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IT outsourcing waves and other matters..

An interesting discussion on Sramana Mitra's blog about Wave 3 of Indian IT Outsourcing by Sudhakar Ram. Read the article and the comments, especially by Subbaraman Iyer.

Now, for my take on this topic. I must say both Sudhakar Ram and Subbaraman Iyer have valid points. I am reproducing my comment on their posts below. However, before you read my comments, here's little summary of the debate.

Sudhakar Ram (he is the founder-CEO of Mastek)'s thesis is that the time is ripe for a Wave-3 in Indian IT Outsourcing. Wave 1 is the staff augmentation (body shopping) phase where Indian companies did low end work in India, and sent hordes of people to US to work at client sites. Wave 2 started in mid-90's and currently at its peak. This involves large scale offshore projects and implementation of CMMi and other quality processes, and world-class IT infrastructure.

Wave 3 according to Sudhakar Ram will see Indian companies do what hitherto has been the preserve of global MNCs such as Accenture, IBM, Bearing Point and EDS - playing the role of a 'trusted business advisor' to customers. It will mean that a TCS or Infy will own the IT budget of a customer and deliver 'business value' directly to the customer instead of services.It will also mean other knowledge-intensive services such as software products, platform-based services and so on.

Sudhakar is optimistic that Indian IT majors can and will manage this transformation and quotes the example of a couple of large transformational projects done by Mastek. Subbaraman Iyer agrees that it is a market imperative for Indian IT majors to transform into what Prof.Yves Doz terms the 'experiential and existential' layers. However, he (Subbaraman) feels that it is going to be extremely difficult and he sees Indian CEOs going for a Wave 2.1 and calling it Wave 3.

Now, read my comment on their blogs:
Dear Sudhakar and Subbaraman,
Here's my take:1. Sudhakar is confident about the ability of Indian companies in making the transition, with out explaining the 'how' of it. As Subbaraman says in his response, it is not as if we can throw a switch and bingo- we start functioning at Wave 3 level. It will be interesting to learn from Sudhakar as to how he sees his company Mastek managing this transition (if he finds it convenient to share those thoughts that is).
2.Subbaraman, I quote from your blog:
"Just because one does exceedingly well in a particular position in the value chain, doesn’t guarantee that one can transition to a higher level in the value chain."
It also does not make it impossible to transition to the next (higher?) level in the chain. In fact, if I am a leader at the Adaptive layer, while it is difficult to let go from the comfort zone, I also understand that it is imperative I make the transition or lose out. But being a leader gives me enough strength ( a war chest, traction with customers etc) to plan my transition in a phased manner.
One might argue that there is a chasm between each layers, and as the old chinese saying goes, one can not hop, skip and jump over a chasm; one needs to leap over it.But is it always true?
How about, say a firm like TCS or Infy (or Mastek for that matter), aiming for 20% revenues from Wave 3 work over the next 2-3 years, and increase that % to beyond 60% in 5-7 years?
To do this, what kind of organizational and branding changes are required? Will it call for creating an SBU or two within the org that nurtures a different kind of DNA? Will it help to have a mechanism to identify Wave-3 capable talent from the existing org and retooling their skills?Will strategic acquisitions ensure a faster transformation?
My point: Between the two of you, the problem statements have been defined very well.Please share some thoughts on the solution approaches, rather than defending your views.
Thanks for an insightful discussion.
My actual concern: Indian IT majors are sitting on tons of cash and doing literally nothing about (1) Acquiring big global MNCs and (2) Investing massively in the Indian startup eco system. By doing the first action, they can move faster into Wave 3, especially now that some of the companies are available at attractive valuations. By doing the second action, Indian IT majors will be seeding Wave 4, that of Indian products and Indian services becoming ubiquitious in the global market.

My guess: CEOs of Indian IT majors may do neither.Instead, they would manage the revenues and resource growth quarter by quarter. Of course, they will do some small scale acquisitions, and they will provide seed/equity funding based on advice by Silicon Valley venture capitalists.I wonder if these half hearted, risk-averse approaches will make a difference at all, and see them passing on a historical opportunity. I hope I am proved wrong.

Comments welcome, please.


ramana k v said…
kumar xplained the things in a nut shell nd itz really interesting readin this and i believe that strategic acquisitions ensure a speedy transformation and need not to say that it should be coupled with utmost dynamism which is now inherent in a closed shell of risk-averse approach.