The Problem of Plenty

The problem of plenty: that is the problem that prospective entrants to IT

services and ITeS industries have to be able to solve. The market is huge. Not

only that, it comes in packaged across many functions-different verticals,

varied geographies-and more. Therefore, companies looking at fresh entry or

expansion can have a tough time deciding where to go. Here, one is not talking

about the few large companies but many small and medium tier ones looking for

the break.

Consider the decision points.



At the start: Should it be an IT or IT enabled service? The latter is the

flavour of today. The former is tried and trusted. Either way, both are here to

stay, for a decade at least. And the potential is enough for all aspirants.

If that decision is taken the question of verticals comes up: Which is a good

vertical to be in? There are many possible candidates. Some have a proven track

record and some others have the lure of high potential. Is working in one

vertical a good idea or is considering multiple options a better one?

Then there is the question of geographies: The US is the big magnet. There

are many smaller ones too. While the former contributes more than 50% of the

revenue, for most companies, it is also the most competitive. So, where does one

dig for the gold?

What about the position on the value chain? Should one look for high volume

low margin businesses or the reverse? There are successful business models

available for each.

Lurking in the background is also the question of products and/or services.

Or, as most companies are discovering, is it really about productization of

services? Again, the options are open and there are success stories in all.

Emerging from the shadows is the question of domestic versus global markets.

The former is small and offers, what many see as, inconsequential margins. But

it is growing and offers a chance to develop and train people. It also keeps the

bench from getting too warm in times of need.

With so many options the answers are not straightforward. There are no

models, consultants or past experience to turn too. Many choices are not easy to

ride.

Historically, the entry point strategy, in most cases, has been to get

business through semi-formal marketing routes and building strengths as a follow

up. The strategy is not without merit but has a few pitfalls. If the initial

business is small this method can work, but for a larger, more critical,

business application the customer wants to stick to someone with more

experience. Building skill sets is an issue since successive orders may not need

the same skills. And the cost of learning therefore becomes too high.

The reverse strategy of offering existing skill sets or developing them has

its own pitfalls. If skill sets have to be developed the choice of area becomes

a critical one. In which functional or vertical should they be developed and

how? There is an element of risk here since post development business is not

guaranteed. So, how does one offer what is not available, or take the risk of

investment with few guarantees?

Whichever way one looks at it, the barriers to entry are increasing and

investments going up. IT or enabled services are becoming long haul games, and

need clear game plans. Will the future growth then come from large existing

players or will there be new entrants? From a country perspective, having more

players is beneficial. But there does not seem to be any plan to make that

happen.

Either way it is an interesting problem: The problem of plenty.

The author is Editor-in-Chief of CyberMedia, the publishers of Dataquest Shyam

Malhotra