Nasscom defends election results

The Indian IT industry's peak body is defending its recent executive council elections against allegations the voting mechanism discriminates against homegrown startups and SMBs.

No small companies are part of the new EC, a fact which exposed the organization to further accusations of being a big boys club. Nasscom this week confirmed the 18 senior executives from local and western multinationals elected to advocate for the industry's interests, a list exclusively revealed last week by ZDNet.

One source with direct knowledge of the situation told ZDNet the voting rules favored larger companies.

Some of those allegations were detailed in a document leaked to ZDNet: "Analysis of Nasscom EC Elections: Why the deck is stacked against smaller companies?" The document, anonymously published in January, predicted why smaller companies would be excluded in last week's vote.

Why the rules are stacked against startups

Before the 2011 elections, Nasscom introduced a new rule that required voters to submit the names of at least 10 preferred candidates, instead of just one.

However, this immediately discriminated against small companies, the unnamed author argued in the document, because the preferred candidates would boast a greater number of larger, household name companies.

In an interview with ZDNet, Nasscom senior vice president Sangeeta Gupta dismissed the complaints about the 2011 rule changes and defended the current governance structure.

She said the multi-vote rule was introduced because large companies would simply vote for themselves, and ignore everyone else. Nasscom analyzed the impact of the rule changes, and found the new rules did not change the results in 2011, nor would they have had an impact in 2009, or 2013.

"I'm not sure why this is being brought up now," she said, adding that the rules were approved by members at the annual general meeting.

She noted the rules were designed to ensure a free and fair election by voting for more candidates. "For anybody interested we've done a lot of analysis, so I would ask any [detractors] to please take a walk," added Gupta.
The second reason laid out in the analysis is because of the tiered voting structure.

A source told ZDNet that in Nasscom's six categories of membership, "A" members have six votes, which gradually drops to one vote for "F" members.

Membership is determined by revenues so the A, B, and C members generate more money than their D, E, and F brethren.

The document explains that while big companies in the A, B, and C categories constitute only 28 percent of the overall membership, they generate over half the votes.

To address this imbalance, the document argued that at least 50 percent of D, E, and F members would have to collectively vote for a slate of ten small companies--an impossible task because candidates can't canvass votes.

SMB representation missing?

In the two most recent elections, no SMBs or start-ups were elected to the Nasscom executive council.

Gupta said 582 members--70 percent of them SMBs--voted last week, reiterating information from an earlier press release. She pointed out there would have been an SMB representative if all smaller companies had chosen to pick one.

"Small companies, many of them may feel their interests would be better served through these larger companies, who are not representing themselves but representing an industry," she explained.

An industry source explained the stacked voting structure was an obstacle against some of India's more successful product software startups.

"Product companies usually have valuations that are five to ten times the size of their revenues while services companies are usually one and a half times revenue, so the current system penalizes product companies in the number of votes. The bigger revenue, higher membership category, more votes," said the source.

Manish Bahl, Forrester vice-president and country manager for India, called on Nasscom to release more information.

"It would be helpful if Nasscom can provide more details on the voting process to provide greater transparency which will help everyone understand the reasoning behind SMEs voting for larger companies," Bahl said, in comments emailed to ZDNet.

What's next?

Nasscom's Gupta downplayed the importance of the elections, and said smaller companies can also be appointed to the EC via soon-to-be-formed industry-focused groups, targeting e-commerce and mobile.

"The entire objective of creating vertical councils is to ensure there's broad-based representation. It ensures there's not one EC that's responsible for everything that Nasscom does," said Gupta.

"The [reorganization] work has already started and we're in the process of creating the councils and recruiting the staff. Not everything will be done now, and there are different priorities."

However, she dismissed questions about what would be first in line.

"We will share that information when we're ready," the Nascomm executive said.

She was non-commital when asked whether the voting rules would be changed before the next elections in 2015.

"During the next two years we will review what, if any, changes are needed," she said.