further directly impacts their ability to build strong leadership pipeline because they leave no room for others to grow or operate.

This article is inspired by Kendra Cherry's compilation of articles. Kendra is an author on psychology for About.com

Show “Unconditional Positive Regard (UPR)” towards your team

Unconditional Positive Regard”, a term used by Carl Rogers, father of humanistic approach to psychology,  is complete support and acceptance of a person no matter what the person says or does.

How UPR helps at work

UPR establishes a deep bond between an individual and his manager. And as long as manager is fair and doesn’t let relationships come in the way of his professional conduct, UPR can do wonders. Let’s see how:

a)      UPR helps improve performance - One of the factors that plays an important role in an individual’s performance is the ability of his manager to provide “timely” and “relevant” feedback AND in an individual’s ability to “absorb” that feedback. However simple these terms may sound, they have a profound impact on performance and yet they are rarely practiced.

• Relevant – Relevant feedback is all about providing specific feedback on issues that may sometimes look trivial e.g. issue with written communication like emails or improper handling of  crucial situations or even certain words used in meetings. Most managers do not provide this specific feedback but generally hold such behavior against the employee’s readiness to take on bigger roles. UPR creates an environment where a manager feels compelled to share such feedback because she knows that lack of feedback is eventually going to harm the employee. Since the manager begins to associate her success & failure with the success & failure of the employee, UPR creates an open environment.

• Timely – Feedback must be given regularly, typically very close to the observance of the behavior itself. Timely feedback also makes it more “relevant”. E.g. we often find ourselves providing immediate feedback to our loved ones at home knowing that they know our unconditional affection & concern for their well-being & success. It is the same concern that drives the behavior at work. UPR creates a strong professional bond that facilitates continuous flow of mutually beneficial discussion.

• Absorb – We all hear but we absorb only the part that we believe in or buy-in. Absorption ensures that the feedback isn’t lost but is put into practice. UPR creates trust that enables the employee to be open to feedback from his manager because of the credibility the manager develops in the employee’s mind. E.g. conversations, with managers with whom I enjoyed UPR, always left an impact on me not because others did not have a meaningful conversation with me but the fact that every word in UPR situation is seriously absorbed.

b)      UPR helps identify “accurate” issues impacting employees.

• Accurate – Often issues manifest themselves in other ways. E.g. if  I was upset at specific feedback I received from my manager and in turn ended up reprimanding a member of my team who tried to be innovative, it’s not the innovation that was the problem, it was my perception of unfair treatment by my manager that caused my behavior. Issue with such manifestations is that it makes it almost impossible to diagnose the problem. UPR creates an environment where it makes very easy for people to share the areas of their concern much more specifically without feeling awkward or embarrassed.

How is UPR established

UPR clearly creates desired environment at work that automatically improves motivation and hence productivity. Now the question is how do you create UPR ? In my opinion UPR can be created when you are able to earn respect from the employee without your power or position. Respect is typically earned by the following ways:

• Value system alignment. Since individual’s value system could vary, its best to align team with organization’s value system. This works particularly well in organizations that hold value system in high regard and where it is actually practiced and not just preached.
• Trust & Fairness – Create an environment where the team feels that their manager is fair. Fairness requires mutually agreed & transparently visible criteria for performance management & appraisals. Sense of fairness creates trust.
• Say what you do and do what you say – Manager needs to be consistent with actions & words
• Commitment – You show commitment and you will get commitment and if you don’t get despite you showing then you can demand it without being seen unreasonable or unfair. Be wary of those managers who expect the team to slog but aren’t prepared to jump in.

UPR at home is far more prevalent than at work, especially in a marriage. Talking about marriage, try telling your spouse that “no matter what you say or do, I will support you always and no matter who is at fault, I will the one to say sorry”. This statement alone can solve most of your marital discords in less than 5 seconds. But then don’t forget to walk the talk which of course if going to take much longer than few seconds.

Gurgaon Duathlon, Oct 27th, 2013 - Running and Living club

Being an avid half marathoner, thought of running a Duathlon first crossed my mind when it became obvious that despite my best efforts I wasn't able to get my breathing right in swimming. That put triathlon out of reach, at least for some time. I tried my legs with full marathon but earlier this year decided to keep it at bay for some more time because I was unable to manage the last quarter of the run well and it's never a great feeling for a runner to limp to the finish line. So a run + bike combination looked something different and a logical next milestone.

So I signed up for Gurgaon Duathlon. I created a 8 week practice plan. Since this was a run+bike+run combination and I did not want to invest in a bike right away so I decided to use gym bike with resistance. My training regime included bike+run or run+bike both to help me get used to the format. I planned a weekly routine that included a 20km gym biking followed by 3-5 km run on the treadmill, with a 1% incline to try to simulate cross country terrain. I also practiced 10K at 11 km/ hr or slightly better to build up some speed and did this at least once a week or sometimes twice a week.

Though I did not spend too much time on learning the nuances of biking, I did learn one thing that transition from bike to run is a bit tricky as the feet feel heavy and the body and the muscles take time to adjust to the new format. I think treadmill practice with resistance post biking definitely helped me simulate near run day conditions.

