The media is rife about the downward spiral of the Indian outsourcing industry, what with the WITCH companies uniformly declaring thin quarterly results and single-digit growth expectations for the year and more.
In flight command, there is a term called spin: the result of an uncoordinated stall, especially during power on stalls. This is when the throttle is all the way in, and the pilot is lifting the nose up to break wind flow over the wings. At a certain point, the wind flow is completely cut off, and the aircraft loses all lift. Right at this point, the pilot recognizes that the plane will simply fall, and pushes the nose down to restore air flow, applies power and recovers from the stall. Since the pilot will be applying the right rudder, there is a big chance of a yaw, and the aircraft could enter a spin.
The Indian IT outsourcing market is in a similar situation. Rushing headlong on full power, the market has now reached a stalling point, and if not recovered well, could enter a downward spin.
Pilots recover from a spin by using the PARE (Power, Ailerons, Rudder, Elevator) mnemonic of procedures.
Here is how the Indian IT Outsourcing Industry can PARE the spin.
- People: The entire IT industry is built on intelligence capital. Unfortunately, and ironically, the entire industry assumes this capital as commodity and treats it so. Salaries in this industry are above average, but the talent pool is woefully trained. Newer technologies and paradigms are throwing curve balls at this industry, and yet Indian IT remains ignorant, or chooses to be unresponsive: I even see news releases from leading firms claiming to be the leading cloud service provider. A ridiculously ignorant piece of communication. KPMG’s report for 2016 IT trends places skilled talent on top of the list of CIO concerns, and Indian IT should pay heed to embark on a massive skills training program.
- Agility: The standard procedure for responding to any business ask is for IT to go away for 6 months, and come back with a solution that would typically meet about a tenth of the business request. This leads to frustration, loss of faith in IT, and with the onslaught of self-service apps, most business units are now finding their own answers to their problems. While Agile has been around for a while, it is mostly an in-house process, and never a collaborative process. Not just that, IT firms don’t make it a de-facto practice with their customers. Agility in response to business units is a big change agent, as more units will have faith. I met the head of procurement at one of the leading Oil & Gas supply manufacturer, whose IT vendor is one of the large Indian IT firms. He had asked for a report from their Ariba instance, and the vendor took nine months to even respond. He had, in the meanwhile, taught himself SAS, procured a license and was generating his own reports. Not to mention, he now is the head of business reporting as well.
- Rebrand: This is going to be important in the next couple of quarters. Take a look at all the Indian IT outsourcing brands. Almost uniformly, all messages on the home pages are one of the following: Cost reduction, Analyst winner, Process optimization through remote services, Digital transformation, Value addition. What is the audience take-away from any such messaging? The CIO role is changing. Digital is influencing the way she delivers services to the sales, marketing, supply chain, and manufacturing. None of the service providers have ANY experience in selling to business units, so suddenly claiming to be a “digital” company will not cut ice. Neither is buying digital agencies going to help. The industry has to rebrand itself around innovation, risk-taking, intelligent delivery, millennial engagement models, client profitability and scale, and so on. These maybe considered board-room discussions, and they sure are. Unless IT firms sell to this upstream, there is going to be very thin downstream trickle of future projects.
- Enable: I have worked with numerous product companies, who shy away from partnering with any of the Indian IT firms. They would rather work with an IBM or a Deloitte or Accenture. Upon asking why, the most frequent answer has been: the first couple of meetings are great, but post that, these firms just go silent, and after a few months, we see these companies try to build some weak fake copy of our product and try to sell services on top of these fakes. (Yes, I am going out on a limb here, but, I am not afraid.) The US-based consulting firms typically act as enablers of new technologies, but Indian IT is firmly rooted in a people-driven business. I have even heard one of the senior head of financial services practice disclose that their company has a policy of ousting any product that does not have services models around it. This has to change.
There is a small window of opportunity for one of the largest economy drivers of India to drive yet another powerful wave of change. But it has to be disruptive. It is not business-as-usual anymore.
I would be delighted to hear about your opinions, and make this a collaborative discussion, and NOT degrade it into a blaming game.