Home > Commoditization of Offshoring > Satyam Breaking Out of Commodity Play?

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?

  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.