to basics - The new IT mantra
Moving up the
value chain is no longer just a mantra but a reality, and only those who can
provide total services to their international clients will survive, writes
2002 is already
here. After weathering the big storm of 2001 most of us are looking at the year
ahead with a sense of déjà vu. Most professionals are looking at the (stock)
markets to give an indication that the worst is behind us. One or two quarters
of fairly OK results and managers will heave a sigh of relief. In my previous
article, I attempted to hazard a guess on the direction of IT. One thing is
certain, shorn of the hype this is going to be a year of B2B-Back to basics.
The hype that IT
systems and people, along with new technologies can provide a magical cure to
business ailments is dead. By the same token, the hope that IT systems will help
businesses return back to normal is still alive. There is little doubt that
there is a pent-up demand for IT systems and services from businesses in a
reactionary mode. This is especially true of businesses in the US that are
generally proactive when it comes to cutting costs.
I would be
preaching to the converted if I were to tell IT professionals that the “golden
age” of IT when the mere mention of Java, C++ or DB2 on one’s resume could get
one hired. It should be apparent to most professionals that IT houses are
looking for core knowledge and assistance with total solutions than merely for
skill-sets. The IT companies in turn are reacting to a changing marketplace
where they are expected to provide a solution to business problems, not merely
cater to the demand for their professional services.
Case in point:
Take Compuware, a large S&P 500 software company with over $2 billion in
revenues that I work with. Until recently, the company was an amalgamation of
two businesses—software services and software products. The services side of
business employed thousands of consultants with varied skill-sets, hired in the
open market to be placed as “consultants” at client IT shops hungry for talent.
The product side of business focused on selling core software products ranging
from popular mainframe, mid-range and business software for development,
testing, web-enablement, performance tuning, etc. During the boom years of the
nineties, products and services were practically selling themselves. The
slowdown has hit most companies hard and even Compuware has not been immune to
the vagaries of the economy. However, this company’s reaction to the slowdown
has been interesting. Unlike its corporate compatriots, the company has dug in
instead of laying off people like most other American companies, Compuware is
focusing on an innovative strategy of merging its service and products, offering
a unified suite to its customers. The premise behind this approach is simple: IT
users want solutions for their business problems, and do not care about just the
Many big Indian
IT giants are following this approach too — bundling (the few) products they
have with the services. However Indian companies either fall short when it comes
to moving up the value chain or while providing a “total solution.” The big
picture, i.e. the business problem they are trying to solve in terms of
providing IT solutions to companies whose core competence is not IT, eludes most
of the software houses. At the end of the day, IT systems are just
tools-of-enablement to be used by the ‘users’ of businesses to further their
core goal viz. making money and generating revenue.
A down economy in
the US, could lead to some interesting options to Indian software giants looking
to expand their products and services offerings. Cash rich Indian giants that
are listed in NASDAQ could leverage their finances to acquire a few niche market
products and services companies in the US that are undervalued and are looking
to bail-out. What they (Indian companies) would be buying is not just a product,
but a market and brand along with the product. This will help immensely when the
market starts looking up and companies in the US open up the pent-up
requirements for IT products and services.
The decade ahead
is not going to be like the decade past. Companies around the world are going to
question the use of IT and use only systems that are proven to add real value.
The global playing field for IT services and systems is undergoing a sea change.
Mid-tier Indian companies, which were content to skim profits by “people
placement” or selling “cheap offshore development”, are going to find the market
really competitive. Cost is not the only concern for IT users, value-addition is
equally important. Moving up the value-chain will no longer be just a mantra but
a reality, and only those who can provide total, tangible services to their
international customers will survive. As I said earlier, back to basics.