Indian IT Services Business – Can they Transform?

We are possibly in the fourth decade since the business of IT Services began flourishing. Today we hear companies such as Infosys talking about an Enterprise 3.0 that sets out to meet the aspirations of its customer universe. The rhetoric is pretty much similar whether you consider an IBM and Accenture at the head of the food chain or an industry interloper such as Cognizant Technologies and HCL Technologies or even established leaders such as TCS and Wipro Technologies. This edition of my blog is to elucidate what those aspirations really mean for the customers and how they are being fulfilled by the software services companies. The founding premise for a higher and different aspiration than what we have seen in the last 3 decades is:

  1. Businesses have matured and realized IT & IT enabled services to be more centric and innovation enabling their enterprise; collaborating and transparently sharing information across the ‘Customer Universe’ has become a cornerstone for sustained success.
  2. The globality of businesses and the advancement of technology especially the Internet, compels enterprise adaptation to the rapid changes in the external environment with agility and minimal downtime or dysfunction. Services Oriented Architecture (SOA), Cloud and Business On Demand are no longer concepts but practical illustrations of plugging and playing globally.
  3. Software and Technology are embracing Open Systems and Sources more willingly and capabilities are no more properietary and monopolistic. And hence the requirement to work with a more responsive workforce that is resilient and adaptive at every level, participating rather than being instruction driven.

Illustration 1

As is evident from the above illustration 1, the Value sought by customers has moved from Labor and Cost arbitrage through operational excellence delivering competitive advantage to Innovation and Industry Transformation Partnerships. From a Vendor to a Collaborator to a Partner, customers worldwide have a need to shift attitudes and work practices to derive value out of expenditures incurred for developing, supporting and sustaining IT and its related services. In other words, the businesses no longer are thinking about spending on IT; rather about spending the money wisely that derives not just support but ignites and drives the business engine.

Similarly, the demand for renewed business models on the part of IT Services companies has necessitated them to seek a structural shift from poople being resources and  commodities to the current scenario where Human Capital Management is strategic to business innovation and transformation. In the earlier version of the business models, both the customer and the vendor saw little else than billing for people’s time who carried out agreed instructions diligently. The expectation today is progressively moving towards people demanding and using the resources and infrastructure that will enable their learning and build on the collective intellectual capital to deliver  Intellectual Property (IP). This is expected to result in the walls of inter-enterprise collapsing to create a global enterprise that thinks globally and delivers glocally. From the head of hub and spoke systems rearing during the operational excellence era, the thought has advanced itself to more open trust and capability based relationships that connects partners with core competence to deliver value along the chain to Customers and Consumers.

Illustration 2

Illustration 3A

Illustration 3B

As depicted in the Illustration 2, People have once again rightfully come to occupy a centric position in enterprises’ Purpose, Products / Processes and Profits. As is fashionable these days, irrespective of the organizations they work for, people can interact socially in real time and share responsibilities against well structured framework of governance. The key therefore is the Culture of engagement and the Content to Connect. The following illustrations 3A and 3B clearly establish that connection.

Oh well, so far this has been a lot of theory. But really looking at the practical side, the obvious leads to questions like:

  • Does Infosys have the above infrastructure to drive Cognitive Intelligence deliver Customer Experience?
  • What has the Armada of Business Units at TCS announce nearly an year ago have to show for its conquests?
  • How is the People First policy of a HCL Tech manifest in Intellectual Property Creation and Profitability through participation in the Customer’s Purpose?
  • How will the council of leaders corroborate the individual aspirations of their Customers to collective business performance for the shareholders of Wirpo?
  • How has the business value created by Cognizant’s collaboration with its customers manifested in terms of Returns On Assets Deployed (R.O.A.D.) on its balance sheet vis-à-vis reduction in Cost of Goods Sold (COGS)?

