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Outsource magazine: thought-leadership and outsourcing strategy | August 19, 2017

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The Indian IT industry: challenges within

The Indian IT industry: challenges within
Outsource Magazine

In the last two decades the IT and IT-enabled services (ITES) industry in India has grown at an astounding rate and created significant value for stakeholders – as well as having contributed immensely to the Indian socioeconomic scenario. While poverty is still a huge challenge in India, many more have now much more to spend on education and conveniences as compared with the sluggish ’80s and ’90s. The industry rode on Y2K to scale, and reinvented itself during the dotcom boom (and bust) as a trusted partner for many corporations around the world for application support and development. It overcame the initial challenges on quality by adopting high process centricity; on language with focussed training on both spoken and written skills; on technical skills by hiring the best grads from the Indian colleges. However it was scaling up operations where it really carved out a niche, offering low-cost highly scalable support and services solutions worldwide, consistently, repeatedly. Arguably this is the industry that put India on the economic map of the world.

It has had a great run; however the last few years have been difficult. For an industry whose growth was fuelled in large parts by the banking and financial services sector and majorly through contracts from the US, the financial crisis of 2008 was a big blow. Suddenly it was not business as usual. Some existing clients and contracts were gone and others were extremely cautious about making new investments. Things improved over the next few years, but a shadow had been cast! It was clear that new businesses needed to be found and new geographies needed to be explored. To add to the complexity a whole new business model was being explored by enterprises through the adoption of the ‘digital’ paradigm. The evolution of cloud-based services simply meant that software development could just be with folks who knew how to do it best. Mobile, social and analytics have made it imperative to deliver consistent and repeatable, personalised, sophisticated customer experiences. Now organisations could just concentrate on making better products for their customers and establishing new brands.

The new digital space does not lend itself to the generation of large services contracts as those in ERP, CRM or web implementations. The Indian services industry has largely grown up on these. This, alongside the slowdown of demand from US and Western Europe, is the biggest challenge that the services industry has faced in a number of years. What kind of new products and services is there a market for? What do the customers want? Who are these new customers? If information-related services are now available as a service, what role does the application support provider play? If software development and maintenance skills are no longer sufficient, what new skills are relevant? How should the industry reinvent itself? The answer for the industry will lie in addressing the challenges it currently faces in terms of structure, skills and leadership.

The sales, delivery and competence structures developed by the services industry in India are heavily IT- and CIO-centric, whereas in the new digital world, technology investments and decisions are no longer taken by the CIOs alone. CMOs, CFOs and business heads are taking more technology decisions than ever before and the services industry is realising that it just doesn’t have those relationships. The technology-solution-based selling which worked so well in the past doesn’t really speak to these new stakeholders. The senior industry leadership, extremely conversant with the business of technology, is finding it difficult to engage with these new stakeholders and talk the language of business. The IT function in corporates, having historically been part of the larger finance organisation, developed strong governance over spend and vendors. The industry sales teams have over a period of time become familiar with these. However functions such as marketing or sales which very often do not follow such processes represent a different challenge for the already-struggling industry sales teams. The competitive landscape in newer deals is not clear either. As small niche setups compete with larger established players, cost no longer remains the trump card of the offshore partner. Small firms with little or no overhead compete aggressively on cost with established players.

While the external environment is challenging, sales processes in the Indian IT/ITES industry are often not very well established. Most of the senior account leadership is provided by software development leads who have grown in seniority. They are in turn supported by domain experts bringing in functional experience from the industry vertical and technology competence teams. The industry experts have little technical know-how and the technology teams have little to offer from a business standpoint. Together they try to stitch solutions to take to market. The results are not often credible. More so, every call to a customer is a heavy coordination exercise to, first, get the right stakeholders in the loop; next, to second guess the customers’ needs and expectations; and then try to improvise and build a solution. This is a complicated set up, and the IT industry is seriously missing business and relationship skills from their assembled sales effort.

