Print

Comment

Email

Digg

Del.icio.us

Reddit

Twitter

The realization that the world has sunk into an unprecedented economic recession did not just come about yesterday. For the last few quarters, ever since it began as what was then called the sub-prime crisis, before becoming credit crunch to finally become a full-fledged recession, we have known that this slowdown is different from all that we have seen. Initially, with every passing month, the speculated time of recovery was pushed forward by the analysts, meaning they believed the worst was yet to come. In the last few months, even that has stopped. The economists, businessmen, analysts and even the policy makers globally now largely agree that it is difficult to predict when the situation wll reverse.

With that consensus, the questions have changed. The most important question is no more: When is the recovery? It is: How to live with the recession?

With the realization that the recession is here to stay, businesses in most developed markets have shifted gear. They are now looking for a plan B. That is different from what they were trying to do a couple of months back: working simultaneously on two plans: a tactical plan for the time being and a post-recovery strategy for the long-term. Now, there is one plan.

And that is good newsin the context of the present economic conditions, of course for the IT services providers, especially those in India. In a way this realization that the recession will be there for some time and the look for a fairly sustainable plan B has somehow made their business less uncertain, as compared to, say, what it was a few months back.

After Lehman, the situation was really bleak. We did not know where we were going. But today, the clients are realizing that they need to run their business after all. And they are coming to us for helping them out, says Neeraj Bhargava, CEO, WNS Global Services, one of Indias top pure play BPO firm.

When is the Recovery? The businesses may have decided to live with the recession for the time being. Finding an answer to the question of when the recovery is may not be the most important business question. But it still remains the most interesting question that everyone wants to speculate on. We asked the question to twenty-seven heads of IT businesses in India. Here is what they say:

Agrees Pramod Bhasin, CEO, Genpact, Indias top BPO company, It is difficult to say when the economic recovery will actually happen, but our markets will revive toward Q4 (Oct-Dec 2009). That is because this industry is part of the solution to the present crisis, as companies need to be more efficient and cost-effective.

Bhasin is just articulating what is today emerging as a general consensus. That the way out of the crisis is to aggressively drive efficiency. That will lead to more solace being sought in both technology and outsourcing.

It is important to note one point here: a major difference with the last slowdown of 2000, when technology took quite some time to come back. That is because that time around, the IT sector itself was held responsible for the bust and hