A perspective on competitive positioning of IT Services companies?

Not every IT services company have the same strengths or short-comings, nor do they claim to differentaite themselves similarly in the market-place. Their differentiators are often subtle and somtimes it makes it very difficult for clients to make an objective selection or short-listing of an IT services firm. The choice of a right IT services firm for a desired service (AM, AD, Consultng, Trasformation) varies widely be some key factors

1. Cost (Delivery, Year-on-Year Savings, etc)
2. Quality (People, Delivery, case studies, Services, etc.)
3. Capital (experiences, Assets, capabilities, productized services, etc.)
4. Flexibility (ability to meet client diverse requirements and remodel their delivery to suit client requirements)
5. Scalability (size, ability to grow in size and scale to provide services across the regions where client may require servie)
6. Portfolio (the ability to handle different portfolio of services, products, etc.)
7. Commercial/contractual limitations (FX, COLA, Tax treatment, Partnerships, Jt. GTMis etc.)

There are lot of other soft factors (relationship, ongoing service, prior experience, preferences, perceptions, etc). These often tend to not very objective.

The perception that I document here are based on the insights of different IT service providers in the market. These are not based on any objective assessment (based on factors listed above), survey results or facts. Some of these could be superficial/erroneous, neverthless I would take a pass at it for some top-tier companies in India that seemed to have being great offshore players:

TCS - Cost Leader
Wipro - Quality Leader
Infosys - Flexibility Leader
HCL - Commercial/Contractual Leader
Cognizant - Scalability Leader

For the large tier 1 vendors their
IBM - Portfolio/Capital Leader
HP - Portfolio/Capital Leader
Accenture - Multiple dimension (difficult to clearly get their sharp market position)
Cap Gemini - Unknown

There are lot of niche companies whose positioning has superceded the above common factors. These niche players are identified below:

Tech Mahindra - Telecom Services (this assessment is before Satyam was acquired)
Sasken - Embedded Product development

What are the other factors and perceptions you share based on your insights?

Enculturation and Acculturation of IT Solution - Does culture influence the IT Solution design and delivery?

This is an interesting  question that has been nagging me for a while. I've been designing and delivering IT solutions for clients across the globe: Americas, APAC and EALA geographies. I got inspired by Geert Hofsted works on assessing culture of different countries based on the 5 dimensions: Power-distance, Individualism, Masculanity, Uncertainity avoidance and Long-term orientation. While, these dimensions may or may not (followers of Brendan Mcsweeney  and Ailon G articles cannot agree less) be relevant or even correct in the current context, but still provides a sound perspective to compare culture across countries. Another interesting observation I noted after reading these articles is that the Occupational culture is not the same between employees within the same organization. Ofcourse, one could argue as McSweeny did; where the organizational culture across nations may still not be the same.  My thesis here hinges on challenging the fact that Occupational culture differences between nations for IT services segment and also that fact that I worked in multiple organizations transcends the premise that it is unique to an organization culture as well!. So give these premise and the belief that national culture does exist and is homogenous, lets look at the patterns I saw in IT solution design and delivery.

 

The IT solutions that are designed and delivered across different countries seem to have some pattern that further elaborates the "uncertainity avoidance" dimension of Hofsted. I got a Self Reference criterion (SRC) whenever I look at some solution designs and sometimes even search for these traits in the IT services execution. In my SRC, I have abstrated few dimension that characterizes IT solution design and delivery.

 

1. Engineering/Structure: In this dimension, we see how the levels of engineering for a solution design and delivery varies from low to High. Generally we have seen German ways to design and delivery is high leading it to be too complex. On contrary we see the other extreme, bieng the low engineering and design and delivery of IT services to be low for India.

2. Clarity: The amount of clarity (scope, outcome/deliverables, schedules, efforts, etc.) required to design and execute the solution seems to be high for typical European client than the american or APAC clients. This can be construed in other ways to minimize the unfacourable outcomes and the propensity to tolerate ambiguity.

 

 Are there anyother dimensions that you have witnessed? I'll be happy to hear it.

 

I'm not sure we can give a quantitative score for each of the above attribute for each of the country. It may be a worthy exercise to pursue. The study result can be put to use effectively in devising a solution for clients in the geography. What do you think?

What options/scenarios lie in breaking the People-Revenue jinx for IT services firms

It is not suprising to see that the revenue growth and profitability of IT services firms have been closely knit with the people scale. The levers (Strategic, tactical and operational) for growth and profitability that have been driving this industry has not changed in the last decade and neither are we seeing any innovation that would break the jinx. This is quiet contrary to what we see in the IT Software products companies, where the relationship between people and revenue/profitability does not exist. Why is that different for IT product companies? It is simple their economics of operation is not very different from that of industries like FMCG, CPG, pharmaceutical, their levers of revenue growth/profitability is the unit of product sold and the cost of creating them....Definitely NOT PEOPLE.

What are the options are available with leadership of IT services firm to break the people-revenue jinx?

Lets look at what IT services firms have been talking about lately:
1. Commercial pricing plays: There are several variants, whereby one can claim to break the jinx between revenue/profitability from people. They all go by different names like Fixed-price delivery, value-based delivery/pricing. All these as I've seen are just the variations in pricing plays. The underlying delivery construct had hardly changed. We still see that the core drivers of revenue and profitability are still based on people.
2. Shared services: Services delivery with 1-many client realtionships. For example 1 resource serving multiple clients and thereby changing the linear relationship between revenue growth and profitability.
3. Productized service: Offering more products and building layers of services around the product that require less people to service. The companies then charge premium for selling such productized service.

But none of the above three seems to set the tragectory or crossed the required threshold or gained the required meomentum to enable the IT services firm to break the revenue/profitabilty-people jinx.... Atleast they are trying, not by design or forethought but my compulsions to meet their short-term numbers!