Anyway the race day approached. This was a 2 km run followed by 20 kms bike followed by a cross country run of 9.5 kms. My strategy was to try to use the initial 2 km run as a warm-up and use first 5 kms of biking as a test. Completed 2 kms of run in about 11 min. Cycling was fun, first 10 kms included good climb and the last 10 kms was on a flat road. Took a total of 44 minutes to complete 20 kms, not a great timing but I guess ok for my first experience on an ok rented bike.

Transition from biking to running was a challenge as the legs felt really heavy, my stride was almost half of my usual stride. To make maters more interesting there was a gradual climb from 1st km till 4th kms during the initial part of the cross country run. The track itself was beautiful - real country side in the Aravalis just outside Gurgaon. The track at times had little larger than the largest pebbles but smaller than the smallest boulders, the kinds where you cannot take your eyes off because you could end up with a twisted ankle. It was a 9.5 km run and I took about 54 minutes to finish in total time of 1:48 min against the first finishers time of 1:20. 

Interestingly I felt at my best during the last 5 kms of the event, something which is typically rare and was rather sad that the run finished so early, one of those days where you wish you had the opportunity to run longer!

As I earlier mentioned that it took me first few kms to get out of the transition phase but during the last 5 kms it felt as if the 20 kms biking consumed a different set of muscles and energy store.

Weather was great, temperature of around 24 degrees Celsius with low humidity.

In any case I loved the entire format and now I am seriously thinking of investing in a bike and taking up biking to complement my running.

Thanks to running and living club again for organizing a great event, their passion for the sport shows in everything they do.

 

Sustainable development for Tier 2 towns

Leave about 10-12 cities, the condition of the rest of towns and cities in India hasn't changed much. Crumbling roads, unsafe & unstructured local transportation, non-existent drains and ever increasing insecurity is a story you see everywhere. My issue with socialism starts here and no wonder states with more socialist attitudes are worse off. While we are on this topic I am also against the Detroit like capitalism, at the end any system with no control will create havoc!

Couple of years back I was invited by Fairfax county of Virginia to speak on an event they had organized at Bangalore to attract investments in their county. I was astonished at the corporatization of administration of cities and counties in the US. It is like running a company. Counties manage their profit & loss, raise money and debt as required and invest in building infrastructure to further attract investments. I know our socialist structures won't allow such a change and perhaps we are not ready yet. But we can begin to adopt some best practices.

A. Raising Investments - District machinery that comprises of the office of commissioner must be given a mandate and target to raise investments from businesses by creating fast-track approval windows and incentives for real estate. Come to think of it, their job is to provide efficient administration and one indicator of this must be their ability to attract investments. What do the businesses need the most in India? Fast track approvals and supportive government machinery.

B. Focus on Mass Employment Sectors - Units that create mass employment and drive secondary growth must be our focus areas. One of the easiest ways to create sustained growth is to create opportunities for Tourism. IT industry continues to look for low cost destinations and one of the models that can be employed by Tier-3 towns is to create an eco-system for IT and ITES companies to setup centers. Education and Organized retail also have the capability to provide mass employment and create an ecosystem for an overall growth of the city. Organized real estate both for investment and for self-use is another area that can help our tier 3-4 towns to get a face lift.

C. Organize unorganized retail - Every town and small city have farmers market on the road side, often leading to chaos not to mention the filth it creates. There is abundant government land lying vacant and it can be easily converted to makeshift commercial markets allowing small businesses and shopkeepers to find willing consumers for their products and services creating a WIN-WIN for all.

D. Low cost housing - Clusters of low cost housing must be developed and be made available to people at monthly EMIs. Banks can employ semi urban CSP (customer support point as used in Financial Inclusion) model to provide services and do recovery.

E. Tap Educational Institutions for growth - Higher education and professional education is widely available in most towns & cities and we must tap that infrastructure to make it work to improve quality of living in our towns. Again this requires initiative and will-power and not funding or even policy. 

Government has an important role to play here and instead of treating such initiatives as cash drain, it must rather play an active role in creating sustainability of such programs by formulating a strong policy framework. Government must therefore create an opportunity without providing a facility.

Each local administration must have a priority plan to address the following core issues:

1. Drainage and Garbage disposal
2. Security
3. Roads & Infrastructure
4. Stray animals
5. Crisis management

Perhaps right time for us to experiment by bringing in strong industry leaders to run our district administration? Why is this the purview of only the IAS officers ? Do we lack district administrators who have the drive and initiative ? Perhaps we do or do we just hide behind bureaucracy? Or find the system too tainted to be fixed ?

We still have very basic issues to resolve while we continue to march forward. Let's shake-up the system a little bit to build a country that we can all be more proud of. 

Boss, stop adding Value!

Surprised? I am sure you are not because most of us have wished this at some point in our career where we want our managers to stop adding value. I spent some time studying this in little more detail as part of my Psychology curriculum and here is what I discovered.

Disclaimer: This blog is specifically meant for team of high performers where not only the leader but a number of direct reports are high performers, self motivated and truly charged up to make a difference. Wherever this isn't the case either because of lack of skill/experience or motivation of the team, bosses need to use little autocratic styles of leadership and this article is irrelevant for such situations.

However what has been observed in high performing teams is that leaders often have a tendency to add value by always having an opinion in everything that their team does. Interestingly various authors who have studied this behavior argue that often there isn't more than additional 10% a leader can add to what the team has already thought through and planned. However in an attempt to add small incremental value the leader often ends up demotivating the team from executing 90%. Why ? Because the idea isn't their's anymore!

