Unchained from the Value Chain

In this year’s Dataquest Salary Survey, the average pay in BPO was Rs 2.8 lakh–versus Rs 4.6 lakh for software. Yet BPO employees turned out to be more satisfied than their IT counterparts. And with BPO at 24% of India’s $10 billion services exports and growing rapidly, few are deriding it as ‘low value’ any more.

There’s this mythical ladder we used to call the value chain. The industry spent a lot of time worrying about it and answering media and analyst questions on it. The holy grail was “products”, with incredible margins (after whopping development costs). 

The value chain has metamorphosed. It’s no longer a vertical stairway to heaven, with progress measured by how high you’ve climbed toward the top rungs: products, or very high value services. It’s turned more sensibly horizontal, a market segmentation guide to help you choose your place.

BPO helped drive this realization about the ‘value chain’. Software was discovering it more slowly. I’ve sat on panel discussions and even answered repeated college audience questions on why we don’t have more products in India. And yet, in the USA, I’ve faced questions about how India has been able to grab this huge area of services so thoroughly, while the world chased products and missed out on services–and on products, too! After all, barring Microsoft and five or six others, what software product vendors can you name?

This change happened in manufacturing decades ago. There used to be the integrated everything-in-house full-systems vendors on top. But the big outsourcing shift to the East, to Japan, Taiwan and China, helped change that. Taiwan made components, cabinets, keyboards. Today, it makes most of the world’s laptops. But it also does components, and contract manufacturing, and some impressive R&D and design. This is not a pecking order. It about a vendor’s place in the sun and its choice of market segment to lead in.

The billion-dollar TCS tops Indian IT, and spans activities from share processing to code maintenance and porting to development. There are small firms at the cutting edge of R&D chip design. BPO firm Spectramind shook up the industry and VCs with its staggering valuation and acquisition by Wipro, an IT giant that’s incredibly cautious with its money. And other BPO firms are finding innovative niches to step into, and lead.

The global IT marketplace is too big to be defined and measured by one value chain that you climb. The laws of positioning and marketing hold good here too. Find your place, or your niche. Create the category, if you can, and lead. And quit worrying about the value chain–it’s not what it used to be.

Prasanto K Roy