Signals for change

Off late, there have been many indications that the traditional method of IT outsourcing adopted by majority of Indian IT companies would face huge challenges. Not so glamorous results of Wipro and rejig at the top is only a small indication that the shoe has fitted all for too long. Infosys results not showing favour with stock market and static results of TCS are not just indicating that post recession things needs to be relooked but also shouting out loudly for change. The current setup of all these companies are highly oriented to body shopping and servicing clients IT needs instead of innovation and creating futuristic products which can create future jobs.

While I had been critical on the methods of third party service providers in India in employing large number of graduates for doing blue collared jobs in IT, eventually the market has now got tuned to churn out graduates who are only fit for such blue collared IT jobs and have little or no growth in future.

Traditional markets of North America and Europe are either remaining stagnant or shrinking. Customers are not ready to commit for long term and contracts are getting renewed in short cycles of as low as three months. There are pressures for IT companies to re-quote lower rates and deployment cycles are becoming very unpredictable. To add to these issues, US government is adding levels of difficulty in getting H1B visas which is certainly going to hit the profit margin badly in years to come. More and more jobs are now being done out of India for overseas customers and the luxury of 30% operating margin is almost certainly a thing of past unless these IT players end up finding a lot of ignorant customers.

To add to these problems, increasing number of North American and European companies are finding that opening a captive in India helps them in not only saving over these third party providers but also retain IP apart from the most compelling benefit of finding foothold in highly lucrative Indian market for their own businesses.

To add to al of these signals, we have cloud computing which is driven by North American and European companies who use whatever of Indian resources they have almost entirely through their captives in India.  Cloud is going to change the dynamics of IT user in a big way. Adoption of cloud is not very fast today, primarily because the service is still evolving. It is likely that next decade will have cloud as the standard. Indian IT companies in their current form will be worst hit if they do not evolve faster. Standard products being delivered through cloud would end up shrinking IT service market in a big way.

The final straw of the problem is the emergence of China and India. Almost al the IT companies have experience of making money by servicing clients of North America and Europe. China as a market will overshadow the traditional market and Indian companies may not even get a small fraction of that pie. Looking at India itself, there is a huge scope for Indian companies to save face and jobs looking inwards. Again, the track record is very poor. Till couple of years back Infosys did not do any work in India and solely focussed on overseas business. Whatever large contracts were raised, mostly were bagged by MNC operators like IBM. If this has to change, the operating model of every IT provider has to change and margins have to be reworked.

It is certain that if we keep ourselves in fool’s paradise, will have a lot of IT jobs but not the fancy salaries, very slow growth of the industry and employees and thousands of jobless IT professionals who left their core skills to become managers and will have little value in the changed IT world.

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 ¬ 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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