An indication of this was when a top analyst, covering the global services industry, asked the senior leadership of a top ten professional services organiation, how did they sell? He got different answers from each of the stakeholders he spoke to. The Indian services industry would give an arm and a leg to get senior partners on their teams who can provide senior relationship management alongside bringing in business and technology expertise relevant in the industry today. Most companies are attempting to solve this by hiring consultants in local western markets at relatively high wages and are willing to shed some of the flab they developed during the high growth phase. However, while hiring solves some current challenges, it also brings new ones in terms of adopting a more global work culture and higher costs.

That brings up the question as to why – despite having so many grads every year from engineering, medical or business schools – can’t India develop the skills relevant to the business climate today? The answer is: those skills are being developed, but it’s that they are not available to the IT/ITES industry anymore. The leading employers of the past are no longer the preferred employers. Start-ups are flourishing almost everywhere and especially in cities like Bangalore, Chennai and Mumbai. New products, process innovations – low-cost and otherwise – customer-centric brands and experiences are being developed and offered to the discerning buyer. In fact consumer health, auto, telecom and even pharma companies would confirm that India is becoming a hot bed of commercial innovation, fuelled by digital technologies and social media. However this new talent is just not available to Indian professional services organisations. The Indian services industry is losing the battle of talent.

A number of these skills cannot be only taught in colleges but need to be carefully developed and nurtured within organisations. Executives need to be developed through focussed development programs, exposure to new business climates, models and coaching interventions. Talent management needs to get renewed focus to help retain and grow internal talent, and acquire diverse (age, sex, nationality etc.) leadership from outside. The industry has always taken high attrition levels in its stride, and for many years answered it with hiring more fresh grads. However sustained attrition at team lead and group manager levels means that the middle and senior management bench strength is fairly weak. The patience, perseverance and organisation required for developing leadership at all levels is not something visibly demonstrated by leaderships of most leading IT/ITES companies.

It is remarkable that in a country where business leadership is highly catalogued and praised for often succeeding in the absence of government support and structure, its flagship industry is struggling with leadership, structure and skills! The macroeconomic environment is also not helping as import of technical skills into western economies is becoming increasingly difficult. Asia Pacific or Latin America on the other hand have been traditionally difficult to get into for Indian services vendors because of language- and culture-related challenges. The Indian economy is slated to grow significantly but most services providers, having so long been used to the large margins of deals in the west, do not yet have solutions at the cost price deemed attractive to Indian customers.

Given the right leadership, structure and skills, the Indian services industry can still bounce back to path of fast-paced growth; however the challenges within need to be addressed first.

Smit Shanker 150About the Author

Smit Shanker is the founding partner of Smits Consulting LLP, a boutique management advisory firm based in India specialising in user experience design, marketing and analytics, technology and outsourcing strategy.

Smit has over 16 years of experience in the IT industry. He started his career at Tata Consultancy Services as a business intelligence consultant and then moved to Novartis AG. In close to nine years at Novartis, Smit played multiple roles in Global IT leadership such as Head of Business Intelligence for Clinical Development and Head of Drug Safety IT. Smit led the Global IT resources at India for more than five years in his role as the CIO &  Head IT for Novartis Global Business Services Centre in India. His last corporate role was at TechMahindra as Head of the Healthcare and Life Science practice.

Smit has in the past shared his views on IT, Innovation and Business Intelligence as a keynote speaker and panellist at forums by NASSCOM, TDWI (The Data Warehouse Institute), Oracle etc. Smit is a keen follower of Indian classical music, an experimental chef and loves traveling to exciting, offbeat places in India.


  1. Saumya Shanker

    Scathing comments neatly veiled in a beautiful text… One of the more focused thoughts on the Indian IT scene that I have read in recent times… Kudos… Hope the big players shed their traditional approach and disrupt their current operating style… The world seems to be moving too fast else!

  2. Ashish

    Nicely articulated! The point on solutuon-based solution is nicely laid out – can co-relate with some of my prior experience with a client in SE Asia. As an organization, very often we fail to understand who our real stakeholders are (in the client organization). Like you mentioned IT decisions are no longer limited to CIOs, but are increasingly involving other CXOs. Similarly, talent management currently is more of an administrative task instead of an strategic tool. The article asks the most pertinent questions to the stakeholders in IT services industry.

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