Selling in a Down Economy – the IBM Way

The elephant continues to dance, and very elegantly at that!

In this ad, IBM is trying to generate new demand for its products and services by identifying and placing before government and industry, problem areas that could be impacted positively by technology:

The second annual Global Retail Theft Barometer survey across 36 countries in 2008 found that India has the highest shrinkage rate at 3.1% (that’s about Rs. 12,392 crores in losses)…

Owing to it’s unique geo-climatic conditions, India is highly prone to natural disasters. So much so, they cost the country 13% of its GDP today and will go on to become a major stumbling black to its economic growth by next year.

The ad closes with an under-stated reference to IBM’s products and services:

Clearly, there is a pressing mandate for change today. And we have the resources to get started.

This is a masterclass in selling in a down economy.

Can we ever see such selling by Indian IT players? Will Indian IT players ever go beyond the labor arbitrage story? One can always hope!

A Classic Candidate for SaaS

Here is a company – Mindlogicx – which is poised on the threshold of SaaS in India:

intelliEXAMS is a state of the art system to revolutionize the entire examination process by diligently meeting the requirements of a university in conducting online examination. The system handles the complete life cycle of Examination Management which includes online registration of candidates, Examination fee management, internal mark uploading, hall ticket generation, question bank management, question paper generation, Question paper generation, automated evaluation process and up to the reporting of the results. The system is futuristic and scalable and can be deployed in universities, large corporate, banks, etc., for online examinations, common entrance examinations, mass recruitment and for conducting skills up gradation tests.

Looks like Mindlogicx is treating intelliEXAMS as a software product. They talk about deploying in each university, large corporate, bank etc.

Instead, if they go the SaaS way and deploy it in a cloud and offer online examinations, common entrance examinations etc. as a service, they could well be dominating this space five years from now!

A Successful Captive

Today’s newspaper made interesting reading:

The front page bannered the ongoing sell-off of India captives by MNCs:

On the other hand, the following captive story appears on Page 6:

At least one captive is getting it right!

To me, this indicates there is nothing inherently wrong with captives. Success and failure depends on how the captive is positioned and managed. Goal driven local management with executive support can work wonders. Unfortunately many other captives simply attempt to be extensions of their parent IT departments, and that is surely not the way to success.

Welcome to SaaS in India!

It’s happening finally. The focuse in the software services industry is shifting from the “software” part to the “services” part.

Wipro Infotech launches hospital info system

BANGALORE: Wipro Infotech, the India and Middle East IT Business arm of Wipro, has launched a hospital information system under a “pay per use” model. Wipro HIS (Hospital Information System) Lite would be suitable for smaller hospitals, which have not adopted IT because of high hardware and software acquisition costs. Under the “pay per use” model, such hospitals will only have to pay a monthly user based subscription fee.

- The Economic Times, Dec 12, 2008

This development highlights many interesting points:

1. The much talked-about software as a service (SaaS) model is finally being deployed in a very sensible fashion. The focus has been taken away from the much-vaunted software development capability of India and shifted to satisfying business need. This news post does not bother to mention who developed the hospital information system (we can guess that Wipro Technologies developed it, but that need not be the case).
2. This could be the right way to approach the Indian market. While IBM has been going after the high-end of the market (Airtel, DLF etc.), in a developing country like India there surely is a middle-market whose collective buying power could rival the Fortune 100 Indian companies. What better way to tap this market than the SaaS model? Who needs shared services? Those who cannot afford dedicated services.
3.  I have explained the capacity leasing model that the Indian software industry follows in great detail in earlier posts. Here is a service leasing model, where the service provider is truly backing his capacity to deliver business results, i.e. Wipro is deeply committed to business results for their customers. This is a much more respectable model and if successful could significantly change  the profile of the India software services industry.

MNC Vendors in India – Capgemini

This is a company that workup to the India story rather late but having woken up, is making up for lost time!

After getting nowhere with an organic India growth attempt, Capgemini recognized the need for inorganic growth. And they zeroed in on Kanbay [Capgemini Increase It's Global Presence with Kanbay Deal].

With its specialization in financial services, the acquisition of Kanbay pretty much gave them an entire India business unit – the Financial Services BU – on a platter. Contrast this with the EDS acquisition of MphasiS which got them nothing – at best a low-end India BPO capability and at worst a hodge podge of India resources.

With financial services out of the way, Capgemini is proceeding with great energy to setup other business units in various cities in India.  Staring with as low as 4000 people in 2004, Capgemini has now crossed the 20,000 mark and continue to grow.

Question is: what is their business model for India. Is it capacity leasing or anything different?

