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MMIX > MMX - The King is dead; long live the King (Year end musing on IT providers space)

This is probably my last post in this year and I feel like sharing my thoughts together at one go.

Yet another year is about to come to an end. Many would like to forget this year as one of the nightmare - job cuts, stagnation, closing businesses, struggling bottom lines, insecurity and unexpected falls. While several things may have gone wrong; there were some very thought through and meticulous business moves that will change the business paradigm in near future.

This year also brought a sense of ‘sensibility’ and need for ‘introspection’ at the enterprise level. The unrealistic targets and greed were corrected to pave way for players who had ‘invested’ in the enterprise and looked at this downturn as a means to think and correct the anomalies such that the end customers, vendors, partners, stakeholders and employees at large are able to come out of this with an aplomb. Businesses have realized the need to collaborate, rethink on business models, improve on delivery models and do “more for less” so that we all can benefit as an organization ecosystem.

The margins have dipped but the ‘continuity’ and ‘relationships’ have improved for those who kept away from ‘transactional’ mindset. This is a long term investment and will surely reap benefits! The talks about ‘green-shoots’ and ‘recovery’ were being heard over the later part of the year and that sure lays ground for a ‘brighter’ future ahead.

Several participants in this space have commented on the future challenges and opportunities for service providers in IT space. While I like some, I hate some. This is my personal list around these, though not necessarily in any order–

1.       One-stop-shops are needed – A service provider who can provide infrastructure, BPO services, liaising, approvals, research and consulting all together so that the enterprise do not have to go out in search of multiple partners. Platform solutions are another area which need lot of focus and pricing innovation.

2.       Business Transformation deals are a reality – There are businesses that have been running over years and have become a mish-mash of applications all making the organization ‘disconnected’. There is a need for service providers to enter into these ‘transformation’ deals and relate this back to real value for clients

3.       ‘Architecting the enterprise’ – are you game? – There are very few ‘Greenfield Implementations’ today. Thus, there is a need to identify opportunities to rationalize and streamline and in the process ensure that the entire organizational processes are tied together in a way that the business can perform what it is meant to do seamlessly.

4.       Going the cloud way – With so many providers taking the ‘cloud’ route; it makes sense to look at opportunities of moving out some of the non-critical applications on the cloud and leverage of advantages of OPEX over CAPEX.

5.       Boundary-less Organizations - new focus area – Today the business process originates internally goes out to customer / vendor where the processing is  on a separate platform and this then comes back into the parent organization. All these need to be ‘knitted’ together ‘loose’ enough to allow for flexibility and ‘tight’ enough to allow seamless integration of the processes.

6.       ‘Hybrids’ on the cards – With platforms like ‘Azure’ from Microsoft and the strategy of ERP products like Microsoft Dynamics to allow for a ‘terrestrial + cloud’ offering; the service providers need to look at options where the core ERP/CRM may be installed terrestrially (on-premise) while the peripheral systems can be on the cloud.

7.       ‘Nimble’ is in – today the need of the business is to adapt to changes and be flexible enough to actually model the business processes in such a way that these changes can be done seamlessly. The products need to be modeled and implemented in such a way that these flexibilities can be attained at an overall level using the system of connected product and service offerings.

8.       Micro-verticals focus needs more than mere lip-say – While this has been an oft repeated word; the investments in these areas are typically coming in from niche players working in one micro-vertical. There is need to invest in these areas to reap benefit in the long run. The service companies may have to think from the ‘product’ company perspective to achieve any gain in this area.

9.       Size does matter – With increasing experience of bigger Sis/ISVs and cost arbitrage margins becoming lower, it is the elements of ‘reusables’ and ‘accelators’ which can lead to effective reduction in cost. With huge size, there comes an advantage of attracting best talent and utilize them appropriately.

10.   What next after process optimization – Business Intelligence & Analytics? – The products have helped in optimizing the business and ensure that right data is available at right place at right time with right people; what is lacking is how to use this data for business benefit. Value Analytics would be the game changing paradigm and needed for service providers to move up the value chain

11.   Skilled minds are the real assets – Focus on ‘People’ would have to come back. Recession may have considered them as ‘overheads’; but these are the real drivers in the knowledge driven enterprise. Program Management, Enterprise Architecture and User Handling skills would be of utmost importance besides the traditional technical, domain and functional skill sets.

12.   Doing “more for less” would be the mantra – How to optimize on cost would be the constant question. The clients will become more demanding as they would need value out of each dollar invested in the initiatives. The service providers need to show the real value-add to the clients to win deals

13.   Going ‘non-linear’ beyond the established models – Several of now established models around ‘solution selling’, ‘Platforms’. ‘SaaS’ need to be evolved and new models generated to actually delink the revenue growth from headcount which has been more or less proportional ever since the birth of this industry

14.   ‘Developing’ markets hold the key for future growth – Traditional markets have matured and the investments from clients are around maintenance, upgrade and enhancements. While this sure provides some assured stream of revenue; it is the new and emerging markets in pockets around South East Asia, Middle East, South America, South Africa and Eastern Europe which hold a lot of potential for Greenfield implementations

15.   ‘White spaces’ are available for SI/ISV to capture in new verticals & customer segments – Traditional verticals like BFSI, Retail are cluttered; there is a need to look at Communication, Entertainment, Education, Sports, Non-Profit Organization, etc. where there is a need for a lot of investment

16.   Social Media is here to stay – You may stay clear of Twitter, Facebook, YouTube, MySpace and likes; but the role of these media cannot be undermined in terms of understanding the client behaviors, marketing the products, receiving feedback, etc. and all this is going to become even more omnipresent as we see more players jumping on this bandwagon.

17.   Service Levels are needed; but, IP would be the differentiator – Creation of IP and Knowledge assets to provide a different value proposition to the clients would be in vogue and very much needed to lead the race. This will also include bringing about improvements in existing solutions/delivery methods.

18.   From off-shore to near-shore – With low cost locations available to bigger markets, visa issues, increasing travel costs, green initiatives, cultural differences, anti-outsourcing lobbies etc. there is a need to move some work to near-shore locations. This is a strategic move and needs to be implemented with more vigor.

19.   Mergers on the way – The service providers can actually go this route to increase presence in a region, enter into new verticals/domain or to complement the skill sets that might be missing in the parent organization to take up greater and global challenges.

20.   Innovations needed in pricing models – Fixed Price and Time & Material are passé. There is a need to go for Risk-Reward, Risk-Sharing, Transaction based and Usage based pricing. These are mentioned in ‘deck-wares’ and implemented in pockets and sometime retro-fitted to the implementations; but there is a real need to define these models and implement them to bring real value to clients.

I know this was a long one; but then this is what I feel and did not want to edit it to risk missing on my thoughts. Please feel free to add to this list. Season Greetings and have a happy new year 2010. May it bring a lot of happiness and prosperity to all!


This blog talks about more than specific. Overall, One point i would recommend is, instead of single organization to be stabilized in multiple areas as you mentioned, I would recommend to build a strong relationship with partner and increase the employment throughout. This way company not affecting much if any recession. So I strongly believe multiple reliable partner is more powerful than a single unit.

Well written and thought provoking article. Good thinking Sachin.

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