The above are just example  questions that are bound to emerge from the declarations leaders have made from these Public Companies in the public domain. I have had the benefit of speaking to some of the senior members of the leadership in most of the above mentioned companies and they have not given me any signs of encouragement about their currency in thought leadership and preparedness to deliver to the expectations, leave alone aspirations. The conversations still range around headcount and outsourcing deals and margins based on a cost plus model. The dialog in a room with a pipeline of customers that gives the radar a strong sense of accounts being managed for annuity is still missing; where annuity is not to be confused with annually contracted business. Annuity is about the growth of business year on year, that is based on the New – Products, Processes, Services and / or Platform.

Perhaps the intent is there but it has not translated into action. Which brings us to some practical realities relating to leadership. C K Prahlad and M S Krishnan in their book “the new age of innovation” center their work around the concept of N = 1, R = G  would govern the future of innovation and competitiveness. Where N = 1 stands for a “Unique Customer Experience every single time of Customer Interaction” that uses Resources (R) = Globally (G) to build and sustain such customer uniqueness in business operations. One of the leading examples in the book is that of ICICI whose then CEO and current Chairman is K V Kamath, who is also incidentally the current chairman of Infosys. I bring this into account here because ICICI’s core capability in the book is listed as the following responsible for breakthrough customer experience:

  • Business Process flexibility to reflect evolving business models
  • Synchronization of strategy, business processes and ICT architecture
  • Senior Management leadership in shaping social infrastructure and culture

I am not sure what evidence was used by Prahlad and Krishnan to draw the above conclusion.  I as a customer of ICICI would certainly like to disagree and the above is far from the truth. This is based on interactions at several levels with bank personnel as well as a professional as well as frequent interactions as a customer using both technology and personal interaction at a branch level. On the other hand, another BFSI player ING Group (especially in the US) continues to surprise customers with its New Products, Processes, Services and therefore innovation. The question really is whether the PR at ICICI dominate the agenda for building the business of tomorrow at Infosys by the same leader?

TCS under F C Kohli never thought about the results. It was always the process and the expected outcomes of the process for its customer. Kohli’s legacy is building a great chain of potential leaders and people aiming for excellence.A proof of that is the three month training that he inculcated as part of inducting anyone into the TCS organization. Potential is the word I use because that is the best some one else can do for you with respect to leadership. To cross that chasm into realization and performance one has to step up. In contrast, Narayan Murthy, Nandan Nilekani and their friends together put passion and pride behind Infosys.  They have been much less successful in building that pipeline of leadership which shows up in the rift of the  founders led by Mohandas Pai on something as elementary in the founder’s language on succession into key positions of leadership. This is also because they struggled from the challenge of one threshold of capability into the next, more intuitively than based on any management science. Today they seem to have a slew of management gurus on their side but that does not get reflected in the processes the organization has to bare or the people who run the wheels everyday. Ditto for Shiv Nadar and HCL, though one must admit that Vineet Nayyar’s campaign on Employees First, Customer Second resonates to create a people centric enterprise.

All this raises the fundamental question of People alignment and Talent Management right at the heart of the business, where people have worked with each other for a considerable period of time despite being fortunate at being at the right place at the right time and taking advantage of a wave of positive business opportunity in IT and IT Services. What chance do the new leaders have to establish a new way in a much larger organization of thousands of people?

I believe that this will be a period of churn where the Customer Universe including Clients, Employees, Shareholders, Stakeholders, Business Partners, Vendors and Society will throw up questions.  Rather than taking positions behind the smoke screen of PR, these organizations and their leadership must be brave and bold in drafting leadership and people who will serve the dynamically changing aspirations with dignity. After all, these are public limited companies where the investors expect them create wealth from their investment, not just make the people within the organization wealthy.

About Subbu Iyer

Subbu Iyer is an Innovation & Transformation Leader as with 28 years of serving customers globally. He is currently the Chief Designer & Transformer at Energizing Innovation, an enterprise that is being founded to facilitate continuous growth in enterprises and as a consequence create societal wealth. The Radical Shift that this enterprise intends to employ is focusing on the Potential rather than the Performance of a business. He has been a serial entrepreneur and an intrapreneur in his past life, having founded Nihilent Technologies and Nandaki Systems besides being associated in senior leadership roles with firms such as Coopers & Lybrand, Cambridge Technology Partners, Tata Consultancy Services, Wipro Technologies and Steria.
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7 Responses to Indian IT Services Business – Can they Transform?

