Over the last decade, the Indian IT services industry has had a profound impact on the global business landscape. World class IT services were delivered via a global engagement model, and corporations around the world reaped the benefit of high quality IT services at a low cost. In turn, the Indian IT services industry has established a global brand, and India itself has become an icon for emerging economies around the world.

The first generation of Indian IT services companies focused on price leadership on commodity services as their primary competitive advantage. The core competency of first generation companies is to perform repetitive sustenance and maintenance work at highly competitive prices, and use process and quality frameworks such as CMM and Six Sigma to ensure that the work delivered to the clients, is of the highest quality. The success of this business model lies in the ability to deliver a large volume of commodity services at a very low cost.

In parallel, emerging second generation IT services companies are attempting to deliver transformational IT services to their clients. As is the case these days, being a CIO at a large corporation isn't exactly a fun assignment. On the one hand, chief financial officers are demanding reduced IT costs. On the other, line-of-business chiefs are demanding new software applications that can drive new sources of revenue. The paradox is that from a CIO's perspective, much more must be done for a lot less. Clearly, a commodity mindset on IT services cannot achieve this vision-a radical view on how IT can transform organizations, is needed.

Let's illustrate with an analogy the power of transformational services. It is well known that large auto manufacturers rely heavily on standardized platforms that allow them to reuse components and assemblies across product lines as diverse as sedans, SUVs, pick up trucks, and minivans. The obvious benefit of such an approach is cost leverage across R&D, production, and ongoing maintenance. But there is also the benefit of increased business agility. With more than 80% of the components and assemblies standardized, a new product line such as a hatchback can be designed and manufactured very rapidly, thus positively impacting revenue within a very short period of time.

Such a approach goes to the heart of how second generation IT services are working with modern-day CIOs. Newer IT services firms are transforming myriad technology assets into unified software platforms-rationalizing messy software applications into simplified, standardized software assemblies that are interoperable and can be readily adapted to create new business applications. For example, a trading platform can be the foundation for diverse trading applications for equities, bonds, derivatives and currencies at a brokerage. Similarly, a contracts platform can be leveraged to manage deals for books, music, electronic goods, and toys at a retail chain. Contrast this to a commodity mindset where different applications would be isolated from one another.

Transformational thinking has wonderful effects on quality and productivity. Assets that have successfully performed in the past are likely to have fewer problems in the future. They can create a virtuous engineering cycle. Transformational services are about changing the status quo. Newer IT services firms and modern-day CIOs know that a commodity mindset can help reduce costs, but only a transformational approach can create more responsive and dynamic organizations which can adapt.

Page(s)   1