Moving up the value chain – Journey from Aspiration to Necessity…

Amalesh Bandopadhyay 006

Tejuswi Prakash 242
Shashank Yagnick 259
 ‘Cost’ – Critical competitive advantage of the past
 Cheap & Indian – synonymous
 Indian IT companies have taken up opportunities for
cost arbitrage
 Developed newer capabilities in the IT domain
 New age industrial giants – Infosys, Wipro, TCS
 Best foot forward till 1990s & early years of this century
“While it is important to realize the right time to latch
on to a business strategy, it is equally important to
know when to let go…”

 Moving up the value chain has been a desirable &

aspirational business approach for quite some time,
but it may not be too farfetched now to deem it a
necessity…
 Emergence of low-cost destinations e.g.
Philippines, Vietnam
 Difference between US and Indian salaries
was 100%, now only 20%
 Need to improve realisation per employee for
Indian IT companies
 IBM’s revenues are 10 times that of TCS
with only 2-2.5 times its employee strength
 Move beyond the per employee billing rate system
e.g. Infosys Business Models
 Outcome-based or transaction-based model
▪ Offers its clients a value proposition
▪ Rates are irrelevant and the client pays only for the
result the firm provides
 Tapping new opportunities caused by shift in
consumer preferences
▪ Offers solutions in new platforms such as mobile
network & social networking sites
 Assess the domestic market
 MNCs are increasing their base in the Indian market
 India – a resource destination & no longer the exclusive domain of
Indian companies
 Cost competitiveness can’t be sustained unless there is an economic
barrier which is removed with global IT players setting up operations
in India
 Talent no longer a geographically focussed phenomenon
 Increasing need to have a globalised workforce as companies are
moving to more and more diverse markets
 Companies are recruiting local talent because of their familiarity in
their linguistic and cultural skills

 Emergence of new trends like Cloud Computing threatening to

further erode the cost arbitrage advantage
Strengths
 Aggressively compete for leadership positions in value
propositions for IT services
 Invested heavily in delivery processes
 Management team focus on ensuring predictable growth &
earnings
 Leads many offshore competitions in cultural alignment with
West
 Focus on vertical market strategies for deeper penetration
 Have platform BPO and other non-linear solutions
Weaknesses
 Have difficulty articulating long term strategic objectives
 Strategic marketing capabilities could be improved
 Metric driven approach leads to a risk averse corporate culture
 Heavy reliance on North American financial services,
manufacturing & retail but lack expertise in emerging hot
verticals like government & healthcare
 Strategic consulting, transformation & innovation capabilities
still do not match the Western counterparts
 Expansion in regions like Europe has been slow
Opportunities
 Strongly positioned in wake of financial turmoil to capitalize on
cost/value concerns of IT departments
 Well positioned for expansion in emerging geographic markets,
particularly home turf India
 Can steadily move into large IT/business services market within
existing accounts – areas still dominated by Western firms
 Strong financial positions will help companies expand through
acquisition in the wake of global financial market turmoil
Threats
 Intense focus on verticals in strategy and go-to-market
approach will create inefficiencies – may lead to development
of organizational silos
 Without strategic evolution into high margin services, growth
models will continue to be stressed
 Shift to highly standardized cloud and SaaS based services will
likely expose product marketing shortcomings