Transformation Key to Retain Edge for Indian IT Services

The global sourcing industry has changed fundamentally, driven by global megatrends of demographics, economics, rapidly changing technological infrastructure, connected consumers and rise of emerging economies.

At the same time, there is a fundamental shift in customers' buying behavior, with a greater emphasis on end-to-end ownership, standardization, time-to-market and delivering business outcomes. Business units are now deciding what applications they need; business impact is determined by the CFO and many technology related decisions are now taken at the board level as the impact is across the organization. Specialization is the key priority. Businesses want to focus on their core strengths, leveraging technology partners to create products and solutions that can create transformational value to their business.

These changes, coupled with an extremely volatile macro-economic environment present an opportunity for the Indian IT services industry to fundamentally transform itself. Service providers have understood that the capabilities that made them leaders in the past may not be enough to ensure future success. We are witnessing a shift wherein companies are rethinking existing capabilities, developing new ones, strengthening their relationships with upstream suppliers, downstream sales channels and extending relations with customers and other go-to-market partners.

Also, in this global inter connected world, there is realization that not everything can be done from a single country. Languages, skills, proximity to customer, business continuity, and local market opportunities have created a network of global delivery centers across the world. Indian companies are creating a hub of centers across 70 countries that create a seamless solution for the clients. Globalization by Indian companies is being witnessed through this expansion, M&A as well as local hiring.

The business models are also changing. From contracts that were based on per hour pricing, the measurement is now business outcome. Pricing in many cases is moving towards a utility model wherein customers pay per use. Focus on intellectual property creation and end-to-end processes / products enable the customer to also realize top line benefits.

Convergence of technologies is also creating opportunities. Cloud, mobility, social media, analytics, present opportunities for the industry to build new solutions, re-architect existing platforms and target new customer segments like the small and medium businesses. Opportunities within the Indian domestic market particularly for e-governance and inclusion are witnessing transformational solutions that can be leveraged in other global markets.

This year, the Indian IT-BPO sector achieved a significant landmark -- crossed aggregate revenues of $100 billion in FY2012, accounting for almost 25 per cent of India's total exports, generating direct employment for over 2.8 million people. While this is a significant landmark, the opportunity ahead is much larger. NASSCOM's Perspective 2020 vision highlights that the industry can achieve revenues of $225 billion by 2020. However, to deliver this vision, the focus of the industry will need to move towards developing sustainable alternate business models that can deliver significantly higher value for end customers in a way that de-links revenue growth from employee growth. Well structured choice of target markets, core intrinsic and execution models can help service providers develop winning alternate business models.

Som Mittal is the President of Nasscom, which is a not-for-profit industry association for the IT-BPO sector in India.

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