Threats And Opportunities For Software Innovation In India

The continued economic viability of software development in India, whether by independent software vendors (ISVs) or “captive” business units, depends less on pure labor arbitrage and more on delivering time-to-market advantage for clients. The pressure of meeting business expectations demands that software firms harness creative capability wherever they can find it. The increased focus on Business Technology innovation and customer experience over mere cost savings presents both a threat and an opportunity to software configuration and development business units (BUs) in India.This is the key finding from my just-published report

Forrester developed its software innovation assessment workbook to assess software innovation capability of firms. We provided this tool to members of NASSCOM (the industry association for the IT BPO sector in India), comprising both ISVs and captive development BUs in India, and surveyed them to assess the most important process, organizational, cultural, geographical, and staffing practices that promote software innovation. We also interviewed a dozen selected respondents in greater depth to better understand how innovation capability contributes to business success in India. We found evidence of widespread adoption of the practices correlated with software innovation capability, helping to drive a rapidly changing role for Indian business in the global software supply chain.

Innovators in India that were engaged in software development and configuration received high scores for many of the practices that drive effective innovation. They demonstrated strength in:

  • Listening to the voice of the customer
  • Making the development process more iterative and responsive
  • Developing organizationwide best practices
  • Shaping the culture
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The Battle For The Indian Banking Industry Will Soon Intensify, And Big Data Will Decide Who Wins

 

On February 22, the Reserve Bank of India (RBI), an institution that supervises and regulates India’s financial sector, announced guidelines allowing corporations to enter the banking sector. Private companies, public-sector groups, and nonbanking financial firms will all be eligible to apply for a banking license. We expect RBI to start issuing new bank licenses by early 2014.

RBI guidelines state that companies receiving a banking license must open at least 25% of their branches in rural areas. Despite this guideline, I believe that new entrants will primarily target the same urban and semi-urban customers that existing banks target. The reason is simple: These are the most profitable customers. This helps explain why 85% of rural bank branches in India belong to public banks; it’s simply not an attractive market for private banks.

What it means for current Indian banking CIOs: Leverage big data to grow your business or prepare to be left behind.

As competition increases, businesses will expect new IT capabilities to understand and respond to customer needs better, faster, and cheaper. Banking CIOs who embrace this change will adopt big data technologies and become true business partners. The ones who don’t will be bypassed by new entrants (when they come to play) using big data approaches and internal data from whatever market they’re currently in to analyze the banking market. These new entrants will likely influence customer preferences, question existing assumptions, and look for ways to disrupt the market. I recommend that current Indian banking CIOs:

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NASSCOM Restructures Itself For 2020 Vision: A Step In The Right Direction, But Long Road Ahead

On March 4, 2013, NASSCOM, the industry association for the IT BPO sector in India, announced a restructuring plan to help realize its goal of India becoming a $300 billion industry by 2020. The restructuring plan is based on an independent committee’s recommendations, chaired by Infosys cofounder N.R. Narayana Murthy. Key highlights from the announcement:

  • Realignment of the NASSCOM structure into seven verticals (IT services, business process management, global in-house centers, engineering and R&D services, Internet and mobile, products, and domestic market) and five enablers (global trade, policy advocacy, outreach, skills and talent,  and regional connect).
  • Executive Council to be reconstituted to have adequate representation from the seven identified verticals
  • Formation of various councils, including national vertical councils, country councils in key markets, and strengthened regional councils to address local issues.
  • Set up five centers of excellence in five years for software engineering, emerging technologies, vertical solutions, eCommerce, service excellence, and governance.
  • Facilitate 100,000 certifications in specialist skills and domain areas.
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India’s Excise Duty Increase On Mobile Phones Won’t Have Much Impact

 

On February 28, 2013, India (as part of its 2013-2014 budget) announced that it would increase the excise duty on mobile phones costing more than $36 to 6%, up from the current level of 1%. Forrester believes that this increase will not affect the mobile industry in India very much because:

