India’s IT and outsourcing industry: Becoming more than just body shops
November 4, 2010
The USA and financial services-led downturn has clearly taught Indian IT and BPO firms along with their non-India headquartered MNC competitors some cruel lessons. For starters, companies of all sizes have begun to review IT spending and they are forcing their vendors, most of whom have a substantial presence in India, to become more flexible when they sign contracts. Hence and instead of substantial and upfront capital spending, new payment models now incorporate spending in the form of operating expenditures and more payment for on-demand usage – forcing Indian IT and BPO firms to find new business models in order to move away from their body-shop roots.
However and as recently reported by Rahul Sachitanand in Business Today, the Indian IT services and BPO firms are now in the process of transforming themselves in order to meet the challenges presented by new global business realities. In fact, Indian IT companies are now moving away from application development and maintenance (ADM) and into to higher value-added businesses such as KPO, IT consulting, core R&D outsourcing and so-called total outsourcing (which includes both technology to BPO support). Moreover and as Rahul pointed out:
- Tata Consultancy Services (TCS) is now developing new types of software or business process platforms. This includes a bank-in-a-box platform for rural and cooperative banks in India that uses the pay-per-use model and a second platform designed as a horizontal cloud to enable companies to access various internal processes or functions online. In addition, TCS is building new technologies that are designed to deliver solutions to specific industries.
- Infosys is now seeking to have one-third of its business come from what it calls transformative IT deals to help clients change the fundamentals of their businesses. In addition, Infosys is opening a new subsidiary in the USA in order to compete with large American firms such as Accenture, EDS and IBM for public sector clients plus they have plans to expand into new markets like health care.
- Wipro is developing its own tools and platforms such as the Net Oxygen Cirrus, a mortgage services platform, and Wipro BASE, a BPO platform. These new technology tools and platforms are designed to help Wipro move away from the old model of simply doubling its workforce in order to double its revenue into a new model that incorporates a shared services concept.
Meanwhile and as noted in another Business Today article, the MNCs operating in India are also rethinking their strategies in the wake of global industry trends. Instead of building large armies of IT coders or BPO associates, they are now upgrading the skills of their staff and ensuring that they are part of a global chain of delivery centers. Moreover, US and European MNCs who set up captive units in India to handle non-core IT services and BPO tasks are now selling these captives or they are shifting their operations over to other tech MNCs. At the same time, smaller IT services groups are now in the process of expanding in India as growth at home slows or completely stalls while global consolidation trends is increasing the size and scale of some of the bigger MNC IT or BPO firms that already operate in India.
In other words, both Indian IT services and BPO firms along with their multinational counterparts operating in India are now steadily transforming themselves from mere body-shops into businesses that provide higher value-added services.