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Rise
of the 'ConSULTANS'
(By-
Kamal Misra)
I do not fear computers. I fear the lack of them.
- Isaac Asimov (1920-1992), Science- fiction Author
Prelude
Quite agreeable in every sense, the above-mentioned lines conform
to the inherent feelings of most individuals, if not all. We live in an
age replete with the boundless incarnations of technology. Computers
have transformed the very foundation of our existence in every possible
manner. Information Technology (IT) has risen above the levels of
anonymity, as it was a couple of decades back to conquer the imagination
of every techno-savvy individual. Nations have pledged huge sums of
money to establish their superiority in this arena. So, what does the
scenario look like? What are the strategies deployed? Where does
India
find place in this war of titans? What is the future roadmap in this
context? The article discusses the salient points of this highly
interesting set-up. Also, it tries to bring about a balance in the
various outlooks governed by inevitable facts and analysis to depict a
possible avenue for exploration.
The Rising Sun
As the world is being gradually woven into a collective web of
technological enhancements, the IT sector is poised to take home the
lion’s share. People from all walks of life enjoy the benefits of IT.
Hence, it’s highly inevitable that the IT industry would define a new
dimension as far as business is concerned. Given this understanding, it
is heartening to see
India
emerge as the key player in this segment. The Indian IT sector has
proved to be a formidable participant in the nation’s economic growth.
The software and services industry has displayed exemplary momentum to
label the country as the most compelling investment destination for
multinational establishments. A bulge in exports has propelled this
sector to rake in revenues in excess of Rs. 555.1 billion (US$ 12.2
billion) in 2003-04, a jump of 20.4% in rupee terms and 28% in dollar
terms from that of the previous year (Source: Nasscom). There has
been a steady increase in the software service exports since the
mid-90s, as seen from fig1. This market will continue to boom, thanks to
an unprecedented economic weather sweeping across the globe. But, It has
taken a long time to reach this awe-inspiring stage of global
performance.
Figure 1
: Timeline of the software and services exports (Source: Nasscom)
Starting
with the vision of Dr F C Kohli, in the form of Tata Consultancy
Services (TCS) in the early 60s, the IT sector was gradually bracing
itself for a global domination in the time to come. Then, the objective
was primarily to cater to the back-end needs of the global giants. A few
Indian IT companies like TCS, CMC, Patni etc, were involved in the
low-end jobs like writing and debugging code in the then available
computing platform. Maintenance of legacy systems, Production support
etc were some of the other services rendered by these companies The
global companies included the likes of GE, HP, Walmart etc who were more
than happy to outsource work to India owing to the latter’s cost
compliance and huge knowledge base. The world had still not woken up to
the prowess of this nascent sector, which was wrapped in the shrouds of
obscurity.
India
provided skilled manpower and boasted of an abundant pool of
English-speaking population, especially in the southern part of the
country. The MNCs were able to reduce cost by anywhere up to 40%, by
having their work outsourced to a low wage country like
India
(Source: Nasscom). This, in turn increased their profits,
allowing them to invest in growth. The capital invested created new jobs
in the economy and the increased profits helped the company survive.
Hence, the seeds of the service sector had been sown with a view to
bridge the digital divide between
India
and the West.
Later,
with the entry of entrepreneurial visionaries like Narayanmurthy, whose
Infosys put
India
in the world map as a competent software development hub, the service
sector was in full throttle. The Offshore Delivery Center (ODC) model
pioneered by TCS, presented the MNCs with a cost effective solution to
establish their base in
India
. Lower cost of goods helps both consumers and businesses. A vibrant
Indian economy buys US goods and services. US companies, who shift their
base to
India
will in fact, generate more profits, to later invest in growth and
create new jobs. As a result of free trade, both the parties, exporting
and importing all alike, benefit from this win-win situation. Soon, the
foreign companies were thronging
India
to set up ODCs in various strategic locations across the country.
India
was subsequently destined to emerge as the Outsourcing destination of
the world. Further,
McKinsey argues at a well-known point, that for every dollar of work
that is outsourced to countries like
India
from the
US
, just 33 cents accrue to the country and around 58 cents stay with the
US
company in terms of cost savings. Hence, with so many positive facets to
Outsourcing, does it remain the most coveted proposition for the Indian
software companies? Should they remain satisfied to being perennially
touted as “ The Service Bandwagon”? Let us find out in the following
sections.
Shifting Gear
The outsourcing euphoria was short-lived. Buoyed by the success of
Indian IT companies, the US MNCs like Accenture, IBM, EDS have ventured
into the arena with a bigger agenda in hand – IT Consulting. With
prior exposure in this field, these companies are truly global in terms
of their operations and culture. Also, they are recognized for their
optimal and innovative consultancy in the corporate universe. Indian IT
companies, on the other hand, are more in the news for their low-end
jobs in the service sector. Traditional white-collar jobs and the
intellectual bandwidth are the exclusive property of these consulting
firms, wherein they take the high-end decisions. Thereafter, the ideas
and innovations are delegated to the service sector companies for
physical implementation. Hence, a caste-system is bred within the
corridors of the software industry in the form of a white-collar layer
atop a blue-collar layer, the latter i.e., blue-collar representing the
so-called potential software engineers infesting the country’s
engineering institutes. The white-collar jobs are the most respected
ones representing the architects and consultants of any major system.
Indians in the garb of blue-collars have long been regarded as being
very good implementers, but when it comes to designing architecture, the
white-collar people from the
US
and
Europe
, are given preference. A McKinsey paper cites that by moving the
service industry to countries with low labour costs like India, US
companies can focus on creating higher-value or white-collar jobs. These
jobs are created within these consulting firms whose innovations get
incorporated at the low-end by the Indian IT companies.
If the Indian IT companies are to have an edge over their
transnational counterparts, they have to alter their business functions.
Indians have a more versatile academic curriculum than their western
counterparts. They have an extremely solid base in Mathematics and are
very good in creative problem solving. Hence, there’s little doubt
that they can invest their grey matter in the field of consulting.
Fair Game
The
business houses should follow the acquisition process more aggressively.
IBM has acquired Pricewaterhousecoopers under the aegis of its
consulting platoon. Accenture, the erstwhile Anderson Consulting has
always been an astounding consulting firm. Indian companies like TCS,
Infosys, Wipro should earnestly deploy a consulting aspect to their
business process. They should aim to get a US front office, take on jobs
as their US counterparts and then execute them as much as possible
within the US by the on hand US employees of the taken over company.
This can be the strategy to counter US software vendors who posing as
American companies advertise jobs and subsequently get them done
offshore. The business model is bound to change in this respect. The
cost arbitrage deployed in the offshore environment, in order to benefit
from the wage differential in the low cost countries, has to be curbed.
In order to acquire consulting skills in a shorter frame of time, they
should acquire existing consulting companies, irrespective of their
size. They should also take care to absorb them within the parent
structure. Thereafter, the absorbed companies should transfer knowledge
to the parent company and get involved in consulting assignments
simultaneously. This “Knowledge Deployment” model would allow the
latter to grow within the organizational shell and also, help in posing
a latent threat to the consulting biggies of the
US
.
Also,
the Indian IT companies must climb the value chain and acquire domain
specializations to be competent enough to address larger issues like
business problems. They should offer consulting skills in a variety of
verticals, namely, Finance & Insurance, Manufacturing, Telecom,
E-business etc. They must not confine themselves to delivering technical
solutions to solve IT related problems. Also, persisting on the Offshore
Delivery Model for a longer period may help in managing scale and
operational margins, but will stamp
India
’s image as the IT-Back End support hub forever. Going up the value
chain can result in a two-forked approach. One of them is the
development of new technologies, thus keeping abreast with the software
product companies worldwide. The other one is to put into use the
consulting power to deploy this technology. Hence, the company benefits
from the product development department as well as the consulting
department. Also, the scale of recognition increases placing the company
in the international business environment in an amazing position. But,
traditional Indian IT companies are too parochial to make a proper
distinction between services and software production. They are too
compulsive on retaining their service status for time immemorial. This
perception needs to change if one is really preparing to venture global.
Cultural Openness plays a significant role in the consulting
ambience. People should be willing to embrace a foreign culture in a
shorter span of time and should essentially impress the clients with
their mannerisms. Indians seem to be lacking in opening up to their
western counterparts in a confident manner which might not work well in
their favor while clinching business deals. They need to wear a winning
personality to charm the clients with their dialogues as well as
consulting abilities.
Lower
wage rates in the Indian subcontinent has always been a sore in the
throat for it’s competitors. Indians are billed abysmally low as
compared to their American, Irish or Canadian counterparts. A
mathematical catch in the foreign exchange convertibility though, keeps
them happy, thanks to the magic of the purchasing power parity. In the
market economy, the wages cannot be lowered for a given skill level. If
the
US
were to increase the supply of labor, in accordance with the theory of
competitive advantage, the price of labor will decrease. This will
provide the
US
a healthy competitive advantage. Hence, Indian IT companies should very
well charge competitive rates while tackling challenge from the
US
consulting firms.
Beyond the Horizon
The
roadmap burns bright with a full-fledged war in the field of IT
consulting. The so-called Consultants or 'ConSULTANs' are the
ones who have to win over the trust of the international clients, by
virtue of their conning abilities. These sultans of con have to ensure
that they explore all the avenues of survival in clinching a sizeable
share in the consulting market for
India
. As Shakespeare had put it, “All is well that ends well”, the war
will determine as to who will be able to see the light at the end of the
tunnel. As of now, it is pitch black inside the tunnel… |