Those of you who understand what execution is all about would appreciate that any business plan executed to even 90% can do wonders! 

So why try to extract another 10% right away ? And why does a leader knowingly jeopardizes 90% execution by merely trying to add 10% value. Two reasons:

A. Not knowing how others feel and the impact their action has on others

B. Serious gap in the team's thought-process

Whereas A) is related to leadership maturity and EQ, B can perhaps be handled using 1-on-1 communication - Phone and/or email. I remember reading about leaders who would listen to a business plan very carefully and keenly and then later write a long email describing what they liked and what could be improved rather than react during meetings.

At the end a great leader is one who keeps a close eye but mostly stays out of the way of her team after having assured that she is always available to help, whenever anyone needs her.

It has been my fortune to have worked for several such leaders  and I wish one day I could stand in their league !

Always trying to add value isn't great leadership because it doesn't help in building a great team.

Financial Inclusion in India - Challenges & Opportunities

What is Financial Inclusion?

Financial inclusion is the delivery of financial services & products to sections of disadvantaged and low income segments of society, at an affordable cost in a fair and transparent manner by regulated mainstream institutional players. The term "financial inclusion" has gained importance since the early 2000s, and is a result of findings about financial exclusion and its direct correlation to poverty.

Where are we today?

It is estimated, that about 2.5 billion people or about half of the global population do not have access to any kind of formal banking services. In India, only 55% of the population have deposit accounts. Less than 20% of Indian population has life insurance coverage and only 10% have an access to any other kind of insurance coverage. The number of credit cards has hovered around 20-25 Million mark for last 4 years.

Reserve Bank of India’s vision for 2020 is to open nearly 600 million new customers' accounts and service them through a variety of channels. Some of the steps taken by RBI to fuel inclusive growth are:

1.    Setup of business correspondents (BCs):In January 2006, RBI permitted banks to engage business facilitators (BFs) and BCs as intermediaries for providing financial and banking services. The BC model allows banks to provide doorstep delivery of services, especially cash in-cash out transactions, thus addressing the last-mile problem. With effect from September 2010, for-profit companies have also been allowed to be engaged as BCs.

2.    Adoption of Electronic Benefit Transfer (EBT): Banks have been advised to implement EBT by leveraging Aadhaar & BCs to transfer social benefits electronically to the bank account of the beneficiary and deliver government benefits directly without a middle-man, thus reducing dependence on cash and lowering transaction costs.

3.    Relaxation on know-your-customer (KYC) norms: KYC requirements for opening bank accounts were relaxed for small accounts in August 2005, thereby simplifying procedures by stipulating that introduction by an account holder who has been subjected to the full KYC drill would suffice for opening such accounts.

 

4.    Simplified branch authorization: RBI permitted domestic commercial banks to freely open branches in smaller towns & cities with a population of less than 50,000 with general permission

5.    Opening of branches in rural areas: To further step up the opening of branches in rural areas banks have been mandated in the recent monetary policy to allocate at least 25% of the total number of branches to be opened during a year in rural areas.

It is worthy to note that Mangalam, a small town in Coimbatore district in Tamil Nadu, with a population of under 10,000 in 2001 became the first village in India where all households were provided banking facilities by the end of 2005.

Challenges 

Some of the policy changes to improve financial inclusion were hurriedly executed without setting up appropriate regulatory oversight or consumer education. Aggressive micro credit policies that were introduced to enhance financial inclusion resulted in consumers becoming quickly over-indebted to the point of committing suicide. There were large scale suicide cases reported.  We also witnessed repayment rates for Micro-lending organizations collapse after politicians in one of the country's largest states called on borrowers to stop paying back their loans, threatening the existence of the entire 4 billion a year Indian micro credit industry. Industry is still trying to recover from that setback.

It was also felt after a decade of efforts in this space that financial inclusion isn’t possible without financial education. We have seen even in mature & literate economies like the US, there are several social issues that arise from easy availability of credit. At the hind side this should have been anticipated but wasn’t. RBI launched National Strategy for Financial Education on July 16, 2012 with a vision to build “A financially aware and empowered India” with the following goals:

a) Create awareness and educate consumers on access to financial services, availability of various types of products and their features.

b) Change attitudes to translate knowledge into behavior.

c) Make consumers understand their rights and responsibilities as clients of financial services.

Opportunities

Given the focus government has on improving financial inclusion, this sector offers massive potential to entrepreneurs. Analysts put the initial estimates at over USD 2 Billion or 11,000 crore within the next 3 years alone. Let’s briefly look at the kind of opportunities that exist.

If you look at the graphics above opportunities primarily lie around interaction between various service providers and BCs. Few opportunities that are hot today include:

a)   Developing Next generation payment systems – Financial inclusivity deals with high volume but small ticket transactions. Existing payment gateways are too expensive and not built grounds-up to deal with the complexity & nature of this business. Therefore there is an acute need for a new payment gateway that is low cost and based on either Aadhaar or biometrics.  

b)   Mobile technology could be leveraged in various ways as there are over 700 Million people in India who have mobile phones. Today mobiles can do almost everything, from biometrics to even IRIS & document scanning. There are limitless applications one can think of.
 

c)    Financial Applications – Various financial applications be it in insurance, in capital markets or banking could be developed to be able to reach out to the rural masses. All these applications must be able to support Aadhaar, Biometrics & be able to work thru Business Correspondents.  

d)    Services – Setting up efficient BCs & training them to be able to conduct multiple businesses in another massive area of opportunity.

