How does Cognizant compare to Infosys
How does the business model of Indian IT companies such as Infosys, Tata Consultancy Services, Wipro and Co. work?
How does the business model of Indian IT companies such as Infosys, Tata Consultancy Services, Wipro and Co. work?
What do companies like Infosys, Tata Consultancy Services, Wipro, Mahindra Satyam, Cognizant and other large Indian IT companies actually do?
There is a lot of puzzling here because there is often not much to be found online. Here is some information about how their business model works.
In the 80s and 90s the demand for IT services in the USA increased sharply. There were few people in America who could do these programming tasks.
One of the first companies to recognize the potential of Indian IT experts was IBM (IBM now employs more people, around 130,000, on the subcontinent than in the USA). The company already had branches there in 1966.
Some of these ventures, for example, came about in collaboration with Tata. Tata Consultancy Services was established relatively soon afterwards (in 1968).
Infosys was founded in 1981. Founded by seven software programmers.
Wipro also entered the IT business in 1981. Whereby Wipro also belongs to a conglomerate like Tata.
Offshore outsourcing = India + USA
What many do not really notice is that the IT outsourcing is mainly an Indian-American relationship.
For example, 70,000 Indian Wipro employees (for example in 2012) were temporarily employed in the USA in the meantime.
For every employee in the USA there are usually teams on the subcontinent. This makes it very easy to get 140,000 employees at Wipro.
The situation is similar with Tata Consultancy Services. A total of more than 380,000 employees work here.
The main focus was always the USA.
How These Companies Work - The Bench Model
If you want to understand how Tata Consultancy Services and Co. work, you also have to understand the so-called bench model.
Bench - is the English word for bank.
The typical Indian IT company has almost 20 percent of the workforce sitting on the so-called bench at almost any point in time!
These employees are each waiting for their project. The system was partly co-invented by the large IT companies such as Infosys, Wipro and Tata Consultancy Services (TCS).
The idea is to always have enough employees who can be assigned to future projects.
Just think about it, with 385,000 employees at TCS, around 77,000 employees are free and without real work!
But that also means that if, for example, a large bank in the USA says: "We need 30,000 developers who will build a new banking system for us over the next 3 years". Then TCS says: “Yes, we currently have 30,000 employees who we can deploy immediately”.
It is clear that it is more worthwhile for the American bank to hire via TCS than to spend months and years hiring the necessary employees.
How exactly does the bench model work?
But how can that work? To keep 77,000 employees without real work in the company? Does it make sense?
To solve this challenge, Indian IT companies proceed as follows:
1) Hire directly from the university
Starting salaries are negligible for university graduates in India. Around 200 to 300 euros per month are sufficient.
Companies like Infosys or TCS make sure that they only hire the best of the best.
They go to the best universities in the country and recruit from there. This is also called “Campus Placement” or “Campus Recruitment”.
Ultimately, this means that almost all graduates or students in the final year of their training at the respective university take these tests. That’s like 500 and more students taking part at once. Out of these 500, maybe the 5 or 10 best will be selected.
If you repeat this relatively at the same time at several hundred universities and colleges, you quickly come to the several thousand people that you have to hire every month in order to do justice to the market.
2) Training for 6 to 12 months
Now comes the next phase.
Here, the new employees who have just left university receive training over 6 to 12 months.
Then they are ready and can be placed in projects.
3) The bench sale employee
Now it goes one step further.
There are sales employees in these companies whose job it is exclusively to “sell” the employees at the bank.
Then 100 or 500 employees are placed with existing or new customers at once for several months or years.
The complete outsourcing of the IT of a group
Another popular business model is taking over the entire IT of a group.
An insurance company may not want to take care of IT itself because it is not a core competence.
Many companies decide to completely outsource their IT to Indian IT companies. Many companies from Germany also make use of this option.
Nowadays it is not uncommon for you to go to the IT department of an American, Swiss or American corporate branch in Germany to only meet Indian faces.
However, this is often also about second level and third level support, i.e. rather simple tasks. Install software, server maintenance, etc., etc.
How complex are the tasks in such a large IT company
For a long time it was really just about downprogramming the simplest of tasks.
Or just to provide simple IT support.
The tasks therefore had a rather low level of complexity.
Do you really need very good university graduates for such tasks?
One may wonder why one needs the best of the best university graduates for such activities.
The reality is that overall quality in the higher education sector on the subcontinent is rather low. Therefore, you need the best of the best to achieve a good average.
At the same time, large IT companies have a choice. There are many applicants, so why settle for “anyone” when you can have the best of this group.
Change in values in the Indian IT industry
The Indian computer giants are slowly realizing that it is time to move into areas with higher added value.
The pure “body shopping” like most of the companies will possibly no longer exist, because the simple tasks like third level support or testing can most likely soon be taken over by automated software or automation tools.
