What can the Indian IT Industry do to ensure that we dont loose our jobs when we become less competetive (assuming the technology innovation are not mature enough to eliminate the need for significant labour)?
Any ideas!
Friday, September 5, 2008
The reversal of IT Offshoring - How far is it?
How far is the reversal of offshoring witnessed by IT companies?
That question may probably be answered by looking at why companies actually chose to offshore:
1. Labour cost arbitrage in other words low wages
2. Currency arbitrage - Appreciation of US dollars against developing economies
3. Flexibility of resources - For example Loose labor policies & its enforcement allowing companies to exploit Indian labour (Imagine overtime in Indian IT services need not be paid). Working in odd hours to make few extra bucks!
4. Availability of Talent - Tricky bit lets defer this for later
5. Scalability of workforce - Ability to quickly ramp-up resource. Another tricky one which we can defer to later
Some of the above conditions may not hold for too long.
1. The wage inflation in developing countries are faster than that of developed world. For example the wage inflation in Brazil, China and India are in the range of 21%, 19% and 33% in last 5 years as per EIU
2. Currency have been artificailly maintained at pegged level, we had seen enough debates of this between China and US. India is not a open market....How many times have we seen RBI intervention in the currency market to manage the float of rupee against the dollar.
3. Labor in developing can no longer be taken for granted...Gen X & Y dont want to work overtime anylonger and defintely cannot tolerate working in graveyard shift...
4. Availability and Scalability are tricky bits....i'll not address this...but they are more perception then reality...Imagine tomorrow technology innovation eliminates a need for huge labour skills!
How long before we can see the trend reversing...it is a worhtwhile study by looking at the above factors. India today is 1/3rd cheaper then the wages in US...so we can do a simple math to arrive at the number of years 11. Now we've not even included the predictions of exchange rate.
What can the Indian IT Industry do to ensure that we dont loose our jobs when we become less competetive (assuming the technology innovation are not mature enough to eliminate the need for significant labour)?
This is an interesting topic in itself...we'll try and deal with it in another Post...
That question may probably be answered by looking at why companies actually chose to offshore:
1. Labour cost arbitrage in other words low wages
2. Currency arbitrage - Appreciation of US dollars against developing economies
3. Flexibility of resources - For example Loose labor policies & its enforcement allowing companies to exploit Indian labour (Imagine overtime in Indian IT services need not be paid). Working in odd hours to make few extra bucks!
4. Availability of Talent - Tricky bit lets defer this for later
5. Scalability of workforce - Ability to quickly ramp-up resource. Another tricky one which we can defer to later
Some of the above conditions may not hold for too long.
1. The wage inflation in developing countries are faster than that of developed world. For example the wage inflation in Brazil, China and India are in the range of 21%, 19% and 33% in last 5 years as per EIU
2. Currency have been artificailly maintained at pegged level, we had seen enough debates of this between China and US. India is not a open market....How many times have we seen RBI intervention in the currency market to manage the float of rupee against the dollar.
3. Labor in developing can no longer be taken for granted...Gen X & Y dont want to work overtime anylonger and defintely cannot tolerate working in graveyard shift...
4. Availability and Scalability are tricky bits....i'll not address this...but they are more perception then reality...Imagine tomorrow technology innovation eliminates a need for huge labour skills!
How long before we can see the trend reversing...it is a worhtwhile study by looking at the above factors. India today is 1/3rd cheaper then the wages in US...so we can do a simple math to arrive at the number of years 11. Now we've not even included the predictions of exchange rate.
What can the Indian IT Industry do to ensure that we dont loose our jobs when we become less competetive (assuming the technology innovation are not mature enough to eliminate the need for significant labour)?
This is an interesting topic in itself...we'll try and deal with it in another Post...
Thursday, September 4, 2008
Exploiting the Market gap through innovation
Interesting interview from Charles Geschke on his life at Adobe....http://knowledge.wharton.upenn.edu/article.cfm?articleid=2038
Amazing to know that this 4th largest IT products company was the first to pioneer freeware with Adobe much before the Linux of the world. Charles cites of how Microsoft has bullied its way into the market by cloning someones innovation on Excel, Word, PPTs and so on and did so well for itself. He also mentions how the company belts out new products so frequently into the market and monetizes it. The simple rule he says is by exploiting the market gap i.e. identify a unmet need in the market, and launch a product to get 100% of market share....
But honestly, how does one spot such market gaps and exploit them for economic profit in an increasingly complex world! Lets look at what structured approached we have to uncover potent unmet needs:
1. Marketing research - which companies in CPG industries: P&G, Unilever, etc. constantly exploit
2. Proximity to customer by eliminating channels - which company like Dell has exploited so well...
Or a sheer gut feel and intuition!!!! or reading "Blue Ocean Strategy"!
Amazing to know that this 4th largest IT products company was the first to pioneer freeware with Adobe much before the Linux of the world. Charles cites of how Microsoft has bullied its way into the market by cloning someones innovation on Excel, Word, PPTs and so on and did so well for itself. He also mentions how the company belts out new products so frequently into the market and monetizes it. The simple rule he says is by exploiting the market gap i.e. identify a unmet need in the market, and launch a product to get 100% of market share....
But honestly, how does one spot such market gaps and exploit them for economic profit in an increasingly complex world! Lets look at what structured approached we have to uncover potent unmet needs:
1. Marketing research - which companies in CPG industries: P&G, Unilever, etc. constantly exploit
2. Proximity to customer by eliminating channels - which company like Dell has exploited so well...
Or a sheer gut feel and intuition!!!! or reading "Blue Ocean Strategy"!
Sunday, August 31, 2008
Triggers for Innovation - A Laundry list!
What ae the triggers for innovation?
1. Unmet customer need/unfullfilled demand
2. Supply Side Scarcity (resources, capabilities, etc.)
3. Survival instincts!
Any more that can be added to this list!...
1. Unmet customer need/unfullfilled demand
2. Supply Side Scarcity (resources, capabilities, etc.)
3. Survival instincts!
Any more that can be added to this list!...
Tuesday, August 26, 2008
The innovation cost of information assymetry..
Is information assymmetry one of the biggest Innovation impediment?
My hypothesis is Information assymmetry can inhibit:
1. Innovating new product/service
2. Taking innovation to the market for economic benefit
It is often the case that innovative ideas do not come to the fore not coz' it is not potent to produce economic benefit, but more so coz the innovator does not have a method to its madness to tap it for econmic profit.
Some case in point:
a. Toyota did not invent innovative cars when they started off.
b. Dell did not invent innovative personal computers.
All they did was copied a FORD/GM or cloned IBMs innovative thoughts and exploited them to economic profit through ingenious process innovations. They did that as they knew that some of the methods when cross-pollinated in their industry can aid them in reaching far-fetched profits (which other wise would not be feasible). They exploited the information assymmetry of the existing companies in uncovering customers unmet need and applying these techniques/methods to economic profit.
Another way of looking at information assymmetry, I've seen countless number of cases where an innovative idea never reaches the light of the day due to several reasons:
1. Inability of a technologist to understand markets/customers well (case of Palm PC)
2. Inability of a marketer to understand a technology and its capabilities (cant get a case right-away bit can get back to this later...)
3. Inability of an innovator to understand legalities leading to loosing a patent and hence commercial benefit....
The cases could be innumerable. Whenever one understands and plugs these information assymmetries we have often seen successfull enterprises generating great economic benefit not only to its stakeholders but to the society at large...
Do you agree/disagree? Any interesting insight of yours!
My hypothesis is Information assymmetry can inhibit:
1. Innovating new product/service
2. Taking innovation to the market for economic benefit
It is often the case that innovative ideas do not come to the fore not coz' it is not potent to produce economic benefit, but more so coz the innovator does not have a method to its madness to tap it for econmic profit.
Some case in point:
a. Toyota did not invent innovative cars when they started off.
b. Dell did not invent innovative personal computers.
All they did was copied a FORD/GM or cloned IBMs innovative thoughts and exploited them to economic profit through ingenious process innovations. They did that as they knew that some of the methods when cross-pollinated in their industry can aid them in reaching far-fetched profits (which other wise would not be feasible). They exploited the information assymmetry of the existing companies in uncovering customers unmet need and applying these techniques/methods to economic profit.
Another way of looking at information assymmetry, I've seen countless number of cases where an innovative idea never reaches the light of the day due to several reasons:
1. Inability of a technologist to understand markets/customers well (case of Palm PC)
2. Inability of a marketer to understand a technology and its capabilities (cant get a case right-away bit can get back to this later...)
3. Inability of an innovator to understand legalities leading to loosing a patent and hence commercial benefit....
The cases could be innumerable. Whenever one understands and plugs these information assymmetries we have often seen successfull enterprises generating great economic benefit not only to its stakeholders but to the society at large...
Do you agree/disagree? Any interesting insight of yours!
Brains As a Service (BAAS) - Brains on rent
Is there a scope to offer brains on rent?
There are so many interesting innovations we hear lately especially in the Business-to-business space where enterprise services can be rendered as a utility (like electiricity, water, etc) without assuming ownership of resources & capabilites (power plant, river, engineers, etc...) and their risks (issues in dealing with resource & capabilities).
Think about few such themes:
1. "Cloud computing" where IT processing power is rendered as a utility service. Imagine something similar to electricity. We dont care who produces it, how it is distributed and how it is transmitted. All I care is I plug into a electric socket when I need power for my laptop and I get it. I pay a fee for it. I like the baby steps of Amazon here with their EC2 (Elastic clound computing) platform.
2. "Software as Service": Amazing feature to offer software as a service to clients. The client does not have to bother about infrastructure, software license, supporting the application and so on. All he needs is the IT information service rendered to it on paying rental for such a service. Good examples www.salesforce.com, Sugar CRM, SAP Business By Design???
All the above have a viable business to be made on the "long tail" of clients who need simple service at utility rates, without having to bother about the INfrastructure, Software, people to support and so on. Lot of business to be made out there it seems.
In similar light, can we lend our brains to enterprises to solve their productive problems? A kind of Brain as a Service model. Ofcourse, some of us can make a living out of it and that too a prosperous one at it. I guess, this is what Consultants and IT engineers off late do it seems, but by being part of a consulting firm or a enterprise. Imagine if clients can lend the brains of just the individuals and not contract out with companies/firms/enterprises and put them to productive use. All this, without being encumbered with large companies/firms/enterprises out there...Why should I have to go to consulting companies (like Mckinsey, BCG, etc) or Service providers (Accenture, HP, IBM, etc.) to hire the people they have. If I know that all I want is specific talent from people and not the encumbrance of these companies....
Some contractors out there have already doing this like for e.g. teamlease...are there business more companies out there that work on similar model? I contract with individuals not with companies then....
Maybe my idea up there is quiet raw! on the edges of being incoherent or senseless :-)....
There are so many interesting innovations we hear lately especially in the Business-to-business space where enterprise services can be rendered as a utility (like electiricity, water, etc) without assuming ownership of resources & capabilites (power plant, river, engineers, etc...) and their risks (issues in dealing with resource & capabilities).
Think about few such themes:
1. "Cloud computing" where IT processing power is rendered as a utility service. Imagine something similar to electricity. We dont care who produces it, how it is distributed and how it is transmitted. All I care is I plug into a electric socket when I need power for my laptop and I get it. I pay a fee for it. I like the baby steps of Amazon here with their EC2 (Elastic clound computing) platform.
2. "Software as Service": Amazing feature to offer software as a service to clients. The client does not have to bother about infrastructure, software license, supporting the application and so on. All he needs is the IT information service rendered to it on paying rental for such a service. Good examples www.salesforce.com, Sugar CRM, SAP Business By Design???
All the above have a viable business to be made on the "long tail" of clients who need simple service at utility rates, without having to bother about the INfrastructure, Software, people to support and so on. Lot of business to be made out there it seems.
In similar light, can we lend our brains to enterprises to solve their productive problems? A kind of Brain as a Service model. Ofcourse, some of us can make a living out of it and that too a prosperous one at it. I guess, this is what Consultants and IT engineers off late do it seems, but by being part of a consulting firm or a enterprise. Imagine if clients can lend the brains of just the individuals and not contract out with companies/firms/enterprises and put them to productive use. All this, without being encumbered with large companies/firms/enterprises out there...Why should I have to go to consulting companies (like Mckinsey, BCG, etc) or Service providers (Accenture, HP, IBM, etc.) to hire the people they have. If I know that all I want is specific talent from people and not the encumbrance of these companies....
Some contractors out there have already doing this like for e.g. teamlease...are there business more companies out there that work on similar model? I contract with individuals not with companies then....
Maybe my idea up there is quiet raw! on the edges of being incoherent or senseless :-)....
Monday, August 11, 2008
Lean in ADM - Mckinsey Chauvinism
Sometimes I like criticizing Mckinsey and their superficial thoughts. Here it goes again on using Lean techniques for ADM engagement. How shallow and superficial they seem to be sometime! http://www.mckinseyquarterly.com/Information_Technology/Management/Applying_lean_to_application_development_and_maintenance_1979
I remember dealing with bunch of Mckinsey consultants donning a impeccable (Armani) suit and combing hairs in the rest room before a scheduled meet with CxO of my former organization - guess what they were pitching to get a consulting assignment to pioneer lean techniques in IT Services. Ironically they reviewed the work I was already doing for a large utilities companies, pretended to ask me questions and understanding what I've done (well ofcourse deep down I could sense they were thinking how to make their USD 25 Million money out of this client, and were giving me the "Rats-Ass"). They then repackaged whatever I told them into a nice document/ppt and pitched to the top mgmt. claiming to solve all the problems of the organization.
Guess what you can fool around with some people some time, but not all of them all the time!. They got mutiliated when their idea was presented to the leadership and lost the deal. On the contrary some good sense also prevailed among the leadership, to let us pioneer lean techniques ourselves by just reading books and applying it innovatively in our organization...the rest was taken over by the HBR case study on whether applying innovative techniques like Lean can help change course of my former organization over the other formidable competeitors in the IT services market....
The next I heard was 3000 miles away in Germany when an ex-Mckinsey partner messing up with a Communication giant telling them that vendors should apply lean techniques to cut-down ADM to accomodate + or - 30% variability after committing to the estimates....
Anyways happy reading Mckinseq quarterly....It is good sometimes to introspect!...
Now, I feel a lill good bitching about Mckinsey! I'm a mere mortal and this is my second nature!
I remember dealing with bunch of Mckinsey consultants donning a impeccable (Armani) suit and combing hairs in the rest room before a scheduled meet with CxO of my former organization - guess what they were pitching to get a consulting assignment to pioneer lean techniques in IT Services. Ironically they reviewed the work I was already doing for a large utilities companies, pretended to ask me questions and understanding what I've done (well ofcourse deep down I could sense they were thinking how to make their USD 25 Million money out of this client, and were giving me the "Rats-Ass"). They then repackaged whatever I told them into a nice document/ppt and pitched to the top mgmt. claiming to solve all the problems of the organization.
Guess what you can fool around with some people some time, but not all of them all the time!. They got mutiliated when their idea was presented to the leadership and lost the deal. On the contrary some good sense also prevailed among the leadership, to let us pioneer lean techniques ourselves by just reading books and applying it innovatively in our organization...the rest was taken over by the HBR case study on whether applying innovative techniques like Lean can help change course of my former organization over the other formidable competeitors in the IT services market....
The next I heard was 3000 miles away in Germany when an ex-Mckinsey partner messing up with a Communication giant telling them that vendors should apply lean techniques to cut-down ADM to accomodate + or - 30% variability after committing to the estimates....
Anyways happy reading Mckinseq quarterly....It is good sometimes to introspect!...
Now, I feel a lill good bitching about Mckinsey! I'm a mere mortal and this is my second nature!
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