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!

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!

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.

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.

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!

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 :

This strategy map shows three of the four perspectives of a balanced scorecard (for the sake of brevity the learning perspective is ignored).

• The finance perspective encapsulates the corporate strategic objectives of increasing market share and increasing margins.
• The customer perspective translates these finance objectives into customer-facing objectives.
• The internal process perspective has been depicted from the viewpoint of a CIO (i.e. these relate to the internal processes of an IT organization). It is envisaged that each business unit will have its own internal process objectives.

By linking these IT internal process objectives to the corporate customer and finance perspectives, a clear link has been established between the CEOs objectives and what the CIO has to achieve in order to enable to CEO to succeed!

The internal perspective effectively says that in order to support the customer and finance perspectives, the IT department has decided to embark on a program than consists of three projects:

• modernize the member portal
• modernize the EDI channel
• rollout an Enterprise Service Bus

Now we proceed to the measurement of the IT internal process perspective. In order to measure, we need KPIs and measures for each KPI.

Now we proceed to show the balanced scorecard which maps these KPI and measures to the various objectives:

The numeric gauge displays the measures (weighted measures actually) in a visual form. The snapshot shown above is as of the end of the program.

Note that this score-card illustrates the performance of one vendor used by the IT department (I am using IBM as an example here). In other words, this mechanism can be used to compare the performance of various vendors against each other and it has the advantage of being aligned with corporate goals.

The numeric gauge looks nice, but there is still too much data here to form any conclusions. Hence, we export this data to a spreadsheet and do a pivot table analysis on it to see if we can draw some conclusions.

Overall, the vendor gets a score of 83 on 100, considering all perspectives, all objectives, and all KPIs. Looks fine. Doing good on all three perspectives too!

Next we analyze how the vendor did on each of the KPIs:

Now we see that on Architecture and End-User Satisfaction the vendor has fallen below the 80% threshold. This requires further analysis. We need to find out which specific objectives they fared poorly:

Now we can see that the vendor has fared poorly on:

• the architecture of the new EDI channel as well as on the ESB architecture
• end-users were not very satisfied with the new, simplified enrollment process

In addition, we notice another lacuna – on the quality of the ESB roll out (overall quality score was 83% and hence gave no indication of this problem).

These are clear, quantitative measures of the performance a vendor around which constructive dialog can be initiated. That is the power of a IT balanced scorecard.

What are the key success factors for such a scorecard?

1. The objectives and KPIs should be carefully chosen. In this case Architecture was chosen as a KPI because three new technology initiatives were being rolled out by the IT department – EDI channel modernization, member portal modernization and ESB roll out.
2. Effective and quantifiable measures should be identified for each KPI. For instance “fitness for purpose” was identified as a measure of the Architecture KPI. Clear rules for quantifying “fitness for purpose” must be established and all concerned parties should agree to those rules. This is often the hardest part of a IT balanced scorecard exercise. In this case, “fitness for purpose” could be a score assigned by an architecture committee which reviews the architecture. The vendor should be given the opportunity to explain and defend their architecture in front of this committee. In other words, this is kind of like an examination which the vendor is graded on!
3. True “balance” should be ensured by combining leading and lagging indicators. Architecture is a lead indicator to Quality of Software. Measures related to responsiveness are a lead indicator for end-user satisfaction.
4. Once measures have been identified and agreed upon, metrics collections should be open and transparent, i.e. vendors should not question the accuracy of the measures post-facto.

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?

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

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!

Check out this excerpt from the Accenture 10-K filing for fiscal 2007:

Our headcount increased to approximately 170,000 as of August 31, 2007 from approximately 140,000 as of August 31, 2006. Annualized attrition for the three months and year ended August 31, 2007 was 18%, excluding involuntary terminations, consistent with the three months and year ended August 31, 2006. We continue to add substantial numbers of new employees and will continue to actively recruit new employees to balance our mix of skills and resources to meet current and projected future demands, replace departing employees and expand our global sourcing approach, which includes our Global Delivery Network and other capabilities around the world. We have adjusted compensation in fiscal 2007 in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees and we may need to continue to adjust compensation in the future. As in previous fiscal years, we have adjusted and expect to continue to adjust pricing with the objective of recovering these increases. Our margins and ability to grow our business could be adversely affected if we do not continue to manage attrition, recover increases in compensation and effectively assimilate and utilize large numbers of new employees.

A clear commodity play if ever there was one!

Sure, Accenture has consulting revenue of $11.86 billion, but if you work for Accenture in India there is every likelihood you are a commodity in a good campus conforming to the Accenture Delivery Suite!

In effect, Accenture has chosen to neutralize the Indian vendors low-cost capacity-leasing advantage by adopting the same model itself in India and combining that with its strong consulting capabilities in the rest of the world. Excellent business strategy to keep the Indian vendors at bay; and it is indeed a testament to Accenure’s execution ability that they have been able to combine two such vastly different cultures within the same organization successfully (this is what HP-EDS-MphasiS will struggle to do into the foreseeable future).

But, a commodity play all the same.

Note the complete absence of a product capability, as opposed to TCS (Bancs) and Infosys (Finacle)! [Products in the Midst of Commodities]

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!

Combining these three lineages is not going to be easy and any success, at best, is bound to be patchy.

“I’ve had the good fortune to work with HP and to interact with HP people. They are unfailingly collaborative. Even when introducing themselves in class, if there is more than one of them they will unfailingly acknowledge the other, and verbally give respect to one another’s point of view. EDS, different story. Equally great people, equally strong performers, but boy oh boy is that a control culture. At classic HP, people sort of work together to figure things out. At classic EDS, you look in the book. If the answer isn’t in the book, you ask your supervisor. If your supervisor doesn’t know, there’s some process to sort things out. So I think we can anticipate some pretty hilarious (at best) and potentially distressing (at worst) moments when parties from the two cultures, each operating with their own view of the way the world works, try to come together.”

- Will HP and EDS Clash Over Culture?, Rita McGrath, Columbia Business School

Moreover, EDS has a history of at least one failed merger behind it, when it acquired A.T. Kearney in 1995 and eventually divested it in 2005:

EDS recently confirmed rumors about selling management consultancy A.T. Kearney back to Kearney leadership. The only surprise is that EDS didn’t sell sooner. Since EDS purchased A.T. Kearney in 1995, results have been disappointing. A.T. Kearney contributed less than 5% of EDS’ total revenues last year, while posting a $10 million loss. When he took the helm of EDS two years ago, CEO Michael Jordan indicated, that his primary goal was to bring the company back to basics. Because the two companies haven’t resolved their cultural differences, selling Kearney is the smart thing to do — for both firms.

- EDS And A.T. Kearney: Parting Ways?, Forrester Research, Mar 2005

I had a ring-side view of this culture clash during my association with eBreviate, an A. T. Kearney subsidiary, at the time of this messy acquisition [Shakeup Unearths Discord at EDS Auction Unit]

It is unlikely EDS-HP will ever pose a real threat to IBM.

That is not to say that EDS poses no threat to the Indian vendors.

EDS has deep service relationships with its existing customer, having taken significant ownership for the data center operations of these customers. If EDS can make its acquisition of MphasiS’s India capacity work effectively, it is positioned to offer significant cost savings to these customers.

Is EDS doing a better job with MphasiS than it did with A.T.Kearney? The jury is still out. Given its struggles with bootstrapping it’s own India operation, my take is No. While EDS has the potential to challenge the commodity play of the Indian vendors, it is unlikely to actually succeed in doing so.