The next frontier for the IT / ITES industry

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Will the future of the IT/ ITES Industry be the same? Has the customer, and industry dynamics changed? What should New Ventures in this Industry keep in mind? What are the ingredients for success in the next decade?  How has the landscape changed? Read more in this Cutting Edge Panel Discussion organised by TASMAC & Businessgyan.

The Panelists were:


S Nagarajan
COO & Founder, 24/7 Customer


CEO & Founder, Tutor Vista (Founder of Customer Asset)


Krishnan Seshadrinathan
Director, Motive Communications India


Suresh Ananthpurkar
VP, MChek


Balaji Pasumarthy
Chief Catalyst, Businessgyan


Balaji: What does the next generation of IT/ITES look like ?



Nagarajan: It is a billion dollar question. If I knew the answer, I would be doing it. The first generation in ITES was commodity based, we started with services through email and chat, then we moved onto voice and non-voice based higher value solutions. Earlier, the first generation customers came for cost and stayed for quality. The second generation customers came for quality and stayed for performance and innovation, they took cost for granted as the underlying given. Now, we have to meet the expectations of the clients based on innovation and change the game for them in their competitive environment. Thus, the next frontier is going to be in BPO itself. Earlier there was competition between companies, but today the world is flatter, with competition between collaborations; collaborations between clients and service providers.



The company should identify its core competencies and outsource what it is not competent to create inhouse.





Ganesh: The next frontier is going to be b2c (Business to Consumer). Venture Capitalists (VC's) in the US have predicted that soon everything in the US will be outsourced to India. For instance a Tele Radiology company in Bangalore provides solutions to customers in the US. Another new opportunity is using the internet to deliver services directly to the consumer, without any intermediary.







Suresh: The next frontier should have mobile payment as the default payment mechanism throughout the world. We need to emphasize on the leverageable advantage and product conceptu-alization.


Most companies in the off shore mode have gone through cost advantage and strategic cost advantage and are struggling to move to the next level. The leverageable advantage is achieved when companies make use of the local market and build solutions to suit the local market. The next frontier should look at level 3 and 4 of product development and make products out of India for India. Every stage in the value chain has to generate value in the ecosystem. More value is generated in the system as you move up the ladder, this results in cost savings and product innovation.


krishnan-seshadrinathanKrishnan: The various sectors including , Financial Services, Manufacturing and Healthcare have potential. Private equity is going into non IT sectors. Different models like b2c and KPO type of stuff will start up. We need to build IP here, cost differentials alone cannot sustain for a long time; hot spots like Bangalore have to develop the infrastructure. Your business should be able to reach the consumers anywhere in the world. The next frontier could even be c2c (consumers to consumers), as many companies now bank on crowdsourcing - anybody anywhere serving anyone anywhere, which will benefit everybody.


Balaji: If you were to start something from the beginning, how different would it be, considering the ease of communication, due to the internet etc.


Ganesh: The IT/ITES boom is over. Repeating the same success now is not possible. Funding is not available easily to start a Greenfield company again. Try to locate the niches existing in the ITES sector like legal processing services.; captive BPO's have a huge advantage. Interesting Build Operate Transfer (BOT) models might work.


Nagarajan: I know of a company that gives a report to insurance companies for issuing policies against floods. That is a niche. Be aware of what is happening in your market. If you are in the banking sector, and you know the areas for improvement you could make that a niche.


Krishnan: It is difficult to start a services/IT company compared to a product company, where you have the opportunity to create a product either for the domestic market or the international market. Guys in the US pick up guys who have expertise in certain niches like database skill or something similar. On the product side, there is lot of opportunity, for instance, building the telecom sector for India is a huge opportunity. Use IT to make local and global products.


Suresh: Starting a services company is relatively easier, but scaling it up is difficult. Moreover, product innovation keeps happening. You can covert the product business into e-commerce. Social networking is important to build better and newer products. Evolution in social networking has not happened in India to a great extent.


Balaji: What are the marketing issues that you face in a B2C market?


Ganesh: For corporates in the US brand is immaterial; they look at whether you can provide the service or not. The consumers are exactly opposite. They do not believe a new or unknown brand. How do you make your brand known? At Tutor Vista we charge $100 per month unlimited tuition against $40 per hour charged by other institutes in the US. They end up paying less in the long run and we make a long term customer. The compelling value proposition makes people go with us.


Direct internet marketing by Google has value and has changed the phase of consumer marketing. We advertise for 60,000 key words like tangents, quadratic equations, etc. We get about 2,000 consumers through online marketing.


Balaji: Your experiences with regard to setting up a software R&D centre in India ?


Krishnan: The cost has gone up. Attrition has become worse. Finding the right people for the product related work is difficult. There is an issue of services versus captive. The company should identify its core competencies and outsource what it is not competent to create inhouse. My index is if I don't outsource a process in America, I shouldn't outsource to India either. It varies from organization to organization. It is tough to a measure quality when outsourcing software.


Nagarajan: Certain organizations get outsourced completely, for example, Flextronics is one company that takes care of everything from design to delivery. In the future, captive BPOs will realize that it is a huge burden on the balance sheet of the company. They will end up outsourcing everything to third parties and focus on their core competencies and compete in the market.  We are building a BOT model for Aviva Insurance. We have built a model centre for them. We incentivise and instill ownership in the people who work there. In the future, software also will follow that model.


Suresh: The decision regarding Captive versus BOT is of a strategic intent. The domain knowledge and architecture is important to build a good product organization. The company should make the employees feel as owners of the product they are building. In the BOT model, the employees do not feel that they are the owners of the product. The continuity in a product organization is extremely important.


Balaji: In the B2C market specially when customers in a remote location is it difficult to predict what the consumers want?


Suresh: Customers know what the problem is but may not know the answer. A survey showed that, "paying bills on time" as one of the problems. We created a new medium of paying through the mobile in a safe and secure manner. We have to innovate and lead the way to bring the solution in the market.


Creating a product is one aspect, creating a market for that product is another.


Krishnan: Indians are used to be spoon-fed all the time, which is not the case in US. A major mindset change has to take place which will come with experience. You have to do things yourself, in a product company specially dealing with end users.


Ganesh: Anything that can be done for international markets (off shored) from India comes under ITES. C K Prahlad calls it global resource leverage. Tele radiology, Pre production, editing, journalism, etc are already included in the ITES. Magazines in US are being created in India. Animation is already being done out of India.


AM: What about the challenges from Southeast Asia and China? Are the ITES companies paying heed to the various compliances like Business Continuity Plan, Disaster recovery, Information security, California 1380 Act, Sarbanes and Oxley, IT Act, etc? Are these not the next frontier?


Suresh: Yes, the ITES companies are paying heed to the various compliances, though there is no legal backing. BPOs are particular about data security. They are not treated as a separate function anymore. Adhering to compliances blindly makes no sense. One cannot blatantly say that all product companies need compliances.


Nagarajan: As the relationship matures, the customer expects you to have a DRC centre. In terms of information security and compliance, agencies in the UK like FSA insist that any financial services institution that is off shoring from UK should work with providers who are FSA compliant. In NASSCOM, a mere 250 companies out of 1200 are following the compliances religiously.


AM: What are the issues, threats, to be alert of for the next frontier?


Nagarajan: We are the biggest threats to our success. Ours is a knowledge industry. It cannot be successful in the services industry without tenure. Quality performance should be delivered. Attrition is a threat. The company loses on knowledge, the industry loses overall.  Lack of focus is another issue, as we chase the next dream before we have fulfilled the present one. Have patience, saturate the present opportunity first, the cake is big enough.


Krishnan: Quality talent pool, social infrastructure, quality education etc have to be dealt with carefully for the next frontier. 


AM: What preparations are being done to create a pool of quality manpower to battle the shortage?


Ganesh:  There should be a course for BPO/ ITES focused on the demands of the job. What we studied and what we are doing has no relevance. Many industries are targeting schools and colleges where the students are also being taught about the industry through industrial visits and seminars by industry people. Courses related to requirements on the job are being taught at colleges.


Krishnan: We need to have good teachers also.


Compiled by Rohit Gupta. 


Issue BG68 Nov06


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