  • Sub-$100 smartphones will trigger new kinds of competition in the market. As high-end mobile phones get more expensive, Forrester predicts that smartphones costing less than $100 will be in much greater demand. Moreover, handset manufacturers will absorb a large portion of the price increase to sustain their sales.
  • Explosive mobile Internet growth. With increasing urbanization and improving per capita income, more people will begin to use the Internet, and the use of smartphones will rise quickly. We forecast that the mobile Internet user base in India will grow by more than 30% year-on-year over the next five years.
  • Addicted social media youngsters. With more than 61 million Facebook users, India ranks as Facebook’s third-largest audience in the world after the US and Brazil. Half of these users are between 18 and 24 years of age, and the majority of them use their mobile phones to connect to the world.
  • Rapid eCommerce growth complementing the mobile sector. Forrester estimates that eCommerce revenues in India will increase more than fivefold by 2016, jumping from US$1.6 billion in 2012 to US$8.8 billion in 2016. Mobile-friendly sites from various players and eCommerce website aggregators will help accelerate mobile Internet adoption.
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India Ranks Second In Expected 2013 Asia Pacific Mobile Software Spending Growth

Data from Forrester’s Forrsights Budgets and Priorities Tracker Survey, Q4 2012 highlights that a total of 53% of IT organizations interviewed in India plan to increase their software spending on mobile applications in 2013. Among all the countries, India ranks second only after Australia/New Zealand and considerably higher than the regional average:

It’s encouraging to see Indian CIOs start to give a high priority to mobility software spending, but our research shows that the majority of mobile application initiatives are skewed toward employees and BYOT (and, to some extent, partners) with little focus on mobile customer engagement. Forrester research findings indicate that mobile applications will be a more critical channel to reach consumer markets in Asia Pacific in the future compared to more developed western markets.  This is especially true in India, where the population is younger (according to the UN, 27% of the population is between the ages of 15 and 29), the mobile Internet user base is growing at the rate of more than 30% annually, and sub-$100 smartphones are further fueling mobile Internet growth.

What It Means For CIOs:

  • Put customers at the center of your mobile strategy. If you’re not establishing the architectures and capabilities to reach these mobile customers now, you won’t be positioned for success three years from now. CIOs have an opportunity to lead their organizations by leveraging technology in strengthening customer relationships.
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Misaligned Perspectives Are Driving CIOs And The Business Apart In India

Data from the Forrsights Budgets and Priorities Tracker Survey, Q4 2012 highlights the increasing gap between CIOs and business decision-makers (BDMs) in India — a gap that originates in misaligned perspectives. The rapid rise of social media, cloud computing, and mobility in India has started to significantly affect how organizations do business in the country. Business leaders’ use of consumer technology has changed their expectations of how enterprise IT should be harnessed. They increasingly seek to use technology in innovative ways in order to gain a competitive edge and drive business growth. However, most CIOs are still caught in the old world of focusing exclusively on IT budgets and project delivery performance issues:

I recently spoke with a few CIOs in India to explore their views on the reasons behind this misalignment. When I shared data from the chart above and asked their opinions on the insights, some interesting findings that came out:

  • There are many “heads of IT” and few “business technology (BT) CIOs” in India. One CIO from a large auto manufacturing firm mentioned that a majority of CIOs in India are actually “IT heads” who think and act mainly from an IT perspective. Even worse, their thinking is generally very hardware-centric. This CIO’s opinion is in sync with my recent  report highlighting the fact that Indian CIOs are at risk of losing business credibility (and eventually their jobs) if they do not improve their understanding of BT.
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iSPIRT: Why India’s New Software Think Tank Will Struggle To Make A Big Impact

 

Thirty software product members of NASSCOM, the industry association for the IT BPO sector in India, announced that they would form a group to expand the software ecosystem in India: the Indian Software Product Industry Round Table, or iSPIRT. The key driver behind this development appears to be NASSCOM’s limited focus on software product companies in India. iSPIRT plans to:

