Indian IT Industry: Strategy Will Decide Its Score In Changing Times

Published by MBA Skool Team, Published on April 19, 2012

Indian IT industry has a legacy to tell. In last 3 decades, IT boom has lifted Indian industrial focus from primary to tertiary industries.  Skilled workforce and cost advantage have resulted in creation of Information Technology Services giants like TCS, Infosys, Cognizant, etc.  These companies grew rapidly in size to cater big companies in different industries and get benefited from economies of scale. It is an inescapable example of right strategy to exploit enormous opportunity.

Both the parties – IT service provider and client are enjoying its benefits. IT Service provider are earning huge cash with decent margins. In the last decade, many foreign IT giant like IBM, Accenture, etc. have entered into India.  They have set-up huge offices with thousands of employees working 24hrs to serve their clients. There is still much flame left in the traditional IT outsourcing but falling profit margin due to increased competition is a concern for all the players.

IT industry is seeing transformation from Business process outsourcing to Knowledge based outsourcing. Companies seeking IT services want domain experts to help them inching ahead in the today’s cut throat global competition. As a result companies like Infosys, TCS, have structured themselves into smaller domain specific units serving related industries. In 2008, TCS divided its business into Industry Specific Units (ISU) to give its client more domain specific solution.

Acquiring industry specialization has opened new doors for these knowledge driven IT companies in the field of consultancy. Indian IT companies can move up in the value chain and associate itself more deeply with the client businesses. Consultancy is more knowledge intensive and high profit margin business. IT service providers must not only do low end coding but also help their clients in strategic decision making through their expert knowledge in  the domain.  They can become active partner in client’s business transforming process, eyeing on technological synchronization of the client firm. IBM is a good example in this regards.  

IBM has started changing focus from hardware to services and more into IT consultancy. It sold off its laptop business to Lenevo. In year 2002, IBM acquired Pricewaterhouse Coopers’ management consulting and technology services business. This led to addition of 30,000 consultants in over 50 countries to IBM’s global talent pool. The primary focus of the IBM’s GBFM Center of Excellence is on consulting for risk and compliance against Basel II and Anti-Money Laundering norms for banking and financial institutions. In another example, recently Huawei has approached IBM to advise it on branding strategy under management consultancy assignment.

Another opportunity is awaiting in the era of rising number of SMEs. Cloud computing offers low cost IT services to the small firms. A number of cloud services and SaaS(software as a service) provider are mushrooming to take on this less explored section of cloud computing. Microsoft and Google are building their arms to fight in the market.  Indian IT firms are slowly exploring this area of IT services. One which will be left behind in the race may be epitomized as Kodak of IT industry.

Shrinking size of computing devices and integration into a single unit is appreciated by customers.  Mobile application and data services are going to be next big thing. Many banks, consumer utility companies, government services are seeking use of mobile applications to service their customers. IT service providers should build domain expertise in this field to grow their revenues. E –governance projects in developing nations will also boost the revenue for Indian IT firms in coming decade.

Opportunities have its challenges; planning and execution of co-related actions to overcome them is called as strategy. Moving up in the value chain by developing domain knowledge, harnessing potential of cloud computing to target new customers, offering integrated solutions, gaining expertise in mobile applications are few of the strategies Indian IT companies can work on. With fast changing global economic scenario and evolution of new technologies, the most dynamic company will see the fastest growth.

This article has been authored by Nishant Maheshwari from IMT Ghaziabad.

Image: digitalart /

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