As far as I can tell, they are sticking with the tried and tested capacity leasing model and are trying to emulate Accenture in integrating the India capacity with their global operations. Which is not bad at all, considering they were late to the party! And considering the current financial sector meltdown, they are indeed well positioned to capitalize on the bail-out budgets of American financial institutions!

Balanced Scorecard for IT

The idea of applying a balanced scorecard to measure IT effectiveness is not new, but not many IT organizations have put this idea into practice successfully.

The key to operationalizing this idea is the ability to clearly see the linkage between IT objectives (as seen by a CIO) and overall business objectives (as seen by a CEO). This linkage is not always apparent.

In this post, I present a theoretical case to illustrate how such a linkage can be detected and measured using a balanced scorecard.

Consider a health insurance company. The following strategy map illustrate a cause-effect linkage between tactical IT objectives and corporate strategic objectives :

 

Satyam Breaking Out of Commodity Play?

In an earlier post [Kishore's Law], I had posited that Indian software vendors need to make themselves accountable for final results. Signs of that happening are begining to show now with Satyam making the move to outcome-based billing:

In a bid to earn higher revenues from transformational outsourcing contracts, India’s fourth largest software services company Satyam Computer Services will work with customers in the US and UK on performance-linked projects where it will get paid based on the tangible business benefits accrued by a customer.
 
Providing an example of one such “transformational project,” Satyam’s head of global marketing T Hari said the IT service provider is working with an insurance company to revive its lapsed policies.

The project involves analysing product lines and finding ways to redefine them. Satyam will earn a share of premium that will subsequently get generated while the insurance company will not have to pay anything till the results show.

- Satyam Demands Performance Pay, The Economic Times

It is interesting to note that the outcome Satyam is hooking itself to is business outcome (in this case, premium generated by reviving lapsed policies) whereas my recommendation was to tie to IT outcome (i.e. getting the software into production successfully). This is the ultimate form of outcome-based billing but is fraught with unwarranted risks.

When you tie yourself to business outcome without having any say on how the business is run, you are running a high risk of failure, not of your software but of the business model which your software supports. If your customer got his business model or the execution wrong, no amount of ingenuity on the part of your sofwtare can pull the chestnut out of the fire.

All the same, this is a laudable move. Is it just a coincidence that such a move is coming from a relatively smaller Tier 1 vendor and not from the pack leaders such an TCS, Infosys and Wipro?

Boom Following the Gloom

I am inclined to believe that the ongoing global financial sector crisis is a great growth opportunity for the Indian IT service companies and more so for BPO companies.

The following alert from AMR Research confirms this thinking:

Despite the uncertainty and current economic gloom, these really are opportunistic times for the global IT and business process outsourcing industry. Outsourcing thrives on mergers, disruptions, corporate restructuring, cost-containment needs, and business changes. Additionally, tough economies have proven historically to be lucrative markets for increased outsourcing: remember the 2001 recession and subsequent deal activity.

The financial services industry is finally ready for that change, and our recent study of financial institutions and outsourcing services providers, taken over the last two weeks since the U.S. government’s bailout package, confirms this.

 - Opportunities Amidst the Gloom – The Financial Sector is Ripe for IT and BPO Services, AMR Research

Some Indian newspapers are trying to create panic by proclaiming “Doom! Doom! Doom!”, but it simply does not make any sense to me. I think they got one letter wrong

MNC Vendors in India – Accenture

What is Accenture up to in India? Is it differentiated from the Indian vendors or has it fallen into the commodity trap?

The answer in mixed. Accenture reports its revenues under two heads: Consulting and Outsourcing. In 2007, Consulting accounted for 60% of its $19.7 billion revenue with outsourcing accounting for the remaining 40%. This consulting revenue is the clear differentiation between Accenture and the Indian vendors.

That said, it is the outsourcing part that drew Accenture to set up delivery centers in India. Hence, if you look at what Accenture does in India and what any other Indian vendor does, there is not much difference. It is a clear commodity play, with capacity leasing as the keystone!

MNC Vendors in India – EDS-HP

Let us take a look at EDS now.

After struggling to bootstrap an India capacity for many year, EDS acquired the Indian vendor MphasiS, whose strength in business process outsourcing is formidable [EDS – India To Merge Into MphasiS]

Earlier this year, EDS was acquired by HP, creating a behemoth that could rival IBM [With EDS, HP Buys Its Way Into Outsourcing Big League].

The HP hardware lineage, combined with the EDS services lineage, combined with MphasiS’s India lineage brings this company neck-to-neck with IBM (though it still lacks the software products story of IBM).

Therein lies the problem. This is really three companies masquerading as one!