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I blogged yesterday about how IT outsourcing has moved from being about cutting costs to more about adding business value. The Indian suppliers, who came to the table offering 40% cost cuts, are a good barometer of how outsourcing is changing. They have moved from being body shops to business experts in certain sectors.
Here it from the horses mouth in this guest blog from Chandrashekar Kakal, head of global delivery at Infosys.
IT has come this far, what next for 2014?
By Chandrashekar Kakal
“The question is whether the IT sector will become a creator of business value or remain in the back office.
The Indian information technology and business process management industry is at a crossroads today. It has grown from about $100 million in 1992 to about $108 billion in 2012. It employs about three million people directly, of whom about 30 per cent are women, and contributing 8 per cent of the GDP and 23-25 per cent of exports.
Undoubtedly, it is the centrepiece of modern India’s success story. But given the recent global macroeconomic upheavals and rise of new challenges, the burning question is: What next?
Up the value chain
The Indian IT industry has come a long way from supplying staff to managed projects, and from managed solutions to delivering business outcomes. Along the way, moving from the time and material based pricing model to delivering a project with defined deliverables in a fixed price model was in itself a level up the value chain.
The ability to take on IT-led transformation programmes, along with consulting, was enough to jolt the traditional global services firms.
Delivering business solutions and not just IT projects to defined specifications was a transformation for the industry. Having crossed the $100 billion mark, the industry today is at an inflection point, and ready to deliver business value and not just IT skills. While the direct employment generation of the IT and IT enabled industry is well known and quantifiable, the employment generated in the ‘IT enabling’ industries such as food catering, transportation, housing, domestic help and accessories, while only an estimate, is less discernible. The influential, invisible hand of the Indian IT industry in almost every major business of global corporations needs to be articulated adequately.
Value delivery to clients happens either by helping them enhance revenues or by reducing the cost of operations, including IT operations.
For a long time, the Indian IT and business process industry has delivered tremendous value by supporting cost optimisation and will continue to do so. What is being added to this now is a mind-set that creates genuine business value.
The grand challenge for the industry today is to transform its image to that of a value creator by working equally on both the cost and value creation challenges. This will happen, not by mere branding exercises, but by building talent; building domain, process and functional knowledge in addition to technology execution excellence. The associated pricing models will also need to change based on proposed value rather than input cost.
Building and leveraging intellectual property (IP) through products, tools and platforms to better deliver traditional IT services is an integral part of this journey. Another integral imperative is to build awareness among the client base by showcasing the examples of value delivered.
This will help elevate the positioning of the Indian players as a creators of true business value and spur member companies to respond suitably.”