Outsmarting in 2010



Making predictions is dangerous these days. Non linear trends seem to
be all-pervasive to the extent that whatever one thought as a construct
prior to 2008,
needs to validate the same in present context.  However let me
take the risk and share some thoughts of what could shape the business
landscape in 2010.  To start with, this year will be a
portentous start to the new decade.

As organizations across the world dig in their heels and prepare to
bounce back, a new equilibrium characterizes IT. Market demands,
evolving technologies and creative competition are set to redefine the
industry and rewrite the rules.
Faster, Cheaper, Better — these have been raison d` etre of
the service industry. In 2010,
add Smarter to the list. As the market matures and customers become
increasingly discerning, the demand for predictable results and outcome
certainty overwhelmingly influence the modus operandi of service. Here
are a few thoughts on the key drivers in 2010.

Faster

Divide
and Rule:
The worst
recession since the start of the new millennium has changed the R&D
outsourcing market.  Rather than input-based or talent-based
models, there are more componentized, functional services in
R&D. With increasing need for reusability of software, the
‘assembly line’ will gain ground in the software
world. Clients, especially ISVs, are looking forward to the
industrialization of software. The advent of challenging processes and
methodology required to transform software components into an assembly
will enable the production of more competitive software. It will also
spawn niche players like those focused solely on QA or UI or
new-generation technical documentation and user reach, etc.  


Only
the Innovative Survive:
In
the outsourcing market, concepts that will assume a lot more importance
will include model-based development/ componentization, greater
ownership of these components by providers and IP-driven outsourcing.
Companies which have made innovation a habit will definitely thrive in
better health. This innovation could be in business models, products,
frameworks all adding up to the creation of IP’s which add
disproportionate value to clients. The days of transactions based on
labor arbitrage as the crux of deals are over.

Cheaper
Scaling
the Great Wall:
India will
emerge as the undisputed leader for R&D expansion. Larger
companies will get more invested in the Hub and Spoke model, whereby
the captive plays the role of the hub and works with the partner
‘spokes’ . Smaller players will continue to be
challenged on productivity, hence they will need to reconsider whether
they want to set up a captive or want to work with partners.

While the India vs. China debate will abate temporarily, it could be
back should the rupee appreciate again. Companies have also realized
that offshoring to China is not a tactical decision, it’s a
strategic one. It’s a decision for survival.  In
smaller companies, decisions of outsourcing now involve the boards and
not just CXO level executives.  Look at the evolving markets,
say automotive. India is outstripping China in terms of R&D in
the automotive sector. Nissan and Honda will build their small cars for
the global market in India. Such a scenario builds opportunities for
India in engineering design services, electronics and IT related to
automotives.

Health
is wealth:
The other industry
which promises to growth is Healthcare, thanks to the impending
healthcare policy changes in the US and the increasing awakening in
India towards organized healthcare. The medical tourism market is
similarly growing across the globe. There are definite opportunities
across all the micro-segments of this market.

Being
in Currency:
The impact of
the dollar on the industry – in Japan, China, US and Europe has been
very heterogeneous. The dollar’s appreciation against the
rupee and depreciation against the yen yields a lot more inherent
productivity enhancements. But despite the enhancements, the fact
remains that businesses are still looking to liquidate and monetize
their assets. And of course the threat of the impending economic cycles
with the proverbial “what-goes-up-must-come-down”
and vice versa lesson.

Better
The
Simmering Cutlet on the CIO’s Plate:
What
are the technologies of the future? Cloud
computing
, SaaS, Virtualization,
Social Networking Technologies, On-Demand Services are the hottest
technologies in the market, driven to maturity by increasing enterprise
demand. Over the next three years most enterprises will use a mix of
public and private cloud computing, with more money being spent on
private cloud computing, as it requires investment in new equipment and
infrastructure. These evolving technologies impact the service industry
and enable functionalities that service providers wouldn’t
have attempted in the past. For instance, the Amazon Cloud enables you
to actually build a lab in the cloud.  On-demand services
emanate from that. With social networking going mainstream,
organizations are mandating the addition of a social dimension to their
conventional web site or applications. It seems prudent to adopt a
social platform sooner, rather than later, because the greatest risk
lies in the failure to engage and thereby, left mute in a dialogue
where your voice must be heard.

Charity
and IT Business Begin at Home:

A burgeoning India market will challenge service providers with its
different dynamics. Expected to grow to 5 times its size as of today in
the next 5 years, the India market will need to be managed differently
because of its acute price and value sensitivity. The iPhone, for
instance, is a global rage but has not made more than a whimper in
India, primarily because of the price points involved. What a Samsung
Corby is doing to the Smartphone is what the Lexus has done to the BMW
or Merc. You define the service and then deliver it at a particular
price point. That’s how outsourcing will have to transform
itself.
Smarter

The
World is truly flat:

Businesses, today, are looking for the best resources for the job,
regardless of traditional outsourcing preferences, like say India or
China. Outsourcing will only become more holistic and definitely,
global. This is only a reinforcement of the point made earlier that the
Boards of companies are getting involved in outsourcing decisions in
order to achieve strategic objectives. The emphasis on outcome
certainty and guaranteed results is only to be expected. Customers want
predictability to costs, schedules and the quality of the outsourced
software engineering process. Naturally, the onus is on service
providers to attain greater efficiency, offer better costing and more
conscious investment in improvements across their
processes.    

Say “Clean” – Some industry needs, like the need
for clean energy, accentuated by the recent deliberations at Copenhagen,
and the increasing focus on healthcare, will assume greater importance.
Spurred by the explosive demand on diminishing natural resources by
countries around the world, clean-energy technologies are the next
power engine for economic growth. Investments in clean technologies
have grown substantially since coming into the spotlight at the turn of
the century. Competition in the high stakes race to dominate the clean
technology industry will only trigger ‘cleaner’
products and services and build the jobs of tomorrow. Similarly, the
adoption and use of healthcare IT to reduce costs will be in focus in
2010.  This will not just result in technology and
telecommunication players aggressively pursuing a share in the
healthcare business but it will also result in creation of greater
value in the healthcare system.

Learn
Thyself:
Finally, people will
need to be multi-skilled in the demand-driven market and take greater
ownership for their learning. It was a common refrain amongst employees
to think that training and development were the tasks of the
organization they worked with. While the organization can provide a
strong ecosystem: formal training, peer reviews, academia interactions
and networking opportunities with industry counterparts, the employee
of the 2010’s will need to take lot more initiative to and
investing in learning more on their own.

Amitava
Roy is the Chief Operating Officer of Symphony Service Corp.

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