There is a controversy raging over the entry of giants such as Tesco and Wal-Mart into India after the government last week permitted foreign direct investment (FDI) in multi-brand retail. Most economic analysts look at it in terms of capital coming into India to oust local shopkeepers or in terms of capital coming in to offer better prices to farmers or set up distribution chai-ns and storage facilities to help consumers. These arguments seem a little old. There is a technological dimension to this that may reveal that it is India that is behind the competitive edge of big retail chains.
In 2009, Wal-Mart picked Bangalore-based Infosys Technologies and India-centric Cognizant among three information technology service vendors for a $600 million multi-year contract. Finance is now easily available for retail companies from banks and equity markets. What sets the real smart retail giants apart is their ability to leverage software and IT to keep their competitive edge.
Supply chain software can help lower costs by managing inventories. Data analytics and customer relations software can help them identify the more lucrative customers or choose discount strategies. Partners, employees and vendors of retail giants are now connected by software. Indian talent figures in all this.
Infosys was an early adapter of Wal-Mart’s move to go in for radio-frequency identification (RFID) tags that helps the retail chain track inventories at low cost.
Last year, Wal-Mart also acquired Kosmix, a cutting-edge search engine, founded by Indian-born Venky Harina-rayan and Anand Rajaraman (who earlier co-founded Junglee.com that Amazon acquired). Now Kosmix is a part of Wal-Mart Labs. Its technology filters and aggregates information by topic from Twitter messages and the larger Web in real time. This is a new way to interact with shoppers.
Tesco now owes its edge to its Bangalore IT facility called the “Hindustan Service Centre” . The British retail chain says 6,000-employee-strong HSC’s strategic initiatives cover the “IT, business, financial, commercial and property aspects.” In Bangalore, Indian techies develop tools like mobile applications for Tesco. HSC was set up under the leadership of Meena Ganesh, a former Microsoft executive who is now a serial entrepreneur.
Manthan Systems, based in Bangalore and founded by Atul Jalan, calls itself “the world’s leading producer of retail business intelligence”.
Its software helps retailers identify, target and serve customers better. The company names itself after the mythological churning in Vishnu Purana — as a metaphor for the churn to create excellence. This company, which has had three rounds of venture funding, is one to watch out for.
Western retail giants are thriving due to Indian talent — not recognised by India’s own business enterprises.