The Power of Profitable Growth

Prasanto Kumar Roy

This second volume is probably the most awaited of our four DQ Top 20 issues in the industry. At its core are the Top 20 companies, adding up to over half of Indian IT's revenues. But it's the DQ 200 list that shows the spread, growth, reach, and ups and downs of this industry.

An industry that now takes growth for granted. That's dangerous. But at the individual level, most companies haven't forgotten the lessons of the dot com bust. You work hard and run scared-for sustained, profitable, growth.

Growth doesn't equal profits. IBM sold off its PC division because it couldn't make money. While the new Lenovo has entered the DQ Top 20 with an astounding 220% growth, it's lost money. Not surprising in year one for a PC vendor, but its challenge will be to break out of the red asap.

That's tough in hardware, which is why there are so few pure-play vendors like Dell and Lenovo left. Most have had to add services and other profitable businesses. Well, you can't have a services and software market without hardware: so someone will do it. Distribution has scary 2% margins, but it's a competitive hotbed. HCL, for one, has shown how profitably distribution can be managed, with its Nokia business.

Intel shook up the market with its processor price cuts (and held up the market until they kicked in). It's neat dual-core strategy: competition-killer entry pricing, high premiums on newer chips. But Intel does not have the cost structure to sustain very low prices, without taking a hit.

Growth is a great indicator of a hot area. We see that with laptops (over 100% growth for the third year running now). And with many companies. Red Hat is small, but its 435% growth tells you how hot Linux is. Polycom's 104% growth tells us that conferencing is red-hot, with great interest from businesses, states, and nations (including Pakistan, Sri Lanka, et al).

We are often asked why we don't include parameters other than revenue in DQ Top 20. Our answer's unchanged. We do use softer parameters for surveys such as channel or user satisfaction awards. But apart from the sheer complexity of adding verifiable numbers across the DQ 200, we do believe that all other parameters ultimately boil down to revenue and growth in the long run. Ethics, or PAT, or customer service: they all translate into business health. Lose sight of those, and you decline. Do them well, and you prosper and grow.

And that applies to the industry at large too. The key ingredients need focus: HR and training, infrastructure, and more. We cannot take growth for granted, even after so many years of it. That's what we did with the Sensex earlier this year. And we all know what happened.