That is why the big players in the industry, such as Infosys or TCS, are increasingly trying to penetrate new areas, such as software product development and marketing.
Although there is a knowledge that there is a change in values towards higher-quality services, the change is slow. You are too familiar with the old model.
Small bright spots
However, you can see more and more that such companies rely on more and more qualified employees with many years of professional experience, instead of predominantly university graduates, as was previously the case.
Infosys in particular is trying to be a pioneer here. (But even too innovative ideas are met with resistance at Infosys. Just recently the founders, who sit on the board of directors, removed Vishal Sikka from his position as CEO. He had great ideas, but no one wanted to listen to them. He was one of them before of the main innovators at SAP)
Medium-sized IT companies like MindTree (more than 16,000 employees) are able to undergo a cultural change. The big ones have a tough time.
How interesting are jobs at such companies?
For university graduates, it is of course exciting to work with other highly motivated people in a top modern office complex.
With the employer brand you can also score points with older people or on the marriage market (this should not be underestimated in India, especially with younger people. This is no longer so pronounced with older people).
The salaries are comparatively low. However, high when you compare this with other entry opportunities in other industries.
The jobs are mostly in metropolises such as Bangalore, Delhi or Hyderabad, where the cost of living is very high. There is usually nothing left of the money you earn per month and you usually live in shared flats.
The traffic in such metropolises is almost terrible. An employee often spends more than 3 or 4 hours a day in traffic / on the way to work.
At the same time, many end up on the “bench” after training. Nobody really likes to come into the office without a job and just wait. At the same time, the job becomes less secure if you sit on the bench for a long time and cannot be placed (for example due to a lack of orders).
But as already mentioned, a great start, an interesting training and a great office, paint over these rather not so great points.
The reality is that such jobs are simply a better alternative to the labor market there. Compared to European university graduate entry, however, the offers are not as attractive.
What skills do people acquire who work in such companies?
Many university graduates who start there are scheduled in support roles. Good examples are the already mentioned points of testing, second level support, third level support, simple tasks in IT support of the IT activities taken over (outsourcing IT department).
It is also clear that you are not trained to become an expert in such activities, but that it is mostly repetitive, simple tasks.
Normally, these tasks could also be carried out by someone with a simple education.
Only a few get into really interesting projects. This includes the implementation of ERP systems in customer companies or the development of your own products (rather low in such IT giants).
There are around 30 to 40 percent of the workforce who work on services that require further training / expert knowledge. The other 60 to 70 percent only pursue simple activities.
Very work-sharing approach
As in a large factory, the tasks are often very detailed.
Instead of getting a complete overview, there are specialists for individual sub-areas.
There is then a team of UX / UI developers, a team of database specialists, a team of front-end developers, a team of back-end developers, a team of testers, several project managers and many other roles.
Specialists who learn the full range of technologies (frontend, backend, database, testing, etc.) are rather small.
Are such employees suitable for smaller companies?
In the case of smaller IT service providers, the tasks are usually not that fragmented. At least not with smaller service providers in Europe. There an employee can usually cover a wide range of things.
On the subcontinent, many smaller service providers have adjusted to the fact that, for example, a separate front-end and back-end developer is required and this is not done by one and the same person.
For smaller companies, such employees from large corporations are only of interest if they have worked in an interdisciplinary manner and have gained insights into many areas.
Such employees, with broad knowledge, are more likely to be found in small (1 to 50 employees) to medium-sized Indian IT companies (51 to 500 employees).
Therefore: If you hire IT employees from larger companies, you should check to what extent they fit into a small team, where you should usually wear a lot of hats (backend, frontend, design, database, project management, testing, etc.).
The business model of Indian IT giants has been successful for a long time. Today more than 4 million people work in the IT industry there.
The main work is still simple activities such as support or testing. This has changed increasingly in recent years and a large number of them are working on the development of innovations or helping their major customers to develop them in the form of services.
In today's digital age, in particular, IT services are more in demand than ever. The subcontinent offers a good destination to get to sought-after IT experts.
At the same time, you should weigh up which type of developer you need, someone who can wear many hats, or an expert in a sub-area (e.g. a database expert). In the first case you should opt for employees from small to medium-sized companies, in the latter case employees from the IT giants can be a good option.
What are your experiences?
List of the largest IT groups in this South Asian country
Types of software companies found on the subcontinent
Pictures: Flickr.com/ gdsteam / bluesbby / Hillary
The author: Sascha Thattil works at YUHIRO and helps entrepreneurs and companies to easily set up programming teams in India. YUHIRO is a German-Indian company which provides IT companies, agencies and IT departments with software developers.By Sascha Thattil on October 10, 2017 / India, Offshoring, Outsourcing / Leave a comment
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