Commoditization of IT services – More than just cost savings

No business model can last forever.  Signs are already showing that a lot of IT services would get commoditized and would be easily available over the wire at fraction of cost and much faster than the traditional development model.

Easy availability of Internet bandwidth and awareness of technology has made things far easier. Questions are being asked, when an ordinary citizen can go online and make his train and airlines ticket booking with ease, what is stopping corporate to adopt online systems for their use.

Many organizations are already leading the pack, although most of them are small and mid size companies who cannot afford or do not feel the value for money in investing for their own Data centre and sizable IT team. Change is slow for large organizations, but is just waiting to happen.

After huge success of Salesforce.com, several IT service providers started making their software available on pay per use. Even SAP is moving to E Availability of their suite which may help them multiply faster. Ramco – an Indian ERP provider is already available online and is able to provide real value for money for their customers.

Google, Microsoft, SAP and Oracle are all moving big way to make the change happen for IT from just a service to commodity based out of service. Standardization of such services would also lead to reduction in cost of maintenance as availability of manpower with those skill sets would be easier.

The challenge for IT teams and CIOs would be that these services would question the need for local IT support teams. In reality, it can be a direct interaction between business and the service provider. It is therefore evident that with more commoditization of IT services like ERP, ESS, HR Systems, Finance systems, Procurement systems and likes CIOs will have no reason to keep IT staff to keep these systems operational. It would help organizations in reducing cost but would certainly pose a threat to a lot of jobs which exist today just because the better method is still to become popular.

It is not wrong to estimate that in next three years, almost all small companies would be using IT services in a commoditized form and sharing the IT load with some other departments. Larger companies will continue to keep away from such services in a big way but this change resistance has to give way sooner or later for everyone.

Alok Kumar

Alok Kumar is Managing Partner of SRKay Consulting group, a private equity company, nurturing innovative ventures. Alok also serves on the board of ICCL (Indian Clearing Corporation Limited - A subsidiary of BSE- Bombay Stock Exchange) as an external advisor for technology and information security. Prior to this, Alok had been Managing Director of Sears IT & Management Services India Private Limited (SHI) since its inception in December 2009 and served in the same position till very recently. Having been in senior IT management positions in Fortune 500 companies, Alok has won several national and international awards. Alok is instrumental in planning and setting up SHI and thereafter growing it to a multi-locational thousand-plus people organization. Over the last five years, with his strategic vision, Alok helped SHI grow roots in India, develop and support technology applications and infrastructure across core mainframe, cutting edge e-Commerce and big data technologies. With his unique people-oriented transformational leadership style, Alok turned SHI into one of the most valued investments of Sears, garnering great ROIs, and creating value much beyond cost arbitrage. Under his tutelage, SHI has filed two patents and is recognized widely for its best practices in various areas, the latter, currently featured in Indian Institute of Management (IIM) case studies. SHI also became a CMMI Level 3, PCMM Level 3, and ISO 20000 certified organization. Alok is a widely acclaimed corporate leader in India today. He regularly participates and leads various forums as a keynote speaker and is an author of several books in different genres. Alok has several awards to his credit. He is particularly known in the industry for his people management skills and innovative ideas in improving the productivity of employees through unique people practices. He has been credited with the following industry awards: ¬ Emerging Leader of the Year award 2013 by IndiasGreatest.com ¬ Game Changer CEO of the Year 2013 (SHRM) ¬ CIO 100 - The Bold CIOs - 2008 (Reliance Infosolutions) ¬ CIO - Ones to Watch Award 2008 (Reliance Industries) ¬ Extended Manager Award - CIOL 2004 (Tata Teleservices) As an able leader of SHI, Alok got SHI recognized widely in the industry with the following several awards: ¬ CII Award for HR Best Practices in 2014 ¬ Global Excellence in Outsourcing Award - AIOP (Phoenix 2013) ¬ IT Innovation Award (Design & Engineering) - Computer Society of India 2012 ¬ Golden Company of the Year - Economic Times 2011-12 ¬ 7th Employer Branding Awards - World HRD Congress (Mumbai, India) 2013: • ‘Asia’s Best Employer’ Award • ‘Best HR Strategy’ in line with business • HR Leadership Award • Talent Management Award by Bloomberg TV India ¬ Employer Branding Awards - World HRD Congress (Singapore, Asia) 2013: • 7th rank in ‘Asia’s Best Employer’ award • Award for ‘Best HR Strategy’ in line with the business • HR Leadership Award Other recognitions: Alok had served on the distinguished panel of NASSCOM's GIC (Global In-house Centers) National Council members. The council members play a key role in major initiatives of the industry and include the torch bearers of IT industry as panel members. Books and Papers: Alok is an established author, with three books to his credit. Alok’s third and latest book, a novel, “The Spy from Unaula” is a 2015 publication. A handwriting analysis enthusiast, Alok collaborated with his wife Nandani on the book, “Handwriting Speaks” in 2006. “Value Sourcing – Future of IT Outsourcing” was co-authored with Keith Sherwell (currently CIO, Altice USA) and was released in 2013. Alok also researched and published two whitepapers: a. “Creating next generation captives” talks about the best practices that are helping generate higher value from the IT company captives.

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