Tuesday, June 13, 2017

Consumerism and Frauds in IT field

Consumerism and Frauds in the IT field


During the initial years of Westernization of Indians, many intellectuals saw the world as an undivided humanity that knows no barrier or religion, race, class, and nationality (Datta, 2003). Enduring many invasions through ages, the Indian had a broad and inclusive concept of world that emphasized amongst so many religions what we had was one among many religion. Rabindranath Tagore, the Nobel Laureate in Literature from Bengal, captured this essential oneness of mankind and visualized a universal man in Indian philosophy in his famous Nobel-winning Gitanjali:

"When one knows thee, then alien there in none,
Then no door is shut. Oh, grant me my prayer that
I may never lose the bliss of the touch of the one
In the play of the many."

Neo-liberal Mafia

Off late due to increased westernization from 80's, many religious gurus are professing faith in neo-liberalism that includes market fundamentalism, consumerism, welfare retrenchment, and liberal governance, away from Gandhi's idea of Hindu economics. These revivalist gurus are professing a mix of economic efficiency, ambitious individualism beyond the traditional Hindu society, selfish narcissism, acquisitiveness and excessive materialism for their followers that are taking over the traditional Hindu ethos of toleration and equilibrium in public life. This new culture is feeding the consumer culture and exploiting the traditional Hindu ethos for the sake of new technocratic global-consumer middle class concentrated in few cities.
The Indian people had firsthand experience of this new naked commercialization where huge amounts of money was lost in the bubble busts after bull runs aided by mass hysteria without taking the operating P/E of the sectors into consideration. The new consumer class that is getting  huge flows of capital from West, when examined closely, appear both self-centered and riven by paradoxes, seeking validation for their lives from Hindu evangelist gurus even as they acquire the latest consumer gadgets. At the same time this group hasn't taken the mantle of leadership in religion-socio-economic development, and when compared to similar groups in China or Japan or Korea, they have a  reputation for creating chaos and confusion. (Deb)

This dichotomy in daily ethos among these new adherents of the urban revivalist agenda has created vast number of problems for an average Indian. The neo-liberal professors of this movement such as Subramanya Swamy have paid a nominal lip service to the vast population groups in the country while vocally professing their god given rights for the unbridled consumerism that has sees no responsibility. Some of these new jingoist adherents have identified a caste-superiority based logic in placid Hindu society that legitimizes their dominant position in High-Technology directorships, in Corporate world, in Faculty positions and in Government positions . Researchers have found that the vast masses at the base of the Indian economic pyramid are also affected by the spread of consumer culture. “Increasing desires to consume branded goods that are advertised through television is …a consistent and recurring theme.” Moreover, “intertwined cultural processes of conspicuous consumption, normative change [imposing a link between consumer goods and morality], and [interpersonal] competition” mark narratives of low caste Indian consumers. They reflect an increasingly consumerist content of Indian media that depicts the mythic lifestyles of the rich and famous. (Belk, 2008)

Satyam Scam

For example, during the High technology growth of Hyderabad in 2000's, this new revivalist mafia tried to hijack the technology growth for their own selfish purpose while locking the vast sections of the population in their flawed pyramid of the new-liberal agenda. The case of Satyam computers highlight the nefarious potential of loose-canons that would burst the high-technology growth (only among Indians). The fraud committed by the founders of Satyam is a testament to the fact that “the science of conduct” is swayed in large by neo-liberal agenda, ambition/greed, and hunger for power, money, fame and glory. Satyam fraud spurred the government of India to tighten CG norms to prevent recurrence of similar frauds in the near future. The government took prompt actions to protect the interest of the investors and safeguard the credibility of India and the nation’s image across the world. If the government didn't take action in time the scandal had the potential to spiral into mass hysteria that would have jeopardized the entire IT sector that employed 2.5 million people around that 2009.

Satyam fraud details

From being India’s IT “crown jewel” and the country’s “fourth largest” company with high-profile customers, the outsourcing firm Satyam Computers has become embroiled in the nation’s biggest corporate scam in living memory (Bhasin, 2009)

Satyam ownership model was flawed from the perspective of good corporate governance. There may be three factors responsible for this. The factors are not the causes of global and colossal fraud, but they provide an enabling environment for abuse and delusion.