Very interesting times like these call for innovation & out of the box thinking. Wear your thinking hats, there is never going to be a better time.

Fresh college graduates need to recalibrate their expectations

If you are in an engineering college ranked 30th or higher and in the final or penultimate year of your education then you are most likely worried or should be worried because the IT juggernaut has slowed down and the news for all of you is that this time this is not cyclic but for real. So what about those "easy" IT jobs, yes that is a good question and I have a good news and a bad news for you.

Let's go back to how life was in mid nineties till IT services changed everything around us. I completed my degree from NIT Kurukshetra in Computer Science with good grades but had to work really hard to get a start. Campus placements were few and most of us had to work our way out of campus. It wasn't easy and life taught us tough lessons during our initial 6-12 months of our careers.

I read in the newspaper recently about few graduates protesting the decision of a large IT company delaying their joining dates. My word of advice to these young professionals is that they must understand the realities of capitalism. Getting a job isn't their right, it's a privilege. They must come to terms with the realities of our economy in general and specifically changing landscape of the IT industry.

So if I am in an engineering college today, what should I do ?

1. Unlike 2 decades ago, we have a very strong domestic market today, implies that there are ample opportunities to be part of something innovative. So seriously consider starting something path-breaking or being part of a new setup. There are of course other considerations before you jump into something like this and this option isn't easy but at least worth considering.

2. Specialize in something cutting edge. Learn new technologies end to end. E.g. If you wish to learn mobility, then don't ignore UI design, key is for you to really know an area in its entirety rather than just focusing on programming. So practice and develop some serious projects, volunteer to help a new start-up etc.

3. Higher education can never go out of fashion as it does broaden your horizons and perspectives so keep that option open.

4. Consider alternate careers. Education & Retail are two areas witnessing exponential growth. In addition, Real Estate is set for a complete makeover with government aggressively pushing its agenda to make it an organized sector. Financial inclusion and applications around Aadhar is another area getting lot of focus from the government and the private sector. There are limitless opportunities here. There is never going to be a better time to think about a career in these fields.

5. Last but not the least, tone down your expectations. Don't put a number in your head. Rather spend enormous amount of time in figuring out your passion. Remember, everything else is a distraction. It usually takes some time to figure out what you are really looking for and that is OK.

Good Luck !

International Women's Day 2013

“A woman is the full circle. Within her is the power to create, nurture and transform.”
~ By Diana Mariechild

It is my honor to write few words on the occasion of Women’s day. I am sure many men, including me, would struggle to find the right words on this occasion. Should I talk about the achievements women have made in the last few decades? Or the need for equality or empowerment ? But today I have chosen to talk about something that comes from my heart and something we can all influence in some ways or the other.

There is no doubt about the ever dominant role that women have been playing over the decades in professional, political & social life across the world, especially in India. In our industry alone we have over 35% women, who not only have contributed significantly in taking us from 0 to 100 Billion USD in 25 years but have also played active roles at home and in the society. When Harriet Beecher wrote “Women are the real architects of society.”, I am sure living in the 19th century she didn’t have an idea of what the 21st century would look like because Women are not just the architects of the society, they are also the architects of the IT industry and numerous other economies & industries the world over.

We live in a complex world with myriad forces influencing every decision, it is therefore imperative that the teams we create bring diverse thoughts and skills to the table. My own experience is that women have a much higher sense of commitment and bring a unique perspective to the table, which men often lack. Margret Thatcher once wrote "If you want something said, ask a man; if you want something done, ask a woman." Coming from one of the most successful politicians in the world, these words are worth their weight in gold.

"The fastest way to change society is to mobilize the women of the world.", Charles Malik wrote very aptly and it is so true in the Indian context. We are on the threshold of once in a lifetime opportunity. Our strong economic growth over the last few decades has also brought about massive changes in our society. However it is still very embarrassing to see condescending attitudes that some of us have towards women. We must also realize that no society can progress if one half is continuously oppressed or considered unequal. This is a cause that will require all of us to come forward and spread the message and most importantly we must first walk the talk to start with.

Our future relies on how well we educate our daughters. Whereas I have no doubts in my mind that you all belong to a strata of society that doesn’t distinguish between a boy & a girl but unfortunately we live in a world where a large section of the population continues to be gender biased. This is where we need to pay attention. I urge all of you to come forward and contribute in whatever way you can to create equality and ensure that every girl child gets the right education & attention. Only when we have ensured that we have done well to educate our daughters across the country is when we can be sure that our next generation will be better than us.

At the end to all my women colleagues “Women who seek to be equal with men lack ambition." Though Timothy Leary first said this but I am sure most of us would agree that women have the natural ability & perseverance to do better & reach higher heights, so go for it !

Thank you for creating, nurturing & transforming us, we will always be indebted to you. And wishing you all a Happy Women’s Day.

