Wake Up, Smell The Coffee!

John C McCarthy, of Forrester Research, had some plain talking to do about mid-tier IT companies in India. Here is an extract from his interview;

“Not all of them are going to get acquired, a lot of them are owned by conglomerates like L&T and they think they can still have a go at it.
So, whether they are acquired or not, they will definitely try and focus better on their value proposition than they have done in the past.
You need to look at the ownership structures of some of these companies, and the financial situation.
Some of these guys are struggling mightily.
Their numbers have gone backwards — 20% — because they weren’t differentiated, they had no focus, they were playing ‘a mini TCS thing. When consolidation happened, many customers got rid of them. Yet, there are some vendors like KPIT Cummins, ITC Infotech which have focus and have established themselves as premier specialists in particular domains and verticals.
You can’t be waiting for customers to leave TCS and Infosys — when was the last time you saw an article in the Harvard Business Review that said ‘second-hand’ clients are a viable business strategy?
And this is what these guys are talking about. They can’t just go on saying that we are a smaller version of bigger firms. The clients are not going to be looking at them for generic skills anymore.”

End Quote

It’s worth noting that two of the major issues for the industry, continuing pressure on margins and increasing employee attrition, are both issues that can be handled better by the big guys who have volume and scale. The message is definitely clear for the  mid-tier companies, and it has been clear for a while now.  To be fair, many have already woken up, smelled the coffee and started on a path that is clearly focused on differentiation. But there are still quite a few aspiring “mini-TCS’s” out there, and worse there are some companies who have acknowledged the new paradigm but still have a “mini-TCS” mentality that prevents them from making a wholehearted change in approach.

This change of approach can manifest in a number of significant changes from the “business as usual”. It can be seen in initiatives for non-linear investments, or a drive towards building domain expertise  and strengthening product/ solution capability, an emphasis on strategy and innovation,  or more investments in front-end marketing and in understanding end-user behavior and needs. One can perhaps say that it is a very different way of looking at two of the most important stakeholders in a business; the customer and employee. One can also say that it is a new game, distinct from the generic outsourcing one, that mid-tier companies need to play now.

The game is similar but different skills are needed, the rules are also different. Can Saina (not Sania) play tennis?  Can Sachin play baseball?  Can the field hockey team play Soccer? Yes, they/it can. But for it to be successful, it needs wholehearted commitment to play the new game and stamina for the long haul.

http://timesofindia.indiatimes.com/tech/itslideshow/6082519.cms