1. First, being a publicly owned company, Satyam could raise capital inexpensively if its existing shareholders assigned it a high value. Hence, in order to attract capital from public, it was under pressure to overstate profits to keep the company’s bonds and equities in high esteem. The promoters formed informal partnerships with this neo-liberal mafia all over the world targeting the Hindu temples, Christian and Muslim groups to develop a profitable relationship in the High-Technology sector based on false promises.
 2. Second, the promoter of the company, Mr. B. Ramalinga Raju, owned a very small fraction of the ownership stock. He diluted his holding from 25.6 % in 2001 to 3.6 % in 2009. He could overstate profits with the objective of influencing other shareholders. This ensured that the whole operation was risk free for the Owners in case of volatility in the IT sector.
3. Third important factor for flawed ownership model may be, Satyam could preserve its fictitious profits without having to pay big taxes because its profits were protected significantly from the normal tax laws. They do not pay taxes on fictitious revenues and 22 profits. There are no penalties. The belief that exempting firms such as Satyam from service tax and corporate income tax will make them competitive is a little ridiculous. Satyam would not have overstated its revenues and profits if it had to back both with real cash. A big part of the blame for the colossal fraud thus belongs to India’s trade and fiscal policy makers who gave an uneven advantage to the neo-liberal technology mafia while ignoring the basic fundamentals of the High technology and its impact on the vast reaches of the population.

The owners maintained a consumer relation with the neo-liberal mafia over the period of 2 decades and won numerous corporate awards all recommended by this mafia. In 2007, Ernst & Young awarded Mr. Raju with the ‘Entrepreneur of the Year’ award. On April 14, 2008, Satyam won awards from MZ Consult’s for being a ‘leader in India in CG and accountability’. In September 2008, the World Council for Corporate Governance awarded Satyam with the ‘Global Peacock Award’ for global excellence in corporate accountability”. The company provided vast sums of money to this neo-liberal mafia by funding many higher education institutes such as IIIT, CCMB etc... thereby ensuring and addicting to consumerism the placid Hindu masses.

The promoters successfully cashed out of the company in an immoral relationship with the neo-liberal mafia over the period of 10 years. The cashed money was used in funding the real-estate companies and the socio-educational entities that would support this neo-liberal agenda and in future lay the foundations of the political takeover of the State governments. The owners were successful in creating a huge network of bogus companies that catered to this neo-liberals while systematically subjugating the vast populations to the consumerism.  The owners of Satyam in an unethical relationship with this neo-liberal mafia wrongfully tried to influence fiscal and monetary policy of the Southern States by systematically taking over the social, agricultural, financial, educational, governmental, and meteorological aspects of the morbid agrarian population using an aggressive socio-economic agenda that created a new ecosystem of these fraud companies. The idea was to take over the top positions in the corporate, financial, judicial, religious and political ecosphere of this new ecosystem.

The government acted swiftly by arresting numerous managers for Income Tax evasion and the directors on numerous criminal charges. However the promoters of Satyam were able to show accounting fraud and go to prison while the neo-liberal mafia behind the company is free.

Requirement for newer controls

However this episode highlights the lack of controls at the government level on managing the IT growth and the neo-liberal mafia. The neo-liberal mafia was successful in promoting Mr. Raju as the poster boy of IT revolution and got an international audience with likes of Bill Gates, Bill Clinton, Hillary Clinton etc.. and subsequently benefited in the western countries such as United States and Canada by monopolizing many jobs in number of sectors.

The limits and responsibilities of operating a IT company catering to rich western clients were not defined properly in the existing company law. This is high-time the bureaucrats open their eye to this new pyramid scheme wrecking havoc on the age-old society in India. There should be harsher criminal punishments for people caught manipulating socio-political-economic environment for selfish greed.

Works Cited

Belk, V. a. (2008). Weaving a web: subaltern consumers, rising consumer culture, and television. Sage.
Bhasin, M. L. (2009). Creative Accounting Practices at Satyam Computers. Creative Commons Attribution 4.0 .
Datta, S. (2003). W (h) ither Indian Mind . IJT.
Deb, S. The Nation

Sunday, June 11, 2017

Farmer suicides and agrarian crisis in developing countries

Indian agriculture has been grappling with loss-making propositions like fragmented land holdings, depleting water table levels, deteriorating soil quality, skyrocketing input costs and low yields. Haunted by debt, small and marginal farmers are committing suicide: without credible collateral for loans from public sector lending institutions, they are forced to borrow money at exorbitant rates from moneylenders. Tragically, as India rises to the top slot among global economies, the number of farmers killing themselves every year is rising. In 2015, over 13,000 farmers took their lives. Maharashtra topped the list with 433 deaths, followed by Karnataka (1,569), Madhya Pradesh (13,000), Tamil Nadu (606) and Rajasthan (373).