Engagement Models in IT Services

As I interact with my young colleagues at work I get constantly questioned on non-linear models and the challenges being faced by the industry. So I thought of writing 3 separate articles. This is Part 1 of the series on "Engagement Models in IT Services" that sets the context for Part 2 focusing on "Why Traditional IT Services Engagement Models are Failing" and Part 3 "Business Function Outsourcing" discusses the roadblocks that organisations face while implementing non-linear models.

Trust you will find this informative and if you do, please forward this to your colleagues so that they can take advantage of this shared knowledge.

 a) T&M (Time & Material) - Perhaps one of the most widely used models for most consulting, development & testing assignments. Here revenue is directly proportional to number of hours being put by the employees (the more the merrier !) 

b) Fixed Price - Essentially not very different from T&M as it is as linear as any other model except the fact that a vendor has complete flexibility in staffing & managing the project given that most risks are assumed by the vendor. This model is mostly employed wherever business problem can be clearly and unambiguously defined. This is also perceived as a better model than T&M because of the control that vendors have over execution.

c) Fixed Monthly is a hybrid between T&M and Fixed Price where a certain "productivity" is promised every month for a fixed rate. It has advantages over T&M as it ensures constant source of revenue irrespective of holidays & vacations and yet unlike Fixed Price, one is not bound by hard deliverable.

In all the three models above there is a direct linear correlation between revenues & size of workforce (hence called linear models). This puts significant demand on continuous hiring. To circumvent poor availability of qualified talent in the market most large to mid sized organizations mastered the art of hiring, training & deploying talent directly from the colleges. I won't be off if I were to say that Indian IT services firms have mastered this art more than any other industry in the world.

Let's now spend some time on various non-linear models being practiced in the industry. As the name suggests, the primary goal is to break the linearity between revenue growth & employee headcount.

d) License Fee-based - Perhaps this is where one begins to make a start towards nonlinear models. Few questions arise. Why would a services company create products ? In reality it is not the license revenue it is after but it is the services around the product like integration, maintenance, support & operations that is more rewarding. For now let's answer why would a services company even think of products or product based models. Two reasons 1) Product demonstrates competence and helps win related deals 2)  It is a stickier revenue, a huge plus for services company where revenue backlogs are always thin. But isn't services business quiet different from products ? Yes it is and this is one of the reasons why services companies have done a below average job of creating products as most of them have tried running both businesses together, a strategy that seems flawed at the onset. 

e) Platform based Services - This model marries product with services. Most product companies are not setup to provide more than basic professional services to integrate its product in a client's environment. Just like services companies struggle with products, product companies struggle with professional services because of two reasons 1) Inability to effectively create & manage bench and 2) High cost (and hence bill rates) due to lack of de-skilling of complex tasks. This is where traditional services companies do a good job by not only creating & managing bench strength but also build low cost talent pool that can not only provide integration services but also provide operations around it at an optimal cost by leveraging low-cost centers.

f) Gain Sharing - This is an outcome based model that tries to create a WIN-WIN for both clients & vendors. Clients get service usually at an upfront discount in lieu of sharing the gains with the vendors at a later time. My own experience has been that most clients like the idea initially but the proposal usually gets shot down at the CFO/CEO level as it is often considered as a risky proposition.

g) Joint IP Solutions - Clients & vendors agree to jointly work on solving a business problem. Typically most investments are made by the vendor who is able to create innovative solutions by combining client's sponsorship with it's own agility & lower cost. Vendors gain by not only learning domain but creating solutions that can be taken to market. Clients gain because get the required resources to create these solutions which otherwise wouldn't have been possible because of lack of funding & bandwidth.

h) SaaS - Software as a service isn't new and has been existing for last 15 years. In this model clients typically pays per use and are oblivious of what the vendor needs to do to provide a service. Salesforce.com is one of the most commonly used SaaS. This model allows Transaction based pricing.

At this point it makes sense to introduce the concept of Business Function Outsourcing (BFO), which in recent years is emerging to replace individual function outsourcing. In BFO a client outsources an entire business function rather than pieces of it.

Now consider a case where an investment bank decides to outsource a business function around middle office settlement operations for Listed Derivatives. In a traditional model following modus operandi is followed:

1. Engage a process consulting vendor to review the entire operations and recommend possible improvements.
2. Engage an IT firm to enhance/develop IT applications based on recommended process improvements
3. Setup an IT team to make required changes and same or a different team for ongoing maintenance.
4. Engage a QA team to test the changes.
5. Setup operations team to perform day-to-day operations.
6. Setup a production support team to support the IT applications

If you notice there are multiple touch points by the bank with one or more vendors to perform 1-6 above. There is also significant time spent by the bank in managing these relationships and in coordination, prioritization & in oversight.

Alternately the bank could decide to outsource the entire settlement function. In such situations vendor would either use the client's existing application suite or implement an industry known platform or even write a new one (rare). All IT & operations are therefore managed by a single vendor. SaaS & Platform based services are two models that allow complete business function outsourcing. This also helps the clients turn their fixed spend into variable spend as BFO makes transaction based pricing possible.

Headstrong (A GENPACT company) has a platform called Teevra that allows clients to do real-time settlement & allocation of listed derivatives. Teevra even provides connectivity to 15 different clearinghouses. This platform provides "Settlement as a service" to our clients.

Trust this provides a good overview of various models. Do write to me in case you have any feedback or would like to suggest a topic for future.

