The Way Forward

Business technology consulting in India is evolving from low-value offshore

outsourcing to high-value business results focused work. This fundamental change

in the kind of work performed by business technology consulting firms in India

requires that these firms change their underlying business model.

And therefore the Indian IT industry must raise its sights higher.

On the one hand, the Indian firms have to face the challenges posed by the

multi-national corporations. These companies have moved in and opened their own

development centers, often paying above market salaries to attract hires and in

so doing putting inflationary pressure on wages. On the other hand, the Indian

firms have to look beyond playing the mere numbers' game. Just hiring

programmers by the hundreds month-on-month and wishing that growth will follow

as it has in the past is not going to work for much longer.

As the challenges of managing a huge workforce grow further and as other

countries such as China, Russia, and the Philippines play catch up by ramping up

their human resource pools, the cost advantages enjoyed thus far by the Indian

firms are likely to disappear.

To counter this, and to keep the growth engines going, many Indian IT firms

have set up BPO operations, hoping that they would offset the thinning margins

in the software services business with the currently attractive margins in the

BPO space. Unfortunately for these firms, this is also a short-term approach

built on the sands of labor arbitrage. Business technology consulting in India

must be built on the firm foundation of sustainable competitive advantage, and

in the consulting business there can only be one credible way to do this-consistent

delivery of high-value business results to customers.

So far, the Indian companies have paid scant attention to developing

intellectual property or specializing in vertical industries. The typical

business model is simply a cost play based on labor arbitrage. To the US or

European customers, most Indian software or BPO companies look the same,

providing a commodity service at the lowest price. The underlying benefit

provided is just one thing: lower cost. But history shows that this economic

underpinning is weak-India's short-term labor cost advantage is not

defensible or sustainable. The Indian firms must change their delivery models

and approach to business technology consulting. They should set their sights

higher up the value chain.

Customers are putting more and more demands on technology consulting firms:

expecting more value, asking them to be their partners in achieving business

results, sharing the business and technology risks and, most importantly,

expecting innovation.

It is in business technology consulting where the future holds promise of

sustainable, high-margin business. Support and maintenance, and BPO, are

by-products of business technology consulting-they will be services in a

larger portfolio to be provided by future Indian companies with a business

results focus, global presence, proven delivery capabilities, dynamic workplace

ethic, and an innovative approach to technology.

As business technology consulting in India trends toward more innovative

projects, the current project delivery model must evolve to meet the different

needs of this type of project.

The primary mission of business technology consulting is to help clients

solve their business problems through technology. As companies turn to India for

help on more complex problems, India's consulting firms must change their

business model to meet this demand. The new delivery model will require Industry

knowledge and proprietary methods for solving complex business problems.

The future of business technology consulting will be a more challenging

business environment for Indian firms than one that depends on low-wages for

competitive advantage-and it will also open greater career opportunities for

the talented engineers and graduates that India produces. Because of the

higher-value results delivered to customers, the new model will provide an

economically sustainable foundation for the long-term success of the Indian IT

industry.

Clayton Locke, MD, Sapient Corporation, India