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.

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.

Last week we had an interesting discussion in my MBA class about managing your personal brand on social media sites. Most of us use applications like Twitter, Facebook, LinkedIn and blogs in a haphazard manner. Have you considered what overall image emerges from your participation on these sites? Even if you don’t know it, potential employers and collaborators are looking at these and forming an informed (?) opinion about you.

Here are some tips that came out of the class discussion

Point of view: blogs are about having an opinion about events around us and articulating that with passion. If you have a domain of interest—football, technology, cooking recipes, etc.—start talking about that on your blog. This is a way to engage and learn from friends and followers. The takeaway here was that opinions don’t have to be exclusively job related. People like to engage with you if you have diverse interests.

Event filtering: As you read about world events, does something catch your attention? In many instances you are not sure how this relates to what else we know. This is ideal for a tweet. I use my twitter feeds as a filtered source for information on technology strategy. I follow less than forty people and this allows me to actually pay attention to the triggers that I get. Before I start to follow them, I track their feeds for some time to see if they are interesting. If I do not get relevant feeds from those I follow, I stop following them.

 Evaluating presence: How do you assess the “goodness” of your personal investment in social media? We talked about using the social graph application on Facebook. This shows your social network as a visual. My network was dense, with all my friends (mostly students) connected to one another. I had a small set of professional colleagues and a smaller set of family members off to the side. Look at your network and see how the nodes cluster. Do you have a diverse network? Research has shown that diversity in your network is a good thing and that connecting otherwise disconnected groups (brokerage) is also good. Another application – twitter.grader.com – can help you compute your influence on twitter. The application also gives you some tips on improving your network.

Network fragmentation: Maintaining your social networks across these sites can be challenging. Some efforts are underway to interoperate across these networks (see the action streams initiative). Today it is possible to connect your event streams between Twitter, LinkedIn, Facebook and your blog. Since you may have a different network on each one of them, it is important to filter what you cross post.

Exhibiting expertise: Is it OK for us to avoid participating in these communities? Examples from Amazon and Salesforce.com communities show that expertise in some areas can be gained only by participating. On Amazon Web Services (AWS) participants earn badges based on how much they add to the discourse. These badges will be used as proxies for expertise in a chosen area. Today this trend is only for technical communities but this could easily spill over into other areas. Learning how to participate and navigate in these communities could be vital to your success as an employee or entrepreneur.

Did I miss anything from our discussion? Please add your thoughts to this.

Indian ITES sector shot into global prominence in the first decade of the 21st century with world-class service delivery models focused on operating efficiency across a wide range of business processes. While there is widespread acceptance that India is a prominent and important locus for carrying out business processes, there is also the perception that India is not quite ready for moving into the next phase of growth. The current economic conditions have forced IT vendors to innovate and survive the turbulent times. During the first act, there was minimal differentiation amongst the top-tier Indian ITES providers. To make matters interesting, many multinational IT vendors have also set up operations in India to neutralize the cost leadership advantage while claiming to be more innovative.

As I watched the quarterly results from the ITES sector, it shows that they have continued to show double digit growth in revenues and margins. What steps have they taken to do that? In the first 90s, they specialized in moving work overseas. This was followed by making IT programming services a commodity and delivering it using a global delivery model. This approach has also been applied to entire business processes that created the BPO industry. Their unique approaches to building the IT infrastructure, sourcing talent, and utilizing knowledge management systems were of great help. The capabilities required for the next act are quite different. One approach taken is to move up the IT stack and deliver consulting services. They have also done some innovations in the business models by linking their payments to customer success factors. The birth of the knowledge process outsourcing industry has created a new industry around decision support. I am sure that there are many other innovations currently happening. A colleague of my Venkatraman (from Boston University) and I are studying this industry to understand the new moves that are being invented by the ITES industry. It is our hope that other businesses can learn from this sector.

What are some of the interesting projects that are taking place within the ITES sector? What new competitive moves are being created at this time? We hope to shed some light on these questions this summer. Watch this space for updates.

I just completed a report on cloud computing for the Advanced Practices Council of SIM. Here is the executive summary:

I was following the recent debate in The Economist website on cloud computing. The motion on the floor was that the cloud can't be entirely trusted. We have Stephen Elop from MSFT pushing the software + services model and Marc Benioff from Salesforce.com pushing for an all out cloud future. I wrote the following on the comments section of the debate.

I found the debate on cloud computing to be very fascinating. The focus, however, has been on cloud computing technology and cloud vendors. Based on examples presented here and in what I have seen in companies, the real learning for me has been the potential for companies to adopt a cloud strategy. This means that they have the ability to reduce the "drag coefficient" of their current IT systems and focus more on the business and innovation. The current conversation is too vendor focused. The debate needs to move on to what customers can accomplish by following cloud strategies.

Cloud strategies rest on certain key assumptions about your IT capability. Core principles like data interoperability, transparency, user involvement, low switching costs, ability to mix and match applications, tap into services anywhere and anytime, ubiquitous access to information are all axiomatic to this. The CEO can now think of unique value propositions that can trust the IT systems to deliver on the underlying principles.

This week I had a chance to present my research on cloud computing to the Advanced Practices Council of SIM. I showed the overall ecosystem and the core player ecosytem during my presentation. Here is the list of players and the visual. These core players include both well-known companies and new entrants. Salesforce.com Facebook, Rightscale, Elastra, Kaavo, GigaSpaces, CohesiveFT, Hyperic, Cassatt, Amazon EC2, Flexiscale, Boomi, MuleSource, OpSource, Cast Iron Systems, Appirio, eVapt, Ping Identity, OpenID StrikeIron, Citrix, IBM, MySQL, Oracle, Intel, Microsoft, Sun, Vmware, Google, Amazon Web Services, Hewlitt-Packard.