How India’s IT industry is managing change through volatility

India’s IT industry has been confronted by some tough truths of late. The context for the Indian IT services industry has radically changed, along with changing demands of enterprise customers and rapidly evolving technologies. The industry’s customers, who are from all over the world, earlier came to India because of lower costs. Today, these customers are confronted by a complete change in the way new technologies are redefining their businesses in a digitally disrupted world. As each industry segment sees internet- and mobile-driven upstarts offer customers new ways of consuming products and services, incumbent large businesses find that they are no longer able to address their new business challenges with old business models and outdated technologies.

The importance given to technology and IT strategy within organisations has also grown, and business is now increasingly involved in helping set the strategy and make technology decisions for the organisation. Customers’ expectations of IT service providers have, therefore, also changed. Increasingly, they demand solutions and innovation rather than mere skilled resources. The previous practice of customers owning capital expenditure and assets such as servers, with no risk-sharing with providers, is no longer considered best practice.

The pace at which change has increased in the past three to five years has been dramatic. India’s IT industry in general has not responded quickly enough to external market changes to identify new opportunities that are being rapidly created by changing customer requirements. Indian IT service providers have delivered value additions of operational efficiency and process improvements in IT service delivery, but the game going ahead is very different — driven by expertise and innovation in harnessing new technology to new ways of serving end consumers and running business processes. And this needs to happen at the level of specific industry segments — even sub segments and business processes. The reason is that incumbent businesses cannot afford the luxury of time, as the competitive landscape changes rapidly with technology.

Proactive IT service providers who can leverage their past familiarity with an industry vertical, pick up new technology skills quickly, and engineer innovative new solutions that are a step ahead of the industry norm will win with enterprise customers. To win in this context needs a very different mind set on the part of IT providers. Investments in industry knowledge, design thinking, new technology skills, end consumer research, and the instinct to help shape a future solution rather than waiting for it to come as part of an RFP is needed. Being able to judge emerging technology and work with new age vendors in partnerships that shape new platforms and products will be key. You have to take your bets and build something bigger that can more completely address a critical customer business need.

The talent and organisational processes required to make this happen, and to continue to evolve in step with the pace of change in technology and industry is very different from the traditional scale- and efficiency-oriented IT service business structure. For example, the emphasis on consulting, solution architecture, and pre-sales processes can be vastly enhanced. Technology trends in service delivery automation, and the vast range of pre-built, hosted core technology solutions, such as mobile development and analytics platforms now available, also point to a lot of traditional head count in an IT project becoming irrelevant, and the availability of people being less of a factor.

Sonata, as a smaller provider focused on more value-added engineering and development work, is conscious that there is a unique position we can take in this emerging scenario. Over the last three years, we have been on a transformational journey as a company, where enhanced focus on our core industry verticals, such as Travel, Retail, Consumer Goods and ISVs, complemented with specific horizontal strengths in areas such as omni-channel commerce and SMAC, has seen us win strategic new customers and emerge as one of the fastest growing IT companies. We have been able to contribute significantly to the digital engagement and application modernisation initiatives of some of the world’s leading companies. But the pace of change in the industry today is such that, despite this recent success, it is already time to move on.

Some of the change factors that we identified earlier already point us in a new direction. Our vision for the future is to offer IT platforms that can then be deployed with required customisations — what we call IP led services — for our focus industry sub-segments that will help our customers leapfrog the technology cycle and stay ahead — ready for future opportunities at any time. The approach to this involves investing in understanding and ideating for the next generation of a consumer’s experience of products and services offered by a firm — and how this can be shaped with technology. These applications will be built on emerging core technology platforms across omni-channel commerce, analytics, mobility and social, with pre-defined integrations in a hosted environment. In this manner, we will move beyond technology platforms to specialised industry and business process level platforms. The end benefits will be give enterprises speed, reliability, and flexibility in adopting up-to-date technology and best-inclass business processes that are continuously upgraded.

This is not just a technology-driven vision for us. To us, this is clearly a very important strategic direction in which the future of enterprise IT and sourcing of technology solutions is headed. As rapid changes in technology-led competition introduce an element of volatility for businesses globally, they will have to respond more nimbly to emerging scenarios. An IT solutions provider specialising in a specific industry with platform-based solutions that evolve more rapidly than the traditional approach of services done ground up, and the capability of a partner to innovate with technology will all become very critical to success.

IT service providers will, of course, have to balance this with some very practical opportunities that are more immediate. Better customer account, relationship, and quality management processes, improved productivity through automation, and more strategic marketing in terms of targeting the right segments with an enhanced value proposition: all these have significant value to add to IT service providers. However, true leadership will involve being able to do this while also setting a roadmap for the future that goes beyond existing paradigms. Deeper strategic focus on industries and technology, a turnkey platform-based solutions approach, new talent with wider skill sets, organisations that are more responsive and innovative, and an instinct to compete to create the future: this will be what it takes for Indian IT service providers to take advantage of the enormous opportunities that are being created today

This article is published in collaboration with QS Advisory. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Srikar Reddy is Managing Director and Chief Executive Officer, and a member of the Board of Directors of Sonata Software Limited and Sonata Information Technology Limited.

Image: The hands of Malini Agarwal, blogger-in-chief of missmalini.com, are pictured. REUTERS/Vivek Prakash.