Why Traditional IT Services Engagement Models are Failing

IT Industry has come a long way since the late eighties. It has almost changed the face of India. We are perhaps the only country in the world that has a good visibility of moving from a developing nation to a developed nation with the backing of a strong services economy. Every other developed nation did this on the basis of manufacturing. Unlike manufacturing, that deals largely with machines, services industry deals with people on both sides of the value chain. IT services, in particular, relies largely on adding new workforce to increase revenues. This industry has grown from less than 100,000 employees in 1995 to over 3.5M employees today. We are already witnessing traditional HR paradigms being challenged as knowledge workers demand individuality whereas at such a scale only a cookie-cutter approach can work !

How relevant are the existing engagement models today and what are the challenges being faced ?

a) Most of the innovation in this industry in the last 2 decades has taken place in improving productivity & margins so it is not surprising that there is very little juice left for productivity improvements. How do you become more profitable in an environment where inputs costs continue to rise ? Linear models leave very little scope for increasing productivity or margins as most gains have already been achieved.

b) Business environment has changed. Companies are looking to focus more on core businesses and trying to variable-ize spending on non-core areas. Even the definition of non-core continues to change. Technology, once considered as core to an Investment Bank, is now being seen as a commodity. BFO is therefore emerging as the new need for managing non-core pieces of the business. Traditional models have no answer to this new need.

c) Industry has matured in the last 2 decades. Factors once considered as differentiators like scale, infrastructure, execution capability & quality of people are no longer considered as differentiators because the gap between the average & the best player in the industry has substantially reduced. How can one create differentiation in T&M & FP models if scale, infrastructure, execution capability & people are found to be alike in almost every organization?

d) As discussed earlier, there is a direct correlation between revenue growth and employee count. As the industry grew there was a higher need for qualified talent and that has already put lot of pressure on both the size as well as quality of the talent pool. Though the number of engineering graduates has become 10 times from 50,000 to 500,000 in the last 15 years, Academia & government continues to be very stressed to meet the ever growing demand . This imbalance in demand & supply has also resulted in increase of labor costs. Somewhere this linear cycle needs to be broken.

So as you can see linear models are falling flat to the changing business environment. Various nonlinear models like Gain sharing, SaaS & Platform based outsourcing rely heavily on IP and institutionalized domain knowledge rather than on individuals or on operational efficiency.

Our future depends on how quickly we are able to make a shift towards building IP & foster an environment of innovation else the industry will die within the next decade.

I also suggest you read critical analysis on the IT industry and Business Function Outsourcing

Business Function Outsourcing - Close yet very far!

IT Services Industry is moving fast towards Business Function Outsourcing (BFO). Read Why Traditional Models are failing to know what is driving this change. This is not a new concept and has been existing for a while but the industry has been very slow with its adoption. What is holding the industry back ?

Reasons behind Slow Adoption

a) Lack of Intimate knowledge of the Client Business. Industry has so far focused on achieving operational efficiency and building infrastructure and scale. The need for learning client's business was never felt that urgently because there was no dearth of business and the challenge was sheer execution. It's only when the pipeline has dried in the last 3 years is when the industry is beginning to realize its oversight. We have been a victim of our own success!

b) BFO requires confluence of Consulting, Product Development, IT & Operations - Those who have been in the industry know that these four businesses are very different from each other. Most IT Services organisations run consulting, IT & operations as separate horizontals and in silos. Bringing them together, therefore, isn't something that can be achieved overnight. On top of it, integrating Product development is even tougher. Why ? Cost points, revenue model, people policies, hiring practices, quality of infrastructure & leadership required for running these businesses is very different from each other. There are numerous examples in the industry where this confluence has been attempted and has failed.

So the trick is how to build strong "institutionalized" knowledge of the domain and bring consulting, product development, IT & Operations together to perform full business function outsourcing. 

Lot of companies are trying to solve this problem but unfortunately most seem to be making similar mistakes because we are all trying to "tweak" our proven models rather than unlearning what we have learnt !

What we have learnt so well is:

a) Build scale by institutionalizing our learning & processes
b) Drive operational efficiency in every aspect of the business
c) Utilizing lower experience workforce to do complex tasks by de-skilling the job

It's time to perhaps unlearn some of this, if not all of it. Building capability & competence, a key requirement for BFO, is neither a scale game, nor you can succeed if the goal is operational efficiency at the onset nor you can use inexperience or "bench" workforce. Running IT & Operations, which is the second requirement for BFO, is very well known to the IT industry. How do you, therefore create an environment for innovation & creativity and marry it with scale? Whereas latter is Industry's sweet spot, the former is where it has struggled, an area product companies thrive at.

Looking at the failure rate across, it is obvious that something isn't right.

Common mistakes being made

1. One of the biggest issues I see is that most firms haven't changed their "process" for creating competence and hence have used existing business support groups, most importantly HR & Recruitment. This complex confluence of four different mindsets & businesses requires a grounds-up HR & Recruitment organisations, preferably coming from a product company rather than a services company as existing services paradigms are severely lacking for this new reality.

2. Another change that is a must but often over-looked is the need to establish a strong Take-ONLY relationship in which this group is entitled to draw the required talent it needs from the rest of the organisation but its own talent is unavailable. I have seen that the moment you create a differentiated group in a services company, more often than not it gets absorbed in daily rut because of revenue & delivery pressures. This alone is capable of killing any such initiative.