  1. Dipanjan says:

    Kindness of Your’s that I am invited to this valuable Thought repository. Hopeful many will find this useful.

    May I leave a reflection on this topic in particular.

    There is a “People” factor that lies in root. Senior Management,Board and Exec is “Committed” , all else in the carefully built Pyramid is “Involved”. This creates a basic disconnect to not just flow of Innovation but even flow of Business Value unlocking delivery. For IT services Org in India, I did not find More True than this.

    a chicken and a pig are talking and the chicken says, “Let’s start a restaurant.” The pig replies, “Good idea, but what should we call it?” “How about ‘Ham and Eggs'” says the chicken. “No thanks,” says the pig, “I’d be committed, you’d only be involved.”

  2. Congratulations for the article, Subbu. Pretty interesting!
    I fully agree on the need to synchronize strategy and innovation, and specially keep the innovation focused on specific goals.

    Regards,
    Juan

  3. Divya says:

    Thanks Subbu for letting me in your world of amazing thoughts and information. The article is extremely well written and provides a valuable insight into the Indian IT industry. I truly agree with your thoughts on FC Kohli’s vision on building a great chain of potential leaders and people aiming for excellence. In fact I was discusing the same over past weekend as to how the three months training program in TCS has contributed to my own professional growth in the IT industry.

    For past many years I’ve been on the other side of the fence, on the receiving ends, a clinet to the indian IT industry and I can definitely see so much more needs to be done by the Senior management. They need to build leaders not just resource pool of developers.

    Well, I feel like going on and on and can write a blog about your blog!! Congratulations and many thanks to you once again!!

    Best regards,
    Divya

  4. Hi Subbu,
    Thanks for inviting me to your blog.
    Firstly, congratulations for some excellent writing (in particular i liked the skill vs leadership dilemma, where you take Sachin as example and bring out a very interesting and important point).

    I am quite bullish that a few of the Indian IT services organization will make the transformation to the 3rd level of your illustration. Most of the organizations that you mention are stuck at level 2 and are finding it very difficult to move to the next level. This is clearly because of the current leaders and top managers who run these organizations (exception of one org i have hope to get level3 much faster than the others). Actually, the current leaders are very good at what they are doing which is level2. Leaders in these organizations have worked very hard in making the org. operationally excellent and hence have still managed a decent margin of profit.

    Level3 needs different qualities. Unless these qualities are injected the org will remain in level2. In my opinion current leaders have not put much focus in thinking beyond the current, the curiosity to find new things/opportunities seems to be missing. The progressive leaders are battling the dilemma as to how much risk & investment and for how long should one wait to be able to hit upon on the new business opportunity.

    In my opinion leaders have to invest in- people who understand innovation, provide them with the necessary infrastructure, exposure, etc to make the transition to level3.

  5. Subbu Iyer says:

    Thanks Divya and Pradeep for your kind encouragement.

    Pradeep, I am writing a second part to this article on what it takes to be on each of the levels. If you notice, all of the Indian companies without exception talk about being in the 3.0 space and probably believe it as well. Unfortunately, none of them have an “Enterprise Narrative” to back it. The bane of Indian Management is “spraying and praying” and as you have rightly pointed out, there is a huge dearth in the understanding of creating that cohesive narrative. I am saying this out of personal experience. I have had conversations with the very highest of management / leadership on the topic of 3.0 in some of these leading companies and discovered that they are in the zone of a cusp between Awareness and Understanding of the subject. On a maturity scale of 5, that score is 1.5 where the maturity scale consists of Innocence -0, Awareness-1, Understanding – 2, Definition -3, Competence -4, Excellence – 5. More in my next blog edition. Thanks for your feedback.

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