“Moving Up The Value Chain” Cannot Be Faked!
January 5, 2010
TCS, Infy, Wipro losing contracts to emerging rivals screams the headlines about near-shore competitors from Brazil and Mexico taking Outsourcing contracts away from some of the best Indian Outsourcing providers!
Indian Outsourcing Providers have been talking about Moving Up the Value Chain for a decade almost now! IT and ITES outsourcing is as ephemeral as manufacturing has proven to be, notwithstanding dubious claims about Engliah Language advantage of the Indian providers. If anything, the language advantage is marginal in the long run, with millions of eager, young Chinese learning English diligently! Moving Up the Value Chain also meant taking on tasks of more complexity to be done offshore increasingly! This means Moving up the Service Value Chain alone.
In my opinion, Indian IT providers have lost a golden opportunity the last few years in not gobbling up Small and Medium entrenched Software Product companies around the globe instead of service companies. Service companies are just people. If the people walk out the door, you have nothing. Open Source and Microsoft based software product companies have been thriving, providing solutions that the big box makers used to provide costing millions of dollars. Traditional ERP software is a classic example. When the Indian IT service providers were flush with money a couple of years ago, if they had bought software product companies instead of service companies, they would be in a much better position to move up the value chain and have intellectual property assets that they can sell their already huge roster of customers. You can add services on top to make the deals even sweeter.
That strategy would help fend off nearshore competitiors very easily. It is still not too late to do but somehow, I am not holding my breath. Service companies know only services and cannot easily transition to managing product companies. Even that can be overcome by hiring truly exceptional global product talent and getting out of their way. That would also be against the traditional highly hierarchical management styles of many Asian countries.
Moving up the Value Chain cannot be faked. It requires truly innovative strategic thinking! It can be done but involves doing certain things you may be unfamiliar with or uncomfortable doing!