The Indian farmer, once a rallying election symbol for many political parties, has lost his clout and voice with the political establishment. He is the orphan of growth in an elitist mindset. His voice is drowned in the coveting cacophony of pro-market lobbyists who have captured all levers of the establishment. Ministers, top civil servants and opinion makers rub shoulders at seminars organised by CII, FICCI, ASSOCHAM and foreign-funded economic think tanks, where they wax eloquent about corporate concessions while recommending withdrawal of subsidies for the poor.

published by Indian Express column by Prabhu Chawla
prabhuchawla@ newindianexpress.com

Sunday, June 4, 2017

Disruption of the traditional offshore business

Coming of RPA and the newer technologies

A recent KPMG report argues that the rising cost of labor is causing BPO to become an non-viable option and that technologies, such as RPA, AI, and other cognitive and automation platforms, are advancing to create more sustainable options. According to this report, more and more companies are turning to "machines with rapidly advancing capabilities for understanding, learning, communicating, and problem-solving. Robotic process automation (RPA)—this convergence of low-cost, easy-to-implement process automation, coupled with machine learning, data analytics, and cognitive innovations—is creating a new class of digital labor." The same report suggests this trend will cause companies to turn to more advanced machines rather than relying on BPOs for the work they need to complete, thus eventually eliminating the need for human workers and BPOs.

Recently, great numbers of business process outsourcers have turned to robotic software to automate back office processes, such as FAO, HR management, and procurement - processes that normally require a human employee to accomplish. It has been estimated that one half to 70% of the work done by shared service, captive, or outsourced operations can be automated using robotic software. This technology not only drastically reduces the cost of labor for business process outsourcers, but it produces better quality work and allows employees to focus on tasks that are much more meaningful. Here are some hard facts that suggest a decrease in the use of BPO is possible. Although it is still a hotspot for outsourcing, India is experiencing a decline in outsourcing. Between 2011 and 2014, the number of deals worldwide declined by 61% and value of these deals shrunk from $206.8 billion to $120.4 billion.

Ever since Trump’s inaugural speech emphasizing an America-first message future for outsourcing is uncertain in America, where global labor markets are being disrupted by various flavors of travel bans to the United States, the specter of a wall being built at the US-Mexico border that costs more than the entire Space-X program, a reform of H1B visas that could likely dismantle the traditional outsourcing model, and a curious thing called Brexit that could change the global trade landscape forever, one might be forgiven for feeling slightly disoriented. 

But here are three scenarios that I am seeing for 2017: [Phil Fersht, 2017]

RPA will remain undefined. Over the next 12 months, the perception of RPA will remain blurred. RPA capabilities will fold into broad propositions such as Digital Workforces or Cognitive Automation. This is adding to the continuing confusion around RDA. Extending on that, in 18 months we won’t talk about RPA anymore. Most of the leading technology providers will have been acquired and RPA is a reality in the back-office.

M&A through ISVs. Buyers will have to do scenario planning for acquisitions. While this might bring broader capabilities, licensing costs are likely to increase as well. Pega’s acquisition of OpenSpan is the template for such developments. Beyond the tool providers, the automation pure plays such as Symphony and GenFour are likely to be equally absorbed by larger consultancies.
The emergence of an Automation Ecosystem: We already have seen the impact of Watson, as it is starting to evolve into an ecosystem. Suffice it to say, IBM could be the driving force to extend those capabilities, as we have argued some time ago. But it could equally be one of the tool providers significantly expanding its reach. As stated, we are seeing the providers in the Winner’s Circle moving toward the notion of orchestrating much broader automation capabilities. At the same time, we are seeing providers like Blue Prism and UiPath being deployed in IT-centric scenarios such as IT Help Desk and Application Management, pointing to a convergence of scenarios and tool sets. 

Cloud based Business Process

Outsourcing providers have long employed automation. But a recent report from management consulting firm A.T. Kearney highlights the growth in business process as a service (BPaaS), which lets companies hand off routine chores via the cloud to software systems that perform those chores without human intervention. Any activity that is repeatable and rules-based is a good candidate for such automation, said Cliff Justice, a partner for innovation and enterprise solutions at KPMG. "Payroll, AP, order entry—all of those activities follow a set of rules and parameters and workflows." Johan Gott, a principal in the private equity practice at A.T. Kearney, said that while technology enables BPaaS, it is at heart a new business model. "Even though it’s not core technology, it’s the more disruptive trend that we’re seeing," he said. Spending on BPaaS, in fact, is expected to reach $13.7 billion in 2016, up from $12.95 billion in 2015 (Gartner, Forecast Analysis: Public Cloud Services, Worldwide, 1Q16 Update, May 2016).

While automating processes would involve considerable effort and IT resources for an individual company, achieving automation by using BPaaS via the cloud is a much simpler and less expensive option."BPaaS can unlock an enormous potential for growth in BPO services by dramatically expanding the customer pool to smaller and midsized customers," according to the A.T. Kearney report. "The standardized offerings of BPaaS are particularly well suited to smaller companies, which have neither the volume to enter into large contracts, nor the need to outsource more than a few relatively simple processes." 

Disruption of BPO

The election of Mr Trump to the Oval pretty much just hammered in the final nail in the coffin for the traditional IT outsourcing market as we know it. The Republicans control the House, the Senate and Trump has a huge mandate to impose his will, not dissimilar from Obama and his healthcare reforms.  Change is going to happen and it will likely have a very significant impact on global IT and BPO service delivery. The bad news for the offshore industry  is that Trump's protectionist policies are going to accelerate reality and actions will be direct in the form of raising the H1B minimum salary to $100,000 per year, encouraging cloud-based standardized service providers,and intelligent automation of the existing business process. [Phil Fersht, 2017] The attacks are reverberating at companies with production and IT operations in countries like India, China and the Philippines, outsourcing executives say. Some companies are looking for U.S.-based alternatives, while vendors that provide outsourced services are pushing automation as a cost-effective way to re-shore work—but not necessarily jobs.

The Offshore industry has been living with single-digit revenue growth for some time now and is unable to kick-start growth in a big way amid the global macroeconomic and political uncertainties. These companies in India especially are already feeling the pinch financially, and are making blatant attempt to appease the Trump administration by announcing local hiring in USA in a big way. Infosys said following the release of its March quarter results that it would hire about 10,000 people in the U.S. over the next two years. The company plans to open four innovation center hubs in the U.S. Even as this announcement from Infosys created a furor over its potential implication for jobs in India, Cognizant said recently it will rationalize its cost structure by bringing the employee base in line with demand. The company said on the earnings call it intends to ramp up hiring in the U.S., while at the same time reduce dependence on the H-1B visas. For the top offshore companies, there was a steep drop in H-1B visas filing for the year 2017.

Indian IT outsourcing firms are also exploring other options, including setting up near-shore centers or facilities closer to the U.S, with Mexico being the most-sought-after center. Apart from the option helping to face the challenges of a protectionists environment in the U.S., the cost of doing business also comes down by roughly 50 percent. Nasscom says that India's IT industry contributes to over $2 billion in annual taxes in the US, with a cumulative of $20 billion over 10 years, while generating 4,11,000 jobs in the US as in 2015. The industry says that US companies benefit from outsourcing as they can allocate resources to critical work locally."Indian IT sector must now brace for further troubled times ahead. The sector was already battling both cyclical challenges (due to changes and shifts in financial services, healthcare verticals) as well as secular challenges (i.e., cloud shift, automation, pricing pressure, insourcing) impacting revenue growth. A sub 10% growth for FY17 is certain," Arup Roy, Research Director, Gartner said in a statement on November 9. 

However the companies that  don't diversify their portfolios away from pure body-shopping and process competencies to a technology-driven advantages and that have a big bunch of complacent employees are going to face music in near term from the disruptive wave of automation. While many Asian countries are gearing up to this challenge, the IT sector in India is facing existential crisis largely of its own making because it became complacent and overconfident even as technologies and markets changed.


