I am just back from the whirlwind that is Nasscom India Leadership Forum 2013 in Mumbai, India. The Nasscom event is the premier event for the Indian IT services marketplace. Besides meeting great people, eating too much wonderful Indian food, and seeing action star and local legend AmitabhBachchan in-person, the event provides a chance to check the pulse of the most important geographic hub for the IT services marketplace.
HCL is the fifth-largest India-centric IT service provider in terms of revenue (after TCS, Infosys, Cognizant, and Wipro). While it only derived about 15% of its global fiscal 2012 revenues from markets outside of Europe and the US — slightly lower than the four larger Indian firms — HCL has built a strong base in Asia and now boasts more than 300 customers served by more than 8,000 employees. I recently attended HCL’s Asian analyst event in Sydney; below are some key reasons why I believe that you should consider HCL on your shortlist of systems integrators (SIs) and outsourcing providers:
Flexibility. When I asked some of HCL’s Australian, ASEAN, and Indian clients what characterizes HCL’s approach to managing client relationships and delivering projects, most mentioned “flexibility” and “HCL is easy to work with,” particularly during the transition phase in outsourcing contracts.
Co-innovation focus. HCL’s Asia growth strategy is both focused (on a limited number of vertical and horizontals) and pragmatic. Starting small with staff augmentation deals, the company invests in relationships to develop its presence and its expertise with its clients’ challenges — 2% of the revenue generated from clients is reinvested in the engagement as an innovation budget.
Local commitments. HCL has increased its regional presence via local management and delivery capabilities and local partners, including universities like Singapore Management University; IT companies like Lippo Group in Indonesia; and government, such as its work on the Mobility Lab initiative for EDB in Singapore.
Dan Bieler, Frederic Giron, Brownlee Thomas, Ph.D., Stefan Ried, Christopher Mines, Pascal Matzke, Jennifer Belissent, Ph.D.
T-Systems hosted its 2012 analyst and sourcing advisor event recently. To be sure, T-Systems remains one of the most advanced true ICT providers in the European market. But T-Systems ought to demonstrate more clearly how it can support and enhance business process for its customers and improve the customer experience for its customers’ customers. Of course T-Systems is not alone. The ICT industry needs to emphasize proven capabilities in delivering enterprise-grade ICT solutions ranging from co-management of infrastructure resources to full outsourcing.
T-Systems, like many of its competitors, is busy making sure that it does not bleed too much in what T-Systems calls the red ocean, i.e., the highly competitive market segment of legacy services. That's a good start. At the event, T-Systems communicated very clearly the progress at its internal production factory. This aspect is critical for streamlining and standardizing the portfolio, boosting margins, and developing products and services that the revamped sales team then can actually sell. One tangible outcome of this effort shows through in the high customer satisfaction level and deal wins like BAT, OMG, and Georg Fischer. Importantly, T-Systems also has put in place a rigorous certification framework for ensuring quality of service with suppliers.
However, T-Systems still needs to convince in areas of the blue ocean, i.e., the emerging innovative market segment. Like many of its competitors, T-Systems is not finding this easy. Why? Because T-Systems continues to prop up its legacy business: selling technology solutions.
In November 2011, Atos and Yonyou (formerly Ufida) announced the creation of a joint venture dubbed Yunano™ aimed at the European SMB market. The two companies are at it again, this time focusing specifically on the Chinese domestic market. I recently met with Herbie Leung, CEO of Atos in Asia Pacific, to discuss the partnership and future market opportunities in China. This new agreement essentially covers three areas of collaboration:
Bringing PLM and MES expertise to Yonyou customers. With more than 1.5 million customers, Yonyou is one of the largest software providers in China with strengths in ERP and CRM solutions. However, the company lacks capabilities in adjacent areas like product lifecycle management (PLM) and manufacturing execution systems (MES). Following the SIS acquisition, Atos has significantly strengthened its capabilities in these domains and will offer them to Yonyou clients.
Helping Yonyou’s customers migrate to private cloud architectures. The lack of private cloud technical skills in China led Yonyou to leverage Atos’s expertise to develop private cloud assessment workshops and ERP migration services targeting the China market. Atos will in turn leverage Canopy, a company it recently created in partnership with EMC and VMware to provide cloud solutions to its clients globally.
Helping Yonyou expand into new markets in Asia. Like many Chinese companies, Yonyou has global aspirations.While theYunano joint venture focuses on bringing Yonyou’s ERP solutions to the mid-market in EMEA, the new partnership will leverage Atos go-to-market capabilities to take the Yonyou solutions to other markets in Asia.
During a recent global analyst event in Paris, Capgemini presented its strategy to a panel of market and financial analysts. It hinges on two main objectives: improving the resilience of the organization in an uncertain economic environment — especially in Europe — and finding new levers for margin improvements.
