Indian companies need to adapt to the constantly changing business environment

From the challenges facing the Indian IT/ITeS companies to how to

re-invent their business models to working the appreciating rupee to their

advantage, Egidio Zarrella, Global Partner in Charge, IT Advisory, KPMG, in an

interview with Dataquest, gives an insight into some of the key issues facing

the industry today.

Is the old on-site/offshore business model of the Indian IT/BPO companies

becoming redundant?



The business environment is continuously changing and Indian companies need

to adapt constantly to these changes. The on-site/offshore model is here to

stay. However, there are going to be many different variations of this.

Companies must look at their customers for what the new business model may be.

There is no single model that fits every clients requirements. There is a

strong need to be flexible and dynamic to meet customers needs. Indian

companies will need to be across the different models their customers and

potential customers will want. Some organizations will look at placing their

infrastructure processes in India; however, they will also spread their

portfolio across other emerging countries like Malaysia, Vietnam, and Latin

American countries. This is going to be a world where clients will want

one-source, one-location to multi-source, multi-location models and companies

need to adapt.

Egidio Zarrella, Global Partner in Charge, IT Advisory, KPMG

Why is it becoming imperative for Indian companies to look beyond the US

market more seriously?



Any business model becomes stale after a while. The IT sector and BPO

companies have seen only good times, except in early 2000. For the last several

years, many Indian companies were satisfied with their on-site/offshore model.

There were no market imperatives to build a hub (India) and spoke (Vietnam,

China, Sri Lanka, Central Europe) model. Now it has become important to speed up

plans to not only spread the geo-political risk but to manage the strategic

risk. And, Indian companies have started diversifying globally in order to

reduce their exposure to the US market.

India should see itself as a global player and not jut focus on the US

market. Japans market is still untapped. The sourcing market here will explode.

Then, again, there is the European market, which is largely untapped.

One of the biggest challenges facing the Indian IT/ITeS sector is the

appreciating rupee. How do companies come to terms with this market reality?



Indian companies must become more global, and they need to manage and

mitigate the risk of foreign currency exposure. Such discipline only happens

when organizations learn to understand the global environment they play in. For

all the supposed negatives, there are also significant positives, and companies

need to exploit the advantages in any market positioning. The rising rupee is a

double-edged sword and may even be a blessing in disguise. On one hand, it chops

out operating margins for the Indian IT/BPO companies, as most of the customers

and contracts are in dollar terms. However, on the other hand, companies can

work the rising exchange rate in their favor for gaining greater benefits in

global markets.

Why is it becoming imperative for India to shift from the cost game? Many

countries are becoming cheaper than India. So, in the cost-game, India will

not be the cheapest location. India has a huge pool of talent. It will always be

seen as the biggest talent pool the world of business will be able to choose

from. India must continue to demonstrate that it has the best talent. Some

emerging countries will be able to play the cost game, but they do not have an

unlimited pool of resources. At this stage, India can still draw on untapped

talent.

Shipra Malhotra



shipram@cybermedia.co.in