This week I talked to Chandra MD of Cognizant about what he sees happening in the ITES sector in the near future. He listed three major ones and several minor ones. Here are the three major ones.
Non-linearity: The IT industry has been aiming to grow top line by 30% and operating margins by 20% for a long time. With wage inflation and pricing pressures this expectation is under threat. The way out of this has been labeled non-linear growth. Without this, any increase in top line has to be supported by a proportionate increase in number of employees. The trick is to increase the revenue per employee. Cognizant has been investing in its KM systems to deal with this problem. As the number of knowledge assets and people in the system increases, network effects will kick in and spur the non-linearity.
Orchestrated Ecosystem: The next wave of outsourcing growth will see a marked increase in the number of partners who will be part of the sales and delivery process. Major vendors will team up with lower cost or competency enhancing partners to deliver services. The manufacturing industry will provide the guidance and road map here. While this can be easily imitated, the differentiation will come from their ability to share and leverage knowledge with the same partners. In the case of Cognizant, their internal KM systems have been developed using APIs that can provide controlled access to the partner ecosystem. In fact, on large multi sourcing deals they can even share information with competitors using the same system.
Gray box sourcing: This is similar to the whole process sourcing that Ananth at TCS articulated. Companies are getting comfortable with a commodotized view of IT and willing to have a vendor take up the whole process. The Bharti IBM deal is an example here. Negotiating the whole process and pegging revenue to outcomes like revenue and quality of service would become more prevalent. While the entire process is with the vendor, customers can have dashboard based access to the services and can probe issues in a self-service mode. Cloud technologies have made the pay as you go and monitoring capabilities a viable option.
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I am now doing my rounds of the major IT services companies in India. Based on my conversation with Ananth Krishnan CTO of TCS, I can see three major trends in services.
Native Social web applications: As executives within companies look at applications from Google, FaceBook and Twitter, they wonder why enterprise applications aren't similar from an user experience perspective. IT services companies are gearing up to do the same with applications they are building. User engagement, notification, aggregation from multiple sources, ease of combination. blurring of boundaries between user and developer will all be considered for each application. The total quality of experience has to be a driver in making these decisions.
Whole process clouds: While services companies have been providing infrastructure, application and processes as a service, they will now give the customer the option to get the entire process as a service, with the pay as you go model built in. Specialized community clouds could emerge for domain like finance, healthcare, and manufacturing Data portability will be a base requirement with these clouds. This may result in brand dilution for the hardware, software and service providers while enhancing the brand of companies like TCS. Get ready for the TCS inside future.
Total customer analytics: Current expectation with business analytics is that companies are able to easily derive value from all the data they collect about their customers. The new expectation is deriving value from all the data that exist about customers. If a customer engages a company in a dialogue, that company could augment information that they currently have with what exists on may of the social sites. For example, if a new customer utilizes the service of a company the company should be able to assess the potential value of the customer and act accordingly. If the customer uses Tripit often, the system should be able to infer that he/she is a frequent flier and bestow them that status.