Today, the IT industry in India is undergoing change. The future potential of the industry will do well if it updates its offerings and capabilities in line with the emerging market imperatives and technologies.
THE IT INDUSTRY TRENDS IN INDIA
News on the coming death of the IT services industry in India begun to trickle a few years ago. It was reported that the country is no longer the automatic choice for back-office work and IT services in the world. Regardless of the prognostications, there’s also optimism on the prospects of the Information Technology industry of India for the coming decade. The IT industry in the country has gone through and has survived difficult times before. An example of this is the dot-com crash in the early 2000s as well as the financial crisis in 2008. Another is the major IT services organizations that devote significant resources to hire development and training, providing world-class facilities as well as educational programs for existing and new employees. Lastly, some are starting to adopt new business models and develop new platforms and products to wean off low value-add services, fixed-price pricing models and time-and-materials.
With the changing trends in the technology industry, the Indian IT industry is growing at a 4 percent rate a year, would continue offering opportunities for IT services companies that operate at all phases of the IT worldwide value chain. Primary customers, CIOs for IT services tend to risk-averse as well as like to perform business with companies that they have prior good experiences. All these factors will continue offering opportunities for the IT services companies in India for the foreseeable future. Nonetheless, not all companies would do well or survive even in the highly-competitive and new global business environment. Only companies that continuously upgrade their offerings and capabilities in line with emerging technologies as well as market imperatives could hope to survive and to prosper in this scenario. For the IT service providers in India, there are five priorities to pursue in order to carve out a fair share of the IT services revenue in the future.
The first priority is to continuously build and upgrade capabilities. Continuous upgrading and capability building are essential for a company’s growth and survival. Industries contain the seeds of their destruction via incursions by new enterprises that use innovations to destroy the advantage of the incumbent. Established companies could counter forces of creative destruction via capability innovation and building. Building capability requires the internet and particularly, external knowledge sources and capabilities, acquisitions and mergers, joint ventures, licensing and strategic alliances. The second priority is not just to explore but to exploit as well. Exploitation is using and developing things that are already known whose returns often are achievable and predictable in the short term. On the other hand, exploration is the pursuit of knowledge of things that could be known. Whose returns are not certain and possibly in a distant future. Successful organizations achieve innovation via internal and external sources and more and more on external innovation sources, like open innovation.
Another consideration is to provide ‘responsibility arbitrage as a new value proposition. Foreign multinational firms go to India to leverage the low-cost structure, scale, technology flexibility and expertise of Indian IT service providers. Today, with the growing competition from other locations, Indian companies should offer something that is considerably more valuable to clients to distinguish themselves from the competition. This includes service and guaranteed results consistency or the chance for them to benefit from ‘responsibility arbitrage. To provide service guarantee, firms would have to be extremely selective when it comes to industry verticals, technology domains and the clients that they serve. No company could be everything to everyone.
Often, IT service providers in India bill their foreign clientele on a time-and-materials basis. Much of the risk in this scenario rests with the client. Consistent with the third priority, more and more firms should start moving towards outcome-based, non-linear business models wherein pricing is based on the achieved results as well as the provider having some skin in the game. Traditional sources of competitive edge for the IT service providers in India, such as talent, low cost, scale, flexibility and expertise are increasingly passé. IT companies in India should become partners with their clientele and get involved in conversations on ‘why do it’, ‘what to do’ and not just on ‘how to do it’. Conversations that involve the latest business and technology trends increasingly involve people at a C-suite level. The benefits that IT providers offer their clientele substantially increase as they move up the value chain relationship and from the back office to front office. For the IT sector in India to retain its health, it would have to deal with the challenges on two fronts. First is the changing nature of business and second is one of perception.
THE IT INDUSTRY TRENDS IN INDIA
News on the coming death of the IT services industry in India begun to trickle a few years ago. It was reported that the country is no longer the automatic choice for back-office work and IT services in the world. Regardless of the prognostications, there’s also optimism on the prospects of the Information Technology industry of India for the coming decade. The IT industry in the country has gone through and has survived difficult times before. An example of this is the dot-com crash in the early 2000s as well as the financial crisis in 2008. Another is the major IT services organizations that devote significant resources to hire development and training, providing world-class facilities as well as educational programs for existing and new employees. Lastly, some are starting to adopt new business models and develop new platforms and products to wean off low value-add services, fixed-price pricing models and time-and-materials.
With the changing trends in the technology industry, the Indian IT industry is growing at a 4 percent rate a year, would continue offering opportunities for IT services companies that operate at all phases of the IT worldwide value chain. Primary customers, CIOs for IT services tend to risk-averse as well as like to perform business with companies that they have prior good experiences. All these factors will continue offering opportunities for the IT services companies in India for the foreseeable future. Nonetheless, not all companies would do well or survive even in the highly-competitive and new global business environment. Only companies that continuously upgrade their offerings and capabilities in line with emerging technologies as well as market imperatives could hope to survive and to prosper in this scenario. For the IT service providers in India, there are five priorities to pursue in order to carve out a fair share of the IT services revenue in the future.
The first priority is to continuously build and upgrade capabilities. Continuous upgrading and capability building are essential for a company’s growth and survival. Industries contain the seeds of their destruction via incursions by new enterprises that use innovations to destroy the advantage of the incumbent. Established companies could counter forces of creative destruction via capability innovation and building. Building capability requires the internet and particularly, external knowledge sources and capabilities, acquisitions and mergers, joint ventures, licensing and strategic alliances. The second priority is not just to explore but to exploit as well. Exploitation is using and developing things that are already known whose returns often are achievable and predictable in the short term. On the other hand, exploration is the pursuit of knowledge of things that could be known. Whose returns are not certain and possibly in a distant future. Successful organizations achieve innovation via internal and external sources and more and more on external innovation sources, like open innovation.
Another consideration is to provide ‘responsibility arbitrage as a new value proposition. Foreign multinational firms go to India to leverage the low-cost structure, scale, technology flexibility and expertise of Indian IT service providers. Today, with the growing competition from other locations, Indian companies should offer something that is considerably more valuable to clients to distinguish themselves from the competition. This includes service and guaranteed results consistency or the chance for them to benefit from ‘responsibility arbitrage. To provide service guarantee, firms would have to be extremely selective when it comes to industry verticals, technology domains and the clients that they serve. No company could be everything to everyone.
Often, IT service providers in India bill their foreign clientele on a time-and-materials basis. Much of the risk in this scenario rests with the client. Consistent with the third priority, more and more firms should start moving towards outcome-based, non-linear business models wherein pricing is based on the achieved results as well as the provider having some skin in the game. Traditional sources of competitive edge for the IT service providers in India, such as talent, low cost, scale, flexibility and expertise are increasingly passé. IT companies in India should become partners with their clientele and get involved in conversations on ‘why do it’, ‘what to do’ and not just on ‘how to do it’. Conversations that involve the latest business and technology trends increasingly involve people at a C-suite level. The benefits that IT providers offer their clientele substantially increase as they move up the value chain relationship and from the back office to front office. For the IT sector in India to retain its health, it would have to deal with the challenges on two fronts. First is the changing nature of business and second is one of perception.
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