From an operations point of view, Capgemini intends to continue leveraging the usual suspects: industrialization, cost cutting, and accelerating the development of its offshore talent pool. It also aiming to optimize its human resource pool via a pyramid management program aimed at, among other things, allocating the right experience level to the right type of work.
More interestingly, the company showcased some of the global offerings it has put together or refined over the past 12 months. Capgemini’s strategic intent is to develop offerings addressing three major client-relevant themes – customer experience, operational processes, and new business models. The offerings will be enabled by a combination of cloud, mobile, analytics, and social technologies. Among the set of offerings managed globally, I found the following of particular interest due to their emerging nature and Capgemini’s interesting approach to developing them:
Services budgets represent 10% of annual IT operating and capital budgets[i], but Forrester sees considerable evidence that the influence of these IT Services vendors is proportionally higher — and growing dramatically. While there are several reasons for the rising importance of your services partners, at the most fundamental level Forrester sees that:
Business professionals need immediate access to tech-enabled innovation. Most strategic business initiatives now have an underlying technology component. Service providers come to the table with the tech savvy, vertical market expertise, and best practices to make these initiatives work.
IT professionals can’t keep pace with business demand. The volume and complexity of technology demands from business professionals means that traditional IT organizations have difficulty keeping pace. They too need to work with the best mix of IT service providers to meet the demands of their business. Effective supplier management is quickly becoming the most essential skill in IT organizations.
I recently finalized a report* on software asset (SA) based IT services, this time looking at vendors’ best practices in terms of governance, organization, skills, tools, and processes. Needless to say, the move to software asset-based services will have a huge impact on the traditional operating models of IT services firms.
Obviously, IT services firms need to learn from their large software partners to understand and implement specific software asset management processes such as product sales incentive schemes, product management, product engineering, and release management.
This will induce a formidable cultural change within the IT services vendor’s organization, somewhat similar to the change Western IT service providers had to undergo 10 years ago when they finally embraced offshore delivery models.
I see a few critical steps that IT services firms need to take in order to facilitate this shift towards software asset-based business models:
Build a client-relevant SA strategy. Building an SA base offering is not (only) about doing an inventory of the existing intellectual property (IP) that you have on employee hard drives and team servers. More importantly, it’s about making sense of this IP and building strategic offerings that are relevant to your clients by centering them aounrd your clients’ most critical business challenges.
Next month, I will be relocating to Singapore after two years in India. These two years have been an amazing learning experience for me, both from a personal and professional point of view. A very intense experience too! Of the few Hindi words I learned during my stint in India, there is one that I am particularly fond of: “jugaad,” which can be translated as “making things work.” This is one way to summarize what India is all about — and why India works as an economy, in spite of the gods and despite all of the challenges that India currently faces as a society.
This concept has taken on a lot more importance on the global scene in recent years from an innovation management point of view. A former Forrester colleague has recently coauthored a book about the concept and how it could “reignite American ingenuity.” The economic and ecological crises that we have been through over the past few years call for new ways of approaching economic development and growth. And the “jugaad” concept could bring interesting solutions to our modern societies.
Several recent Forrester reports, including “Mobile Is The New Face Of Engagement,” have shown how new business success imperatives are pushing clients to change the way they leverage IT solutions. In my report “The Move To An Asset-Based Services Play,” I describe how IT service providers will have to adapt to these new rules of engagement if they want to stay relevant to their clients in the long run. In particular, the increased focus on business innovation will push service providers to invest more in the development of software assets — or solution accelerators (SAs) — that provide strong business value to multiple clients.
The move to asset-based services will force service providers to invest in new operating models that differ significantly from their traditional models and are closer to the ones leveraged by software providers. In my next report, I will cover some of the associated best practices in terms of the organization, people, processes, and tools that IT services firms need to implement to make this shift happen internally. Service providers will need, among others, to recruit new skills such as product and portfolio managers, incentivize the creation of software assets, fund and incubate the creation of solution accelerators, and overhaul their partnership management processes.
Infosys announced last week that Bharti Airtel, India’s leading mobile service provider, has selected its WalletEdge platform to operate Airtel Money, the first mobile wallet service in India. This announcement is interesting from a few different perspectives. First, it will provide a new source of revenues for the Indian telecom industry, which has been struggling with low ARPUs for several years. Second, it’s a boon for the banking industry, which will find a way to accelerate financial inclusion initiatives in line with the recommendations from the Reserve Bank of India. Obviously, the urban Indian consumer will also benefit from the “pay anytime, anywhere” convenience of such a service.
I also look at this deal from an IT services industry perspective, and I believe that it embeds a set of very interesting attributes that will become increasingly prevalent in the way IT services vendors engage with their clients moving forward: