The $100-billion Indian BPO industry is targeting a revenue of $300 billion by 2020 as per Nasscom estimates. The number of SMEs in the sector accounts for 85 per cent of the existing 5,000 firms and, hence, they will have to play a big role.
However, the growth of the IT industry in the last two decades — thanks to the rise in global demand for knowledge services, fuelled by a steady supply of engineering talent — appears to have plateaued. The tune of “times are a changin’, as articulated by Bob Dylan, in the 60s have come to haunt the IT sector today, particularly the SMEs.
The financial crisis of the last four years --- the shortening cycle time for breakthrough technologies to reaching commercial product maturation, as enacted by protagonists such as Google, Apple, Facebook and Amazon — is proving to be a battleground for IT services business, especially for SMEs. These firms are often at a disadvantage compared to large firms due to lack of economies of scale and scope, large-scale attrition, operating in niche markets and, hence, lack of resources and capability to broadbase themselves.
The typical portfolio of SMEs that garner more than 50 per cent of revenues from the top 10 customers, needs to change, and fast, to hedge business risks and diversify their solutions and customer base. More so, since large firms such as TCS, Infosys, Wipro and HCL have already diversified their customer base with the top 10 customers, on the average, contributing to not more than 25 per cent of the revenues. While these firms have been able to ramp up gradually, thanks to favourable IT outsourcing climate of yesteryear, the SMEs do not have the luxury today. Hence the following “3-R” solutions.
Resource Leverage
The days of linear growth are over. C. K. Prahlad and Gary Hamel in their 1994 classic Competing for the Future ask the question in the context of Japanese automobile players giving sleepless nights to the Big Boys in Detroit, “How is it that General Motors spends more than four times as much as Honda on R&D and is not the undisputed world leader in chassis technology?
The answer lies in the ability of the Japanese automobile players to win despite scarce resources by “adopting the tactics of guerrilla warfare”.
Indian SMEs will need to learn how to make “more from less” by ensuring that their human resources are trained and capable of being swiftly moved around on technologies and business processes, much like the “lean manufacturing cell/factory layouts” of the Japanese players.
Further the trick will be to not lose out on the depth expected of “specialists”. The concept of T-shaped careers — building breadth and depth simultaneously — and the value of the same for future career growth must be emphasised to all its engineers.
Reading and Learning
Realising the low employability of our graduating engineers, IT firms have created some of the world’s best training engines.
The days of building capability through extensive classroom/in person faculty-driven training are long gone and too expensive for organisations. Since last year, a phenomenon, as exemplified by Massively Open Online Courses (MOOCs), is beginning to disrupt higher education worldwide.
These are ideal for providing continuing education, especially in the contemporary areas of information and computer sciences.
Enabled by easy-to-use platforms such as Coursera and Udacity, incubated at Stanford, and edX at MIT, these courses are a boon to building capabilities on the fly, especially for engineers in emerging countries such as India.
Resource Diversity
The courses provide opportunities for global collaborative work, at zero cost to organisations, except for the high-speed Internet connection. Though assessment methods are still evolving, firms need to encourage and guide their employees to multi-task and delve into the areas of interest for the organisation by adopting MOOCs.
As IT work gets more and more dispersed globally, firms need to attract and retain the “right” talent with the required diversity.
Here, the Indian SMEs can take a leaf from the selection practices of some of the best global campuses. IDEO, a design consultancy firm, focuses on T-shaped skills for résumé assessment to build interdisciplinary work teams for creative processes.
Instead of limiting the recruitment assessment to how well the individual can, for instance, code in Java/C++ or the experience he has with Androids, selection processes must focus on whether the individual can work across diverse cultures.
How well travelled is the person? Has he/ she worked or studied far away from “home”? Any community leadership/CSR experiences? How well read?
What is the individual’s “cultural quotient”? The Age of Products gave way to the Age of Services, which the IT sector has made the most of. The future, however, is the Age of Experiences — where technologies shape our lives.
The ball is now in the Indian SME’s court to counter the challenges to survive in the intensely competitive world.
(This authors work for Sasken Communication Technologies. The views are personal.)