Moving up the value chain has been an aspiration for Indian IT brands for quite sometime now. Now it may well be deemed an unavoidable necessity!
In the 2006-08 phase, Wipro, TCS, HCL and Infosys brought their BPO units into the parent company in order to go after deals with IT and BPO components (the same reason why TCS and Wipro picked up Citi’s assets). But as Sahni of IDC Asia Pacific says, “Indian IT SPs are not as competitive as their global counterparts for business consulting services. Indian IT SPs can provide advisory services as it links to IT operations and vertical specific solutions. However, in the true sense of business consulting i.e. People and Change Management, Corporate Strategy, Branding and Marketing, it doesn’t make sense for Indian IT SPs to enter that realm.” The best Indian IT firms can therefore do is to hire business consultants and leverage on their IT expertise. Two opportunities are hot property for Indian firms over the next few years in this regard. The first is the IFRS implementation, which is going to give them big business across major markets, barring the US (still continuing on GAAP). However, Europe, China, Japan, Australia et al, are gold mines in this regard, as some 60-70% of IFRS implementation is IT. The other big gold mine is intelligent ERP, the reason why HCL went all out to take over Axon.
Then there is the aspect of going deep into specific verticals. Financial services was a mainstay of major Indian IT companies till the recent recession taught them valuable lessons on the same. Now it has become important to diversify and Indian companies are adapting their models to cope. As an Indian IT analyst says, “In terms of deal innovation, Indian players are catching up with global leaders such as IBM and they are learning how to effectively use price innovation and business outcomes based models for winning contracts (eg TCS with Indian Passports Office). Creating a business model around this is complicated and a closely guarded ‘trade-secret’ as each vendor has their own pricing philosophy which is at the core of their sales and client engagement strategy.” Talent related to domain specialization is also getting increasingly sought after. Ravi Shankar, Senior VP and HR Head, India Operations, HCL, explains, “Domain-related specialisation is needed, for instance, in retail and banking (since the IT sector divides itself based on industry verticals). IT industry has always struggled to find domain specialisation.”
It is also important to gain larger deal sizes, in order to break the linear relationship between manpower and revenues. Chakraborti cites an example, “Not more than 3-4 companies are in fact billing more than $300 million deals. When deals become large, you don’t have to put an apple to apple kind of manpower addition. If 50 people are needed for a $30 million deal, that doesn’t mean you need 500 people for a $300 million deal. You may just have to put 150. So realisations are much better.”
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