3. It is not possible to build products & platforms from grounds-up because it will take forever so this business has to be bought. Be it platform or product companies or even buying-out IT platform from Tier 1 banks to get started. My experience is that most public companies get bogged down in valuations and impact on bottom-line & street reaction rather than focusing on the fact that if we do not change we will be extinct !

At the end building true capability (not trained capability) and creating products & platform based services business for BFO is a very different beast that requires IT services firms to unlearn what they have learnt since last 2 decades. Perhaps this is best run as a separate entity that can draw whatever it needs from the parent without giving anything back.

Product creation or building Platforms and real domain capability is diagonally opposite to running a well oiled services business. No wonder a group of product companies recently broke away from NASSCOM to form its own consortium called iSPIRT. 

Industry-Academia Collaboration

I recently had an opportunity to attend Leadership Conclave organized by IIM Kashipur where we all gathered to debate the steps needed to improve Industry-Academia collaboration. It was the confluence of thoughts from various industry leaders that has motivated me to present the following views on Industry-Academia collaboration.

So what has really sparked this debate on Industry-Academia collaboration? The answer is unpreparedness of students to take on industry jobs. And why this discussion now ? Our expectations have changed due to pressure on the bottom-line and the rate of Growth. Some of the reasons behind the stated disconnect are:

1)      Lack of multi-dimensional learning – Today’s jobs have become far more complex. Ram Charan in his second edition of Leadership pipeline highlighted the fact that that there are lot more dimensions that have been added to our jobs today – Managing Cultural nuances because of multi-national interactions, managing different operating paradigms, lack of relationship network that is expected today & unreal growth expectations. Most institutes are still relying on traditional models of education or have failed to keep pace with changing needs. This is very evident in the services industry where the job at any level expects one to deal with various cultures both internally & externally, requires you to leverage your network and switch between various operating models as the economic & financial situation demands.

2)      Outdated Learning – In technology savvy industries, one of the biggest challenge is that Academia hasn’t kept up with the pace of research in that industry. Take telecom or even electrical as an example and one will find that the syllabus is lacking newer inventions which makes the prospective new employee handicap when they enter the industry.

What are really the solutions ? Quite a few and it starts with:

a)      Creation of Frameworks for Industry-Academia collaboration - This is the beginning. An institute must identify the industry it intends to service clearly establishing a collaboration framework with select companies in the identified industry. Exhaustive framework must be created that lays down modus operandi for joint research, participation in student-faculty selection programs, guest lectures, case study preparation and internship. Placement preference must therefore be given on the quality of participation from a company rather than on the compensation being offered by them at the time of campus placement. This framework must also address IP protection as this issue is likely to surface as advanced level of collaboration gets initiated.

b)      Course Enhancement – Of course the easiest way to fix outdated leaning is to regularly enhance course work to keep it in line with the changing industry. However it is always not possible so course enhancement can be done by associating relevant case studies to reflect complex problems being solved in the industry.

c)       Practitioners be preachers and vice versa – Important courses must have an aligned Industry practitioner as co-faculty. This would help in bridging the gap between theory & practice as the industry co-faculty can help make the course contents relevant by citing industry relevance & usage, sometimes using case studies and at times using tours and workshops. Similarly, institute’s faculty can hugely benefit by taking a deputation in related companies to help them solve or research their current issues. This would also help in multi-dimensional learning as more interactions with the industry will help students pick up the secondary skills they need.

d)      Diversity – Both in the class and outside. To achieve this, current methods of selection to various courses must facilitate diversity of students to enroll e.g. MBAs must allow access to vocational & arts students of repute to enroll. This will help broaden the perspectives. Similarly exchange programs must allow students from different cultures & streams to interact.

e)      Build Industry Perspective at the start – It is often noticed that new entrants to the industry often have very limited exposure to the job content. It can be really useful to have the students get an overview of various careers at the onset. This coupled with higher number of electives can help students focus on areas of specialization of their own interest rather than spending time on topics of little or no interest. A 30% - 70% is a good rule between core & electives.

Improving Industry-Academia collaboration does require constant vigil and the conclave organized recently by IIM Kashipur is a step in the right direction. We, as industry, have a responsibility to help Academia improve the quality of education. And it starts by acknowledging the difference between the need to educate from the need to train.

IT Industry - A critical Perspective

Graduating from NIT Kurukshetra and entering into the corporate world in 1994 looked like a very elite milestone during those days. Knew that I was part of only 50,000 successful engineers to do so in India. If you are graduating as an engineer today then you are one among 600,000 engineering graduates being churned out and more than half, irrespective of your primary discipline, will get absorbed in the IT industry.

No wonder fresh graduates entering the (IT) industry find themselves to be part of a herd having to grapple with 9 hour work rules, dress codes, strict adherence to processes, online trainings, under-staffed HR and under-pressured recruitment and resource management groups. Recently I was at an IIM for a lecture on the industry and wasn't surprised to hear severe discontentment among the students who worked with IT companies and were forced to pursue their MBA with an intention to switch to an alternate career. Reminds me of the infamous 'Cattle class' comment Shashi Tharoor once made !

