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 Moving
up the value chain is no longer just a mantra but a reality, and
only those who can provide total services to their international
clients will survive, writes Mohan Babu
2002
is already here. After weathering the big storm of 2001 most of
us are looking at the year ahead with a sense of déjà
vu. Most professionals are looking at the (stock) markets to give
an indication that the worst is behind us. One or two quarters of
fairly OK results and managers will heave a sigh of relief. In my
previous article, I attempted to hazard a guess on the direction
of IT. One thing is certain, shorn of the hype this is going to
be a year of B2B-Back to basics.
The
hype that IT systems and people, along with new technologies can
provide a magical cure to business ailments is dead. By the same
token, the hope that IT systems will help businesses return back
to normal is still alive. There is little doubt that there is a
pent-up demand for IT systems and services from businesses in a
reactionary mode. This is especially true of businesses in the US
that are generally proactive when it comes to cutting costs.
I
would be preaching to the converted if I were to tell IT professionals
that the “golden age” of IT when the mere mention of Java,
C++ or DB2 on one’s resume could get one hired. It should be
apparent to most professionals that IT houses are looking for core
knowledge and assistance with total solutions than merely for skill-sets.
The IT companies in turn are reacting to a changing marketplace
where they are expected to provide a solution to business problems,
not merely cater to the demand for their professional services.
Case
in point: Take Compuware, a large S&P 500 software company with
over $2 billion in revenues that I work with. Until recently, the
company was an amalgamation of two businesses—software services
and software products. The services side of business employed thousands
of consultants with varied skill-sets, hired in the open market
to be placed as “consultants” at client IT shops hungry
for talent. The product side of business focused on selling core
software products ranging from popular mainframe, mid-range and
business software for development, testing, web-enablement, performance
tuning, etc. During the boom years of the nineties, products and
services were practically selling themselves. The slowdown has hit
most companies hard and even Compuware has not been immune to the
vagaries of the economy. However, this company’s reaction to
the slowdown has been interesting. Unlike its corporate compatriots,
the company has dug in instead of laying off people like most other
American companies, Compuware is focusing on an innovative strategy
of merging its service and products, offering a unified suite to
its customers. The premise behind this approach is simple: IT users
want solutions for their business problems, and do not care about
just the fizz factor.
Many
big Indian IT giants are following this approach too — bundling
(the few) products they have with the services. However Indian companies
either fall short when it comes to moving up the value chain or
while providing a “total solution.” The big picture, i.e.
the business problem they are trying to solve in terms of providing
IT solutions to companies whose core competence is not IT, eludes
most of the software houses. At the end of the day, IT systems are
just tools-of-enablement to be used by the ‘users’ of
businesses to further their core goal viz. making money and generating
revenue.
A
down economy in the US, could lead to some interesting options to
Indian software giants looking to expand their products and services
offerings. Cash rich Indian giants that are listed in NASDAQ could
leverage their finances to acquire a few niche market products and
services companies in the US that are undervalued and are looking
to bail-out. What they (Indian companies) would be buying is not
just a product, but a market and brand along with the product. This
will help immensely when the market starts looking up and companies
in the US open up the pent-up requirements for IT products and services.
The
decade ahead is not going to be like the decade past. Companies
around the world are going to question the use of IT and use only
systems that are proven to add real value. The global playing field
for IT services and systems is undergoing a sea change. Mid-tier
Indian companies, which were content to skim profits by “people
placement” or selling “cheap offshore development”,
are going to find the market really competitive. Cost is not the
only concern for IT users, value-addition is equally important.
Moving up the value-chain will no longer be just a mantra but a
reality, and only those who can provide total, tangible services
to their international customers will survive. As I said earlier,
back to basics.
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