  • Convert ideas into policy proposals to take to government stakeholders
  • Enable product startups to discuss issues through a dedicated platform (productnation.in)
  • Create awareness for the adoption of software products within the Indian SMB sector
  • Work with NASSCOM and other industry associations to provide a platform for product start-ups
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System Integrators Are Failing To Meet The Expectations Of Indian CIOs

The rapid rise of social media, cloud computing, and mobility in India has started to affect how organizations do business in the country. This is driving a fundamental shift in the CIO role as it moves from classic “plan, build, run” cycle management to a business-oriented, leadership-focused position. To gauge systems integrators’ (SIs’) readiness to support the changing CIO role, Forrester interviewed CIOs at 30 Indian companies and has just published a report on the same. For the purposes of this report, “Indian SIs” includes SIs headquartered in India and multinational SIs doing business in the country. We conducted interviews with CIOs in the form of open discussions; our aim was to determine CIOs’ opinions about their SIs, including how effectively those SIs are shifting to a more value-added, business-oriented engagement model. These interviews yielded some grim findings, as CIOs believe that SIs:

  • Don’t understand the business requirements of the CIO role. Only 28% of CIOs think that SIs understand their changing business requirements, while 70% of CIOs think that SIs focus too much on technology delivery.
  • Focus too much on upselling or cross-selling their products and solutions. SI teams, including account managers and consultants, usually focus more on promoting products and services; they have very little knowledge of what CIO and client organizations are looking for and don’t care to learn.
  • Lack the tools and templates to define the business value of emerging technologies. Most of the CIOs indicated that they believe that SIs are not able to define the business value of emerging technologies.
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India Tech Market 2013 Predictions

The Forrester Asia Pacific (AP) team has just published its predictions for 2013 in the IT Industry Disruptions Fuel Renewed Asia Pacific Market Growth report. Some of the top trends and predictions that I believe are particularly critical in the India market:

  • Government reforms will not positively affect IT spending until 2014. Forrester estimates that India’s IT purchases will grow by 9.5% in local currency in 2013. The Indian government is taking steps to reform initiatives and stimulate the economy in the wake of faltering economic growth caused by inflation as well as corruption, political gridlock, and lack of business investment. However, Forrester expects corporate spending to remain cautious ahead of parliamentary elections scheduled for 2014.
  • Increasing customer expectations will drive software spending. 94% of the Indian organizations surveyed in our Forrsights Budgets and Priorities Survey, Q2 2012 cited the need to improve their product and services capabilities to meet increasing customer expectations as their top business priority. We therefore expect increased investments in CRM, customer communications management (email marketing software, SMS communication software, etc.), and business process management tool solutions.
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IBM STG Is Upbeat On PureSystems And Growth Markets

 

Last month, I attended an IBM Systems and Technology Group (STG) Executive Summit in the US, where IBM outlined its key strategies for accelerating sales in growth markets, including:

·         Aggressively marketing PureSystems. IBM is positioning PureSystems (a pre-integrated, converged system of servers, storage, and networking technology with automated self-management and built-in SmartCloud technology) as an integrated and simplified data center offering to help organizations reduce the money and time they spend on the management and administration of servers. 

·         Continuing to expand in “tier two” cities. Over the next 12 months, IBM plans to continue its expansion outside of major metropolitan areas by opening small branches in nearly 100 locations in growth markets, most notably India, China, Brazil, and Russia.

·         Expanding channel capabilities and accelerating new routes to market. IBMplans to certify 2,800 global resellers on PureSystems in 2013 and upgrade the solution and technical expertise of 500 of its partners. Also, the company plans to drive the revenue of managed service providers (MSPs) by working with them closely to develop cloud-based services and solutions on PureSystems.

Considering the vast potential demand from growth markets and slowdown in developed markets, IBM is among the growing camp of multinational vendors aggressively targeting them as an engine for future business. Some of my key observations on IBMs event and recent announcements:

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