In The Spotlight

A new architecture for India’s IT sector 

Financial Express Article, 27/09/2010, Ganesh Natarajan

Imagine a company in the year 2020 which is a dominant player in global sourcing of IT and business services. This company employs 800 high end consultants in the US and a similar number in UK Western Europe Japan Saudi Arabia and Brazil. It has near shore centres in Chile, Poland, Singapore and South Africa and offshore centres in India China and Jordan and has an optimised global delivery model which encompasses consulting and high end business intelligence services in high cost markets, domain skills and architecting capabilities in near shore locations and development transaction processing and testing services offshore. Of its total employee base of 5,000 people, the 1600 associates based in overseas locations are equally split between Indians and consultants of local origin and the revenue per employee is significantly higher than Indian companies of similar size operating in the more typical offshore centric model while the profitability may be some notches lower in the traditional bespoke services business but adequately compensated by its cloud based hosted platforms and IP enabled product implementation solutions segments contributing half the revenue with a tenth of the manpower employed in the traditional business streams. A truly successful company that is an award winning role model for the new global sourcing environment and revered in all the countries in which it operates!

Incidentally, this is not some pipe dream but a scenario that could well be played out in the next decade. Today, the Indian IT and BPO industry which has an enviable track record for providing business processes, systems and software architecture to solve complex business problems of its global clients is faced with a new challenge – to discover a new architecture for itself that will enable it to shake off the uncertainty emanating from the political moves in the West and enable it to continue on the growth track that enabled a fifty billion dollar exports industry to emerge in the last fifteen years. The NASSCOM strategy exercise conducted a few years ago with the active support of Mckinsey had drawn up multiple models and architecture for firms that would sustain and succeed by the year 2020. While the obvious configurations included low cost service providers, domain specialists and new model non linear revenue creating firms, a combination of these with the ability to engage equally well at the consulting level and the development and support stages could well be one of the critical success factors for the industry as we move through the critical post recession years and build new forts for the industry.

The good news is that the industry has already begun to take steps to build multiple new platforms for growth. After having successfully made the transition in competitive advantage from wage arbitrage to process quality in the last decade, the innovation initiatives taken to build new products and services, process and business model transformation and even input innovation through successful industry-academia partnerships have borne fruit in most of the leading companies where customer engagements are built on the promise of innovation and transformation rather than a cheaper offshore solution. The focus on refining the value propositions of small and medium sized companies which began in NASSCOM at the dawn of the new millennium has resulted in a robust emerging companies group forming in the industry where the majority of firms today clock less than ten million dollars revenue and are becoming valuable partners to larger systems integrators in large projects. And the product eco-system is also strengthening every year with the present focus on cloud computing applications and lean start-ups holding great promise for making intellectual property led propositions a key focus area for the industry in the next few years.

One of the most encouraging developments in this year has been the robust beginning made by the UID. Under the inspirational leadership of Nandan Nilekani, this newly minted entity may well prove to be the master stroke of the current Government with its influence extending well beyond its immediate mandate of providing a unique identification number to four hundred million or so Indians in the next three years and comprehensive coverage of the entire population in the longer term. The vision of building a comprehensive cloud based horizontal platform that would support vertical applications for state and nation wide education healthcare and financial inclusion services is laudable and can give a fillip to IT enablement in the country.

The optimism that exists in domestic use of IT may not be mirrored in the global economies as they struggle to cope with a jobless economic recovery and the signs that the early rhetoric in the US is being translated to real enactment of protectionist bills and laws is not a good sign. However, the dialog which has already been initiated by the Government and industry associations and a practical approach to developing win-win solutions for the future will ensure that all the parties are able to develop new architectures for customer engagement and work distribution for the future, which can surmount the obstacles that are appearing on path of continuing success and growth!