Monday, June 02, 2008

Indian IT Industry – how do we retain our Leadership status?

In the following series of articles I plan to discuss ‘Leadership’ beyond individual leadership, rather of a collection of leaders, of the full tribe. I plan to discuss leadership of the Indian IT industry.

I had the opportunity, on February 5th 2008, to deliver the keynote address at a session arranged by the Economic Times. I chose to speak on the challenges facing the Indian IT Industry. In the following series of articles I will cover what I spoke; with some additions.

India IT Industry weathered many storms from Dot Com bust to Sept 2001 shock to election year(s) rhetoric and offshore backlash.
But we have grown to be the #1, and stayed at the No. 1 spot. LEADERS
We have also shown steady and continuous growth.
In our short history, however, the current challenges are perhaps the most daunting. these are shaking the very basis of existence, of competitiveness of our industry.
COST ARBITRAGE -- > SHRINKING
A Falling dollar ( now rising for some time, might again fall.. uncertain cannot bank on Rs:$ conversion anymore), Rising Salaries, threat of other countries and ‘lower cost’ locations among others.
Reduced growth rates of spend on IT in the USA
Productivity and Efficiency were important. Now they are critical to survive
There are other factors.
Business mix served by Indian IT cos is changing.
In 2000 it was 100% ADM (Application Development and Maintenance)
In 2011 this will change to 30% ADM. Remaining 70% will be BPO/ RIM/IMS /S.I./R&D
RIM= Remote Infrastructure Management; IMS = Infrastructure Management Services
There is a distinct drive and need to therefore change the business model and shift to a managed services mode
Service providers also, therefore, need to reengineer themselves, change and adapt to the changing customer and market expectations.
A major shift in our customers’ behavior is their openness to involve service providers to share rewards and risks.
In addition, customers desire that service providers be ready to be measured on delivering to SLAs other than mere availability or response times etc.
These SLAs could include business outcomes. This is a more complex measurement mechanism than most current service providers or customers can manage.

This also requires a far higher customer maturity than most customers possess today; maturity with respect to capturing and measuring business outcomes and impact of individual service components (related to IT applications and systems) on these business outcomes.
The resulting challenges are movement from a highly technology and compute intensive ‘production houses’ to people, service level and output affecting delivery. There is an increasing element of real time and managed service in the IT industry, rightly so.

However the industry as it stands today is not geared or grown up to meet this head on.
Most cos. have grown on people volume model.

The fundamental principle of Software engineering was stated by Fred Brooks in his famous work “The mythical man month” – “putting more people to a late project makes it later” - because it increases the number of communication channels and slows the entire process.

The assumption here was that software engineering projects are not commodity work like construction but Complex Engineering endeavors.

Perhaps it is time for the Indian IT Industry to revisit the ‘complex engineering endeavours’ part of the equation.

If these indeed are complex engineering endeavours, which they are, then the attributes of and laws of engineering apply to Information Technology industry. And basics tell us that all engineering processes can be improved and made more efficient.

What it means is we need to move away from defining and measuring the IT industry from a Time & Material mindset. Time & Material defines non complex linear projects.

As we move away from time & material and linear profits model to increasingly non linear profit models example Managed Services, we are looking at new means to maintain the same level of returns as earlier.

We all know there are 3 variables in IT industry or for that matter any industry – People, Processes and Technology. All three interplay with each other. Today the challenge before IT industry is more people and processes, as against technology. Technology has been doing its bit, Technology leaders innovate and continue to improve.
It is the people part of the IT organizations that needs to use available technology to become more competitive.
The key word today is competitiveness. To be competitive you need to take initiative to innovate and excel and continuously improve. We are here now talking of revolutionary not evolutionary improvements. Technology and innovation also has to be relevant, it cannot be away from the context or current need.

The need, therefore, is to move away from the “Per Seat = X$” mentality, and move to non linear “per seat = multiples of X $” through automation and other means.

To be continued...
Copyright 2008

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