Sramana Mitra, whom I regard highly, comes out with a provocative article – may be the title is more provocative . While I agree with her on the part of the offshore headquartered industry needing to look more at products and solutions, I disagree with most part of the article and her conclusions. Getting into products business is a moot point – its like saying Singapore airlines should get into aircraft/aircraft parts manufacturing,to be counted as future safe in business! I find most part of her article somewhat biased. In particular –
“India's $30 billion IT/ITES services industry, meanwhile, is slowly and surely losing its competitive advantage. They are complacent. They will not take risks. They have "outsourced" thinking to their customers”
. None of this is true- my submission.
Ask the CIO’s working with the offshore majors to get a true picture. The fact to note is that Indian IT’s rise as a disruptive force in global IT services delivery is now well accepted. Three – four years from now, the Indian IT services and business process outsourcing (BPO) is very likely to touch US$100bn mark in revenues. In the last ten years, every possible forecast has been bet by the industry and the naysayers have had to bite the dust. The coming years are proving to be as promising and transformational as in the past. Just look at the track record -In the last ten years, the Indian headquartered IT will have grown by nearly twelve times, at a 28% Cagr, compared to a 5.3% Cagr for global IT services spending. Within global IT expenditure, the outsourced component will have grown by around 8%, and in-house spending at only 2-3% - both substantially lagging Indian IT’s phenomenal rise.
From its base level, despite expanding scale, the revenue growth has been 30% plus YonY and it appears that this growth more –or-less may be maintainable for the next few years. Very shortly, we may see 1/3rd of global outsourcing of IT services outside of government spending may be serviced by the offshore majors . Estimates suggest that volume share in english speaking countries may reach around 45 to 50% in the same period. In the services segment from smaller service lines, where they are traditionally strong, Indian IT services are moving to larger spaces like IMS & BPO. Its futile to think that all these growth would happen automatically. Answer to Sramana’s point – in this transition opportunities on SaaS and emerging technologies get adequately factored in. Ask the major SaaS players and product players – they will vouch for the critical role that offshore majors are playing. All strategic partner relationships of product players have the offshore majors playing a substantial role therein. No the Indian headquartered players are not missing on any great opportunity – look at the type of deals being closed, the nature of acquisitions being announced; or better ask the hordes of global IT executives wanting to work for the offshore majors- they will tell why the game is changing – fastly, decisively and increasingly looking like forever.
Update : AMR's Philip J. Fersht provides the right perspective on this topic. I can't agree more.
Labels: CIO, Emerging Trends, IT Services, Offshore Players
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Not many know about the way the india headquartered companies manage to grow so fast and yet remain so consistent in their execution. Ramalinga Raju, Founder & Chairman of Satyam computer services has this to say on this topic in an interview published in the Mckinsey Quarterly. Excerpts :
The development of an innovative business model early on played a vital role in the company’s success. Among other benefits, the framework helped sustain an entrepreneurial spirit, distributed leadership roles throughout the organization, and created an environment focused on “delighting” stakeholders. Traditional hierarchical models will not be effective in a knowledge industry. Rather than focusing the whole business on delivering value in one way,at Satyam value was being delivered in many different ways, depending on the services our clients needed. To cater to these differences, we created an organizational design that distributed leadership more uniformly. Ownership of results shifted to leaders who were closest to the relevant stakeholders, which could be their colleagues, investors, clients, or even society generally. The rest of the organization supported these leaders from behind the scenes, helping to create a “One-Satyam” experience for the stakeholder. This design also sought to bring the correct balance between building the right soft assets that have lasting value and delivering reliable results for stakeholders.
He adds that the most distinctive aspect of the business model that you have adopted is that value creation follows a similar structure irrespective of industry, type of function, or level within an organization. that sense it is analogous to fractals in science and mathematics. Not to get too esoteric; fractals are self-replicating constructs that become increasingly small, like the sections of a seashell or the buds in a stalk of broccoli. While they are similar, they are not necessarily identical. You can look at a business in the same way and try to find a pattern for value creation, an essential DNA that repeats itself in every area and at every level. So we started looking for the smallest reasonable construct in our business that repeats itself. This construct had to deliver value to someone—a client, an internal customer, some other stakeholder—but it also had to be large enough to stand alone. In theory you can take the idea of fractals to the extreme, but in business if this construct gets too small, it consumes more organizational resources to manage than would be justified by the value it creates. We consider ourselves in the business of building leaders. The most effective way of realizing our goals and objectives is to grow leaders faster than the competition.
Labels: Emerging Trends, Innovation, IT Services
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