IT Service Sector vs IT Product Development
Last evening, my friend and me were discussing about IT service sector versus Product development. We were trying to find out the reason why IT service sector is more flourishing in India than product development. We hardly know any billion-dollar revenue product based Indian company. Then the one the most weird HCL commercial commercial flashed on TV. We thought why not check the financials of HCL Technologies and compare with product based companies. Per Capita Income is the measure of income or prosperity of any country. We decided to choose "Per Employee Revenue" as the sole criterion here. Here is the small comparison among HCL, Adobe Inc, Infosys and Sapient.
Data is taken from wikipedia and companies respective web sites
|Company||HCL Enterprise||Adobe Systems||Infosys||Sapient Corp.|
|Revenue||US$ 6.2 Billion* |
|US$ 4.21 Billion|
|US$ 6.99 Billion |
| US$ 1.02 Billion|
|Revenue/Employee||US$ 68.8K||US$ 424.2K||US$ 46.2K||US$ 100K|
Findings: Although it is too early to conclude anything but following were the broad conclusions.
- Service based sector is more profit oriented in India than doing your own product development here. The reason is the large IT workforce which is groomed to work in mechanized form of IT industry. Even companies like Adobe, Microsoft have setups in India so that they can manage (or adjust) their profit margins. These companies whenever are under "Market" pressure, fire people from their US head quarters and hire at their Indian subsidiaries keeping their profit-margins at target levels.
- The most surprising element is the Sapient Corporation. Though a US company and in IT service sector, its revenue per employee is almost double than Indian competitors. It is worth to investigate how come its business model is better than HCL's or Infosys's.
- The *HCL Enterprise revenue per employee appears higher than that of Infosys Technologies. But there is a catch here. One of its subsidiary is HCL Infosystems which deals in hardware. If we compare the revenue of HCL Technologies alone i.e. US$ 4.12 Billion along with workforce of 89,319 employees. Its revenue per employee comes around US$ 47K (near to Infosys revenue per employee).
- We didn't compare the other business models here that are followed by Amazon, Apple and Google. Neither we compared other big shots like Apple, Microsoft, Oracle. It is equally interesting to explore them also.
- One big question which surfaced during our discussion but remained answered. Companies like Microsoft, Adobe often allege that the piracy is high in these Indian IT service sectors. If true, what's its impact on the revenues of service-based Indian companies? Similarly why these big Indian IT companies (HCL, TCS, Infosys) do not develop software like Photoshop or SQL server which are in high demand in India. It will add to their revenue and provide a low cost good quality alternative to Indian market. The question still ponders!