Outsourcer's chief exec Vivek Paul talks on the rise of outsourcing, India's role and the bum rap the industry's getting.
Vivek Paul is at the center of the outsourcing debate. As vice chairman of Wipro Ltd. and CEO of Wipros global IT, product engineering and business process services segments, Paul has been central to the companys growth; the $1 billion company has 26,000 employees and 24 locations around the world. Editor in Chief Eric Lundquist interviewed Paul at the companys Mountain View, Calif., offices.
Why the dramatic rise in interest and activity in outsourcing?
In the 1990s we learned that manufacturing could be done anywhere. In the 2000s we are learning that knowledge can be done anywhere.
What are the limits?
Anything can be done because you have all the enabling technologies in place.
Are you a global company or a large outsourcing company based in India with many branches?
I think of ourselves as a global company, but I also know that is more of an ambition than a reality. Right now, we are a company from India selling to customers everywhere in the world. I also dont want to get ahead of myself, but its clear that ... we have to be a global company. We like to think of ourselves as a global company, but were not there yet.
From your perspective, what has the rise of the global services industry accomplished?
We are moving to a world where everything has technology in it. I cant buy a car that doesnt have many, many electronics in it. My briefcase is going to be smart. My house is going to be smart. If I do not have the ability to service all these electronics in a way that is cost-competitive, there is no progress. We would be in a gridlock. What has happened over the past few decades is that we who are in global delivery have solved something that otherwise would have brought technology innovation crashing down. We answered the question of how would you have met the rising demand for services around the rising installed base of technology. We were in a situation where technology could have hit a bottleneck, but we learned how to tap reservoirs of skills around the world.
Could you contrast that to an industry that has not seen the rise of the global services model?
Health care. You have a very highly regulated environment with no global delivery possible. Are the end users satisfied? No. Do they get the highest level of care possible? No. Are the people who pay for the service satisfied? No. They are paying an incredible amount of money. Are the people who actually deliver it satisfied?
And how about IT? Where does that fit in the services model?
The rising demand for services is particularly true in cases where you dont have one technology replacing another. In IT, you did not have client/ server technology replacing mainframes, but client/server came and sat on top of the old. Then you had distributed computing sit on top [of that]. Now you have generation after generation of technology sitting on top of each other, with Web services trying to sit on top of that.
And what is next for IT?
What has happened is that over the last few years, what started with IT and is now spreading to engineering is an increasing ability to unlock the potential around the world. To unlock capacity around the world. Any time you have a change of this magnitude, you always have people who are disenfranchised by that change and people who are enfranchised by that change.
Who are the enfranchised?
Clearly the users of technology, the people who pay for technology and companies like us who are the new-age service providers.
And the disenfranchised?
The disenfranchised, unfortunately, include that set of engineers who were working expecting a 15 percent salary hike that now becomes a 1 percent salary hike. It includes people who, in the short term, are out of a job. However, I believe that job loss is more a factor of U.S. economic conditions versus outsourcing. Four million jobs were lost as a result of the recession, and 300,000 were lost as a result of outsourcing.
Whether due to the economy or outsourcing, what can be done for those out of work?
The question is, can you create a training fund?
And the source of those funds?
We contribute to the H-1B funds. All of our workers end up contributing to the Social Security system of the United States without getting any benefits. We [the global service companies] pay almost $1 billion into Social Security funds without getting any value. Whenever we pay any of our employees who are here on assignment, they have to pay Social Security, but they are not eligible for those benefits.
Why India, and why is Wipro in a lead position in outsourcing?
Where India has an advantage and where Wipro has an advantage is from our investments in process quality. If we hadnt led with quality, outsourcing wouldnt be as large as it is.
What about steps beyond the outsourcing of services—application development and management? Are they next on the agenda?
There are very few boundaries we havent already breached. Anything that relates to application development, we have been doing. Anything that relates to application management, we have been doing. Data warehousing and Sarbanes-Oxley [Act of 2002] compliance are two examples of things we can already do.
Whats the next wave?
The new wave of things that are growing really fast is infrastructure management. We dont do the break/fix, but we do the management and redirecting of the infrastructure. Someone still has to do the break/fix. It doesnt matter where the management is. The other area is product development and design and testing.
And software development?
If you look at how we do software development, you find a very structured, process way of software development. It is rigorous and repeatable. It is much more of a factory environment.
And the front end of that, the business expertise needed to develop the software requirements?
You have to ask, "What are the systems I need to create to quickly launch business programs?" Customers want an integrated solution. You have to build the understanding of the customer domain. Thats what were trying to develop.
Has the concern about outsourcing been overblown?
Outsourcing is a card. But only one card in the deck. You want to be able to play it in the right circumstances. Oftentimes, we help customers understand what they shouldnt outsource.
Do you think the reason the outsourcing issue has become politicized this election year is because its such an easy target?
One reason is bad communication. To every one of the millions of unemployed people in the U.S., that job created in India looks like that was "my job." So, there is an issue of a job lost here is a job created there. As a result, there has been an enormous magnification of how much impact outsourcing has had. The second is, as a result of the type of economic recovery being made in this country, companies are not willing to open up the gates to hiring. Now you take that circumstance that in a political year it becomes a platform issue. It doesnt matter whether its right or wrong, its a political platform. You will see this issue being politicized because of the perception of "thats my job sitting over there."
How does that perception affect your company?
In our mind, it is very clear. Global trade is good. Global trade results in competitive industries and value for the buyer and the seller. To us, there is no reason to look down when someone looks us in the eye and asks, "What do you think about outsourcing?" Globalization is an unstoppable trend. You can try to slow it, but it will happen.
What is your advice to a student considering studying engineering? Will there be a job at graduation?
My view is that anyone who thinks that technology is done is just crazy. The amount of innovation yet to happen is mind-boggling. Everything is going to change again and again. The demand for technology in the U.S. will be unsurpassed. What possible reason is there to be anything but optimistic? So, the question would be not what should I do as a student, but what are our government leaders doing to make sure the country will have a stable economy?
And your advice for the 40-year-old engineer here in Silicon Valley whose job has been outsourced?
In this economy, the engineers are paying a price bigger than the others. Make sure that you are quickly getting yourself into arenas that are, in fact, pushing the edge of innovation. If your job involves sitting in a cubicle and not talking to anyone else, you are at risk. Get yourself into a role that is more attached to the customers or suppliers and is on the cutting edge of innovation.