Business technology consulting must be built on the firm foundation of sustainable competitive advantage, and in the consulting business there can only be one credible way to do this: consistent delivery of high-value business results to customers.
Business technology consulting in India is evolving from lower-value offshore outsourcing to higher-value, business results–focused work. As companies turn to India for help on more complex problems, India’s consulting firms must change their business model to meet this demand. This fundamental change in the type of work performed requires that these firms change their underlying business model, increase their industry knowledge and establish proven methods to solving complex business problems.
The shift to high-value work would not be possible without India’s enormous talent pool. People are building excellent careers in the Indian IT industry, an industry critical to the ongoing development of India’s economy. This important industry must raise its sights higher than they currently are set in the value chain. The industry must increasingly invest in new ideas and innovative ways of doing business.
Creating Sustainable Competitive Advantage
To date Indian companies have focused largely on setting up massive development centres and hiring programmers and graduates in large numbers. They have paid little attention to developing intellectual property or specialising in vertical industry knowledge. The typical business model is simply a cost-play based on labour arbitrage.
To keep the growth engines going, many Indian IT firms have set up business process outsourcing (BPO) operations to offset the thinning margins in the software services business. Support, maintenance and BPO are by-products of business technology consulting. In the future they will be services in a larger portfolio provided by future Indian companies with a business-results focus, global presence, proven delivery capabilities, dynamic workplace ethic, and an innovative approach to technology.
To American or European customers, most Indian software or BPO companies look the same, providing a commodity service at the lowest price. But history shows that this economic underpinning is weak: India’s short-term labour cost advantage is not defensible or sustainable. The Indian firms must change their delivery models and approach to business technology consulting.
Meeting Customer Demands
Customers want more than just vendors pushing low-cost labour rates. They are putting more and more demands on technology consulting firms: expecting more value, asking for partnerships in achieving business results, sharing the business and technology risks and, most importantly, expecting innovation. Indian firms who want to catch the momentum of the IT industry in the next few years need to be able to proactively meet these demands.
For example, an energy company wanting to do a better job of purchasing fuels against forecasted demand does not simply ask the technology supplier to implement a procurement or forecasting system. It requires the supplier to restructure, automate and integrate business processes and IT systems using innovative methodologies. A retail conglomerate is no longer content with pre-packaged retail automation software — it asks the technology partner for help in boosting revenues and reducing operating costs through full cross-channel integration. These are exactly the kind of relationships that business technology consulting seeks to engender and nurture.
Evolving the Delivery Model towards Innovation
As business technology consulting in India trends toward more innovative projects, the current project delivery model must evolve to meet the different needs of this type of project.
Today, IT consulting companies in India sell on the low price they can achieve through lower labour costs. The projects are not innovative, they are highly specified. The typical IT consulting company in India now employs and trains computer programmers; other people solve the business problems. This business model works best for simple outsourcing of known processes and well-understood system development. And, while it is likely that one or two companies will prevail as giant low-value providers, this is not the future of business technology consulting in India.
Innovative projects require flexibility particularly in the early stages of the project when the team is exploring new ideas and concepts. These ideas and concepts must give rise to innovative solutions that create lasting business value for their client. This implies a high level of flexibility and interaction with clients as the team works together to develop such innovative solutions.
The future of business technology consulting is a more challenging business environment for Indian firms than one that depends on low-wages for competitive advantage. Such an environment will open greater career opportunities for the talented engineers and graduates that India produces. Because of the higher-value results delivered to customers, a shift to the new delivery model will provide an economically sustainable foundation for the long-term success of the Indian IT industry.
Moving Forward
Simply put, as the challenges of managing a huge workforce grow and as other countries such as China, Russia and the Philippines ramp up their human resources pools, the cost advantages enjoyed thus far by the Indian firms are likely to disappear. With this differentiator diminishing, the need to deliver innovative value for clients’ businesses in other ways is critical to the success and sustainability of Indian IT firms. Now is the time for Indian firms to begin the shift to more flexible delivery models, leveraging the experiences of the multinational firms that have already successfully completed such transformations.