  1. On the Eve of Disruption, https://www.atkearney.com/documents/10192/7094247/On+the+Eve+of+Disruption.pdf/49fa89fa-7677-4ab8-8854-5003af40fc8e, A.T. Kearney, 2016
  2. RPA and BPO minor changes or real disruption, https://www.uipath.com/blog/rpa-and-bpo-minor-changes-or-real-disruption, UIPATH, 2016
  3. RPA 2017 report, http://www.horsesforsources.com/RPA-provider-blueprint-snapshot_022217, Phil Fersht, 2017

Wednesday, March 1, 2017

S-band scam at Indian Space Research Organisation(ISRO)

Using  insider knowledge of what ISRO can achieve at a throwaway price by targeting customer specific satellite,a large chunk of S-band spectrum was bought by for a throw away amount by Devas Multimedia — a venture founded in 2004 at the initiative of former officials of the Indian space programme and involving foreign investors. In July 2008, they even sold a 17 per cent stake to Deutsche Telecom AG for $ 75 million (around Rs. 318 crore at the time) and had unbridled optimism for exponential growth.

The Comptroller and Auditor General (CAG) was on the case despite the bureaucratic hurdles placed in its path. Among the concerns registered by the CAG in its process of enquiry were the following: S-band spectrum was being given away without inviting competitive bids; organisational control systems were not followed; the Prime Minister’s Office, the Cabinet, and the Space Commission were not properly informed about the contract details; public resources were being diverted to building two customer-specific satellites; and the contract terms deviated from the terms of previous contracts entered into by ISRO and Antrix.
CAG suspects a scandal in the allocation of S-band spectrum and is reportedly investigating losses worth Rs 2 lakh crore in the scam. Department of Space and ISRO are under the scanner over the S-band spectrum. The alleged scam is related to a deal between ISRO’s commercial arm Antrix Corp and Devas Multimedia. ISRO is accused of allocating to Devas 70 Megahertz of scarce S-band spectrum for a 20-year period. The CAG was alerted because unlike in earlier contracts, ISRO placed no restrictions on Devas Multimedia for onward leasing of spectrum, which means the company could make huge amounts of money by sub-leasing its privileges.
The loss due to this deal between ISRO and Devas Multimedia has been estimated to be about Rs 2 lakh crore. Deal includes custom made two-communication satellites (GSat-6 and GSat-6A) and 10 transponders will be used for commercial purposes. Department of Space comes directly under the Prime Minister. This is just not loss of revenue to the Government of India exchequer; this is a rare spectrum, that’s a national asset.
The Fallout
The most striking fallout was the action taken against Madhavan Nair, Sridhar Murthi and two other scientists, A Bhaskaranarayana, former Scientific Secretary in ISRO, and K N Shankara, former director in ISRO Satellite Centre, in 2012. The four — all of them had retired by then — were barred from taking any government position in future.

Also, a full-time chairman-cum-managing director was appointed at Antrix. (The ISRO chief was thus far also the Antrix chief) The Satellite Communications and Navigations Programme Office was restructured into three separate wings. An extra slot for a non-ISRO scientist was created in the Space Commission.
The Enforcement Directorate (ED) attached assets worth nearly Rs 80 crore of Devas Multimedia Ltd under the Prevention of Money Laundering Act (PMLA), saying three directors of the satellite services provider had admitted to criminal conspiracy against India's space agency over the alleged deal to lease a satellite. The central agency said it had recorded the statements of three Devas officials — Ranganathan Mohan, director (Finance), Desaraju Venugopal, founder-director and D Nataraj, former director — when it searched the premises of company in Bengaluru last month. It also alleged that two directors of the firm— Ramachandran Viswanathan and M Chandrasekhar, were in the US.
Jan 28: Antrix, Devas sign deal
Oct: Space Commission approves G-SAT6A; K Radhakrishnan takes over as ISRO chairman
Dec 8: ISRO constitutes BN Suresh committee to review agreement
June 6: Suresh committee submits report
July 2: Space Commission recommends termination of deal
Feb, May: Government sets up B K Chaturvedi and Pratyush Sinha committees
Sep 2: Chaturvedi committee submits report
Jan 13: Madhavan Nair, 3 others, barred from government jobs
Feb 23: Delhi HC tells govt not to take ‘coercive steps’ against Devas
June: Arbitration begins; Devas claims $ 1.6 billion in damages
Sept 29: Arbitration panel asks ISRO to pay Devas Rs 4,400 crore

Aug 12:CBI files chargesheet against ISRO ex-chief Madhavan Nair
Mar 1: The Enforcement Directorate (ED) attached assets worth nearly Rs 80 crore of Devas Multimedia Ltd under the Prevention of Money Laundering Act (PMLA)

Consumerism and Frauds in IT field

Consumerism and Frauds in the IT field Introduction During the initial years of Westernization of Indians, many intellectuals saw the...