Top Actions Required in your Annual Plan to Survive IT Services Transformation

I am writing this blog as many of Indian IT companies finalizes its strategy for the FY ahead. Of course, many reports will tell you from one extreme with dooms day view of how economy is tough/ market is dull to other extreme with rosy picture that Digital transformation will open new doors of opportunity for you. Both extremes are only partly right, and hence totally wrong to consider as basis for strategy.

As we spoke to 400+ clients in last two months and discussed with/attended annual planning/strategy sessions with many of your global as well as Indian peers, I felt that many firms are reluctant to accept structural changes.  This industry is going through and are shying away from taking drastic steps required to survive long term seismic shifts – even if these changes mean disruption and temporary business challenges:

  1. Be Ready for one more year of muted growth  & know well that Digital hype won’t deliver much

 Trend:

  • While select verticals in US shows recovery, verticals like Energy, Telecom shadow overall numbers.
  • Europe will continue to be a problem. In addition to economy, geo-political and terrorism spoil European spend.
  • Hype of Digital and IOT will yield only smaller projects.

What it means?

  • Prepare for industry growth of 6% – 8%.
  • Margin pressures continue to mount.
  • Focus lot more on analytics.
  1. Re-jig Dely Org to suit millions of small projects

Trend:

  • Scale of technology acquisition reducing.
  • On one side deal sizes are dropping and on other hand all projects driven by new technology and functionality plug-ins are of smaller size.
  • New Dev Ops tools and platforms needs less people to do same task compared to five years ago.

What it Mean?

  • ODC and large/broad pyramid centric models are over.
  • Embrace Manufacturing best practices to run efficient project factory, not mere software engineering and accolades like CMMi.
  1. Need to re-skill about 60% of resources and reduce hiring coders and testers

Trend:

  • In rising world of Automation as well as Analytics, Clients need more help in deploying technologies interpreting insights.
  • Having detailed /minute  domain capability and experience and operating skills will be in demand.

What it means:

  • Organizations of Coders and testers need to augment with Users and installers (configuration/deploying etc).
  • Recruit non-engineers, end users from client side, and data scientists/experts more.
  1. Get to account level – research, strategy, solutions and message

Trend:

  • Current micro-vertical based strategy will not succeed. Horizontal services (like Digital, SMAC, and IOT) will fall even shorter than that. Actually these are not tech practices.
  • No two companies – even in same industry and geo – are facing same issues. Your one size fits all message won’t work.

What it means?

  • Start micro-strategy. Identify top accounts that will give over 60% revenue and work at account level (not by sales leaders, but at company level).
  • Your message need to be account specific and research based.
  1. Update current outdated Strategy, Marketing and Sales Support

Trend:

  • Every second Nasscom member has same story…. And still they believe they have differentiation.
  • Currently, these functions are mere plan facilitators, campaign managers, event planners, hosts for visiting clients /analysts, and collateral content creators.

What it Mean?

  • These functions need to provide account level actionable insights, talking points and help to create client conversation.
  • Strategy need to identify solution hot buttons that field and account teams can use to improve pipeline quality and deal strike rate.

Why NASSCOM need to transform

In last twenty years, as nascent offshore IT services market evolved and forayed into the mainstream, evolving client expectations and competitive realities are now forcing Indian IT companies to change. NASSCOM – the representative industry body has also evolved with the changing industry dynamics and is also now facing the urgent need to transform gain. Given massive structural changes in industry composition, market economics, and changing role of overall IT itself, the challenge this time, however, is of mammoth scale than ever in the past.

Before debating on what it needs to do to transition itself to the new role, NASSCOM should address a core issue– answer in an unambiguous way exactly whom it represents and whose cause it is expected to fight. While a large section of its 1250+ members are from its core constituency – IT services and software companies, a large number of its new members are not from the same pack. These new members such as online retailers/travel agencies and MNC’s back offices surely do business leveraging IT, but are not in business of IT outsourcing, software or BPO. They have started pulling NASSCOM’s agenda in multiple directions. A close review of its apex governing body (Executive Council), various forums it runs like internet working group and captives, its top sponsors at events it hosts, and NASSCOM’s own commentary on these various subjects clearly indicate NASSCOM’s multiplicity of goals. To remain relevant to its core constituency, it is of utmost importance that NASSCOM nails down its focus.

At the moment, I would like to assume that this top industry body – NASSCOM (that stand for National Association of Software and Services Companies – will primarily concentrate on its core territory- “Software and Services”. I feel there are six issues it needs to focus on as key objectives of its transformation.

  1. Extend its initiative of industry-academia collaboration. Irrespective of the hype around intellectual property based solutions, more than 95% of work India does today is people centric. Skills of college freshers are not aligned with industry requirements. Companies invest in training for almost six months before assigning the person on a client engagement. NASSCOM should work with technical colleges to align syllabus to newer requirements, ensure they have quality facilities and high standard faculty. The initiative needs to be continues and result oriented.
  2. Redefine its government interaction. While policy advocacy, working with authorities for industry benefits like tax benefits are important and should continue, NASSCOM should work with government to encourage, facilitate, and accelerate eGov or citizen services projects. It will not only create more opportunities for its members and help society, but will also boost the technology appreciation and penetration across country.
  3. Develop many more delivery locations within India. I know some steps are taken in this area. But looking at a few over-crowded locations like Bangalore, Delhi, or Pune, it is clear that much more needs to be done to develop several other locations like Nagpur, Mohali, Mangalore, Coimbatore, Ahmedabad, Bhubaneswar, etc. This will not only help in reducing costs of operation, but also help to manage staff attrition at lower levels.
  4. Help overall industry to upgrade their brand and international communication. While IT companies believe that the industry is moving up the value chain and the future lies in high end services and IP led solutions, most clients and governments abroad still look at the offshore industry as job stealers. The industry needs to be much more proactive to educate clients on the value it delivers and the innovation can bring to help companies become efficient. Today one sees weak arguments and limited branding exercises by industry and the association.
  5. Encourage small/medium sized member companies to build core functions like strategic marketing, corporate planning and international business operations. ‘Client-pushed’ business has stopped. There is intense competition for every dollar. Firms need to think more strategically and sophistication of value articulation needs to scale up. But there are limited trained resources and experienced executives available today. NASSCOM should take initiatives like creating marketing and strategy peer groups for building best practices (at least in non-competing areas) and leverage international institutions for producing business focused resources (and not mere technical resources).
  6. Create a new structure that meets aspirations of its key stakeholders, and build a model that allows partnerships with relevant groups that leverage IT, rather than trying to do it within NASSCOM. The association should play a role of an apex body and promote these new-age companies, back offices of MNCs, and other technology firms to create their own organizations. Rather than trying to serve every industry – be it US/European bank’s back office or online retailer, anyone that uses technology – it should collaborate with newer associations and working groups. This will allow NASSCOM to serve its core constituency better, while benefiting from working with these new-age companies which, strictly speaking, are not IT services/BPO or software companies.

NASSCOM’s signature event and AGM is around the corner, its election process to form new executive council is on, and study groups are submitting their recommendations on what shape the country’s top IT body should take. At the same time, its most core constituents are looking for more transparent debate on the subject and expect representation in decision making. Recent announcement of a group of 30 product companies (iSpirt) or rising aspirations of city level initiatives like HICC in Hyderabad or SEAP in Pune has clearly indicated that all their needs are not being addressed by NASSCOM in today’s form and function, and need to transform.

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