The Future of the IT Industry
2009 is looking a lot
like 2002 in the IT outsourcing industry. Back then clients were cutting back,
driving economies of scale and consolidating vendors. Decision-making moved
away from business and IT managers to purchasing teams. The difference back
then was western IT companies – the incumbents - suffered as Indian outsourcing
companies benefited and took ground.
In 2009, the Indian IT
companies are the incumbents and clients are scrutinizing all vendors and
contracts. Senior executives at IT outsourcing companies need to take action
now to make sure they aren’t the losers when the consolidation decisions get
made.
So, how should they
prepare? Start by looking at what happened in 2002. Purchasing departments at
large clients used two metrics to make vendor optimization decisions – cost and
quality. Cost is easy to compare but what about quality? Back then the decision
makers seized upon CMMI as the standard of quality and quite honestly the
Indian IT industry was only too pleased, as all the large players had already
been appraised at CMMI Level 5 – the highest level achievable. The companies
that enjoyed success in 2002 were those judged, according to the CMMI, as
having the highest quality processes. In 2009 this focus on quality will remain
just as critical; however, there needs to be a shift in the measure of quality.
As the industry moves
towards more high level tasks such as research and development and KPO
(Knowledge Process Outsourcing) that put the focus on the qualifications and
quality of the professionals doing the work. The quality of the talent and the
workforce is the next key measure of quality. What I am seeing now is there is
no measure of quality distinction offered by IT providers and therefore the only
variable left is cost. In this scenario we run the risk of IT providers
dropping pricing in order to survive. This will cause a long term earnings and
investment gap in the industry. Dropping pricing today will take down long-term
earnings and in order to minimize the impact to earnings, companies will reduce
critical investments to remain competitive. There has to be a better way.
Benchmarking their talent
to a global standard will be critical for organizations with a desire to become
dominant in the industry.
At PAC we are working
with leading companies do exactly this.
Benchmark and certify their talent against a global population. The
process is rigorous but highly rewarding. Beyond a marketing edge, companies
get rare insight into their talent pool, training processes and the deployment
of their staff. By sharing the insights with their clients they collectively
make better talent optimization decisions. They are now working with their
clients at a more strategic level and proving themselves as a high quality
partner.
So, are you ready for
2009?
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