Sunday, August 10, 2008

Clear & Present Danger for India (IT) Inc.

According to our friend Karl Keirstead at Kaufman Bros, in the IT services and consulting space, client demand is shifting beyond tactical IT projects to more strategic and complex cost-saving and transformational projects requiring greater innovation, deeper industry expertise, greater intimacy with the client's business and the need to sell beyond the CIO to other parts of the organization.

Most Indian vendors, however, have the seemingly dubious reputation for being project-based, less strategic and without deep industry expertise. This image has been further exacerbated by actions taken by the Indian vendors in the recent past. In an effort to cut costs and hold margins in the face of wage inflation and (until recently) the rupee appreciation, many Indian firms shifted the offshore/onsite mix to even more (higher-margin) offshore work, and shifted the employee base to even more (higher-margin) young college graduates. This has reached the point whereby the average number of years that software programmers at some of the large Indian outsourcing firms have been in the industry is now just two years or so. Many years ago, Accenture was mocked by its competitors as employing a delivery model of one senior partner and a "school bus" of inexperienced consultants fresh out of college. It now seems as if the Indian firms have deliberately shifted toward this model in an effort to hold margins steady and it may ultimately make any transition more difficult. Moreover, recent efforts to cut travel costs may help margins in the short term, but they end up further limiting client interaction at a time when the Indian vendors need to strengthen their client relationships and learn more about their client's businesses.

Looks like lack of proximity to on-the-ground client issues; coupled with lack of vertical expertise and weak client relationships are being responsible for Indian IT vendors’ increasing difficulty to engage the c-suite. This has resulted in Indian IT vendors being left out by the client while making strategic and transformational choices.
India (IT) Inc’s strategy of positioned herself as a ‘Thought Partner’ contributing to higher value solutions, rather than just an ‘Implementation Partner’ providing lower cost services, is definitely not working. It requires urgent and immediate actions on the part of Indian IT players to ensure sustenance.

No comments: