Moving Up The Value Chain

Extract from Chapter 1 A Multi Speed Global Economy In the past, many Indian IT and BPM exporters have typically focused on the US and UK. During 2012-2013, many of them reported higher revenue growth rates in Europe when compared to their biggest market, the US. If you look at the European continent, the term “multi-speed economy” is quite appropriate. This geography consists of the UK, Euro zone and rest of the EU. Chapter 2 takes a deeper look into Europe. It covers industry shifts to explain why there could be an interesting “window of opportunity” for Indian IT and BPM exporters. Since the end of 2011, business media reports in the US and UK painted scary pictures of Euro zone: about the exit of Greece from the Euro zone; about the future of Euro as a global currency; you name it! The Euro zone crisis affected European banks; but still, Euro zone doesn’t look so scary. Slowly, Europe is coming out of recession. Each European business is trying to become more competitive. European business leaders are desperate for new growth opportunities. In some countries, spending on technology has resumed including discretionary spending by business units on newer technologies. If you take a closer look at US economy, a lot has changed since the Nov 2012 Presidential Elections. Since March 2013, US stock markets reached an all-time high. Yet, political debates have continued in Washington. If you look deeper into economic indicators, the term “multi-speed” does sound appropriate to describe the US economy. In spite of low interest rates, unemployment remains high and growth is uneven across different states in the US. How has this affected capital spending and IT investments? US MNCs are reportedly holding cash reserves worth $ 2 trillion. In recent quarters during 2013, a weak Rupee has come to the rescue for many Indian IT and BPM exporters. How long will this party last? Get Closer to Your Global Clients Most Indian IT professionals are familiar with technology trends. They need to understand two types of industry shifts in order to get closer to their global clients: 1. A change in the business mix or the business model of global clients. 2. A change in the pattern of IT spending and/ or a change in the priorities related to IT spending. Most MNCs and large banks are trying to grow by expanding their global footprint. This will take time, effort and investments. In the meanwhile, some of them are unable to maintain consistent growth in both revenues and profitability quarter to quarter. Even those already having a global footprint are finding that their old business models may not be suitable in every country. In short, each global client faces challenges while navigating a multi-speed global economy. This is leading to an industry shift and a change in the competitive landscape of many industries. Chapter 5 explains this with an example from the global auto industry. In addition, it covers a wide range of topics related global manufacturing and supply chains. They are relevant to Indian IT and BPM professionals working in areas like supply chain management. They are also relevant to those working on solutions and services for manufacturing and retail industries. Topics related to engineering and R&D services are also covered in brief. Chapter 6 covers several topics related to Banking, Financial Services and Insurance (BFSI) clients. It covers industry shifts associated with global BFSI. The impact on this industry is quite different in the US and in Europe. Chapter 6 highlights these differences from the perspective of Indian IT and BPM exporters by covering major banking businesses. Moving Up the Value Chain This term refers to a series of steps to be taken by Indian IT and BPM exporters to address challenges in the short term. In recent years, the global IT services business is changing: many services related to IT infrastructure, packaged software and custom application development and maintenance (ADM) are getting “commoditized”. How can Indian IT professionals also move up the value chain? This is more about moving up the professional ladder: not necessarily moving up the organization ladder! To do this, they need to relate technology to their client’s business and their client’s priorities. This applies to cloud computing, big data, analytics, mobile computing, social media, you name it! This way, they can start getting into the solution space of technology. From a professional perspective this is another part of moving up the value chain. In the past, CEOs asked two typical questions while making technology related investments. One, how can IT help us “run” our business? Two, how can IT help us “improve” our business? Recently, they have been asking: How can IT help us transform our business? Answers to such questions can’t be offered only through cost arbitrage or outsourcing. Indian IT professionals need to understand the new priorities of CEOs. They must also respond quickly with appropriate solutions from a business perspective. Today, CEOs view technology as an enabler to business. They also view technology as a differentiator in terms of global competitiveness. They are asking additional questions while making IT investments. How can IT make us globally competitive? How can IT help us “grow” our business? How can IT help us “innovate” in our business models? While answering such questions, Indian IT professionals need to demonstrate their knowledge of their client’s business. Indian IT exporters may also be required to make changes in their current business model. Earlier, IT budgets were pooled and centrally managed by CIOs. In recent years, business unit managers have a bigger role to play in decision making. They also play a bigger role in choosing the appropriate technology and/ or solution. The stakeholders in decision making can be quite different in specific areas like cloud computing, big data, data analytics, mobile computing and social media. The role played by each stakeholder could be different. What applies in the US many not apply in many countries in Europe. This is why Indian IT professionals need to understand decision making by major stakeholders as well as their priorities. Accordingly, they can position technology based solutions more effectively. Even if their client’s IT budgets remain flat, they will be able to get a bigger share of it. Typically, MNCs have businesses spread across the US, Europe and emerging markets like China and India. However, their priorities in each business unit could differ. Indian IT professionals need to understand terms* like competitiveness, efficiency and productivity in a business context for each of their global clients. * The term competitiveness relates to costs associated and how they compare with competition. The term efficiency refers to cost optimization, or reduced inputs. The term productivity refers to getting more “bang for the buck” or getting more output for the same input. Having understood the cost advantage offered by India and the skills available, MNCs and global banks are improving their competitiveness in a different way. In recent years, many of them have set up captive units in India. A captive unit can be part of a globally distributed function within the MNC organization. This can also leverage newer technologies to offer the necessary environment for collaboration and innovation. Increasingly, India based captive units are offering a wide range of high end services to MNCs. How can the India Inc. move this to the next level?