While introspecting our journey in the last 2 decades, I find that there are two areas where we went wrong:

1. We, as industry leaders, have fallen prey to our own success. According to management theory, the best time to change is when you are down-under! Does this imply that when times are good there is no need for a change? It seems so because when the industry was riding the wave of labor arbitrage in the nineties, I wonder if any of us was thinking about what happens when the tide ebbs. Perhaps that was the time for us to work overtime to build strong domain capability whereas we  were all busy making ourselves operationally efficient and improving our profitability. As a result we continued to rely on traditional outsourcing models that are highly dependent on individuals rather than capability. So the only way we have learnt to increase revenue is by increasing people. Top 5 IT services companies today employs over 800,000 professionals up from less than 8,000 only 20 years back!

2. Okay, so we did not devise alternate models that were competency based and waited for too long but then why did we have to resort to 'Cattle Class' policies ? As the industry scaled we were in dire need of leaders who were expected to lead and not manage. Let me tell you a story that will perhaps explain what I am trying to state. I know someone, let's call him Prasad,  who joined a mid-sized IT services company and was greeted by the MD with a rose and a personalized message on day one. Of course there were just 200 people then and as the unit scaled to 2000, not only was Prasad expected to do just the same as his MD did but should have passed on that culture to his next level. Unfortunately the tradition stopped soon after as Prasad became busy running his own unit and never understood the importance of building a culture. Prasad's MD couldn't see the culture die so had no option but to devise a process of welcoming new employees by sending them a rose in an email ! Culture was "stabbed" that day.

Couple of years back I was in an HR conclave attended by the biggies of the industry and in one of the sessions HR heads from various companies debated passionately on how they have streamlined induction training and one HR head stood up and proudly announced  how they have completely 'automated' the 'process' where induction program is now video based with no 'human intervention'. We continue to stab the dead corpse!! Take 9 hour rule for instance. In any company of decent size, it is estimated that about 15-20% employees abuse flexibility so when companies devised 9 hour rule  it looked very fair and justified. While managing scale, one often relies on the front-line manager to uphold organization's culture & traditions but since we haven't had the time to groom them so no wonder there is misalignment & mistrust in the system. Policies have replaced what culture was doing before or is supposed to do.

So why didn't we create a culture by aligning front-line managers? That has to do with how we have rewarded managers. Today you can barely count on your fingertips the number of companies who disproportionately reward managers and leaders for imbibing culture and grooming leadership. We have chosen to rather reward on P&L accomplishments. The results are in front of us. We are operationally best in class but continue to struggle with emotionally relating to our employees, whom we fondly call "resources".

All is not lost, we need to focus on two things for course correction and both are easy said than done:

a) Continue to spend disproportionate time in innovating and

b) Celebrating those who build cultures and groom leadership.

Try doing this and we have a chance of making the "Cattle Class" tag disappear and continue to lead the outsourcing industry in the world.

My passion for Running, looking back...

I still remember first time I ran in the ninth grade about 24 years back to defeat my dream which often led me to believe that while I was trying to run, I wasn't moving forward. Memories of the course where I used to run, while my parents strolled, are still fresh in my mind. I used to gauge my performance each day by the landmark where I intercepted them along the way. Relived some of those memories recently during my visit to Ferozepur in Punjab during May this year, of course, missed my father who often looked back during those days to see if I was catching up faster than the previous day. He would have been really proud of me today !

Later that year and for next few years, I got engulfed in studies, though my dream kept coming back.

Life went fast forward for few more years and then one day found myself in a strategy conversation with my colleagues of batch of 90 planning to beat our senior 2 batches and emerge as the overall sports and cultural leader at Kurukshetra. Don't remember how I volunteered but remember shouldering the burden for my batch in the 5K and 10K competition. Couldn't finish to the podium in 5K but did so in 10K. We won the overall trophy that year.

Time flew once again and I often found myself running around Woodbridge mall in Iselin, NJ in bitter cold in the year 97. Same year got married. Life looked a bit of a race from then on, often thought about running but couldn't.

At the hind side, looking back at 2004, Reena, Avi and I were destined to return to India and after few months of settling down in Noida, buoyant by a busy and yet very satisfying professional life in headstrong, I started gradually picking up my lost passion, running.

Little irregular for most of 2005,6 & 7 before Anil Chawla gave a new meaning to my passion. Still remember competing in Delhi Dream run in winter of 2007 and called Anil immediately, remember being pushed by the organizers to clear the finish line.

The thought of waiting for a year to run another race was depressing so signed up straight for a half marathon at Mumbai for Jan 2008 event. That was the race I experienced 'wall' for the first time. Cheers around me were fainting fast and the pain was excruciating by the time I hit the 16th km mark. Felt like withdrawing from the race but I noticed the resolve in my fellow runners, men & women, young and not so young, each one on a mission to fulfill a personal milestone. It wasn't easy but I ran the last 500 meters at my best pace to finish strong. Learnt another lesson that day, that in life you are up against yourself most of the time and nothing else matters.

Since then never looked back, after 4 half marathons and two 10K events it's time to raise the bar again. Can't stop and be content with what has been achieved. Have learnt to always look ahead to what you can do next, but only after you have achieved what you wanted to and take the next goal, one at a time. And this time it is Mumbai marathon on Jan 15, 2012.

This story goes to all those who aspire to run but never get time, dream but do not fulfill them. Wake up one day and just do it !!

This one is also dedicated to my father who ignited my passion and to Anil who gave a new meaning to it.