Nandan Nilekani, president, CEO and managing director of Infosys Technologies, took over at the helm last year, which turned out to be the most trying in the history of the Indian software industry.

With a good first quarter and a successful ADR issue behind him, he exuded confidence while speaking to Subir Roy.

Excerpts:

How important is offshoring and what does it mean for the Indian software industry?

From a strategic perspective the key point is that offshoring has become mainstream. We should not underestimate the significance of this. Almost every major corporation in the world is either doing offshoring or looking at it seriously. That is significant as it is an important mega-trend of globalisation.

Second, not only is it mainstream, India has become the country of choice. When people look at price, quality, performance, people, maturity of firms, India stands out as the best place. And Infosys being the market leader, is right there when all this is happening.

Offshoring has become mainstream because companies all over the world are facing economic pressure. So they will obviously look at pricing and hence the pricing issues. As the percentage of offshoring goes up, average prices will go down even though margins may be better. The other implication is that global competitors have to come here.

How is global competitors coming here playing out for you?

Global competitors are going offshore not by choice, but because their customers are asking them to do so. Customers, having seen the value proposition and business model benefits of Infosys, are asking their incumbent suppliers to give them the same value.

What is the threat or non-threat perception in this?

It is good that the competition is coming here as it only reaffirms that offshoring is mainstream, and has come of age. It further legitimises the value proposition and brings the battle, in a sense, to our strength -- the global delivery model and so on.

We also believe that what we have to offer is not just a bunch of people but a more efficient and better business model, which delivers superior value at attractive prices and still allows companies to make a decent profit for their investors. Our global competitors have to reengineer their companies to become like us.

What's happening is good for India, but is it good for Indian companies, when you take in the captives and the rest?

What's happening is definitely good for India as it is going to generate millions of jobs, help our foreign exchange, create a global mindset, force our infrastructure to improve. It is also good for Indian companies which pursue the right strategy and execute well on it. There is plenty of room in this for Indian companies with the right brand strategy to do well.

It's been said for a long time that in 2004 there will be light at the end of the tunnel. Would you still say so?

There are enough soothsayers.

Do you see tech spend slowly picking up again?

Tech spending will never go back to what we saw in the bubble era. But technology will continue to be very important for businesses to compete with. That is not negotiable. But how that money is spent is undergoing a sea change. That is the real story.

It is not how much that is being spent which is the issue, it is how people are spending, how they are trying to become more efficient in their spending, making sure they are getting quantifiable returns on their spending, how they are aligning their spending with their business goals.

Is ROI to become all important?

People are asking, is there a way of making my spending better? Are there things I can spend less on, are there things I can replace? With every new item I am taking up, how can I quantify my benefits?

Third is aligning IT spending with business goals. How does this spending make a difference to my business strategy? So the IT strategy becomes subservient to business strategy and every IT spending decision is driven by business outcomes.

In all this, isn't it important at which level a software company is able to enter a client firm?

At Infosys we have been able to broaden and deepen our client relationships. We have very very high quality global marque names as our clients.

In each of these we are working with more people across the firm, meeting customers at a much higher level, participating more and more in their business, thinking and contributing technology solutions. That's the big thing that is happening.

In this, how will you leverage the ADR issue that has just been completed?

The firsts listing gave us the benefits of being the first Indian company to list in America, being seen as the technology leader from India.

That gave us significant benefits in terms of brand awareness and name recall. This time we said we must go to the next level which is, what does it take to become a mainstream stock -- widely held, liquid, covered and mentioned in the same breath as local firms.

That was really the intent of this. We met some 200 investors in the course of our travels. We had a successful issue, it was oversubscribed.

But more important is we were able to get our message across about our business model, why we think it is robust, resilient and we have a future ahead of us.

Everybody listened to us carefully and understood the strategic significance of what we have to offer. We have accomplished all that with the ADR issue.

How much of a bugbear is the visa issue? Does it get automatically solved with a degree of offshoring?

Not really. There are two different strands here, both of protectionism. One is visa issues where, either the number is curtailed or the hurdle rate for getting visas is raised by whatever means.

That is a genuine issue and a potential cloud on the horizon. The second issue is migration of jobs offshore and those bills. It has to do with job losses there and replacement here. Both are potential challenges.

When TCS lists, how will it affect you?

We are very confident about our place. We have been very successful in building our brand. Our name recall has improved significantly in the last few years.

We feel we have the best list of customers, a very broad base of marque names and our biggest customer may not bring more than 5 per cent of revenue.

We are very comfortable and happy with more Indian firms being listed. We are all on the same side in a sense.

On the acquisition front, many of your small acquisitions have not played out the way you wanted. So is there a new strategy?

We have shown robust organic growth. From $ 68 million in 1998, we will be approaching a billion dollars in revenue this year. We will look at acquisitions but at the same time we are doing all the right things to grow the firm organically.

Inorganic growth is the flavour of the day for some but for whatever reason Infosys has not settled for it in the last few years.

In our business where the market share is growing, you acquire not so much as a way to grow but because it fills some strategic hole in your armoury.

In an industry where things are stagnant, you will acquire to get marketshare. But in our market where things are growing, you acquire to get skillsets, market or value add which is not so much growth. So acquisitions with those aims in mind are very much in our planning.

To come to some of the problems of growing, Infosys has lately seen a certain amount of attrition at fairly senior levels.

Our attrition rate is still the lowest in the industry.

Not large numbers, but people who are fairly high up.

Not that high up, actually, apart from one or two cases. It is part of the process. For different reasons, in some cases we may have let somebody go, in some cases there may have been issues which have led to somebody going. But we have an extraordinarily competent senior management team.

The organisation combines very high quality leadership with very strong focus on systems, processes, information management, derisking. So we are very confident and comfortable about how we go forward.

At the lower levels there is a feeling that there is a little more tension these days.

The environment is very complex. We have the growth in volumes and now we have to look at the pricing. The arrival of global competitors in the field creates its own uncertainties. Internally, we have gone through a lot of reengineering, implemented a high performance work ethic, variable pay, role-based organisation.

When you are going through a lot of external issues and simultaneously reengineering your firm, there is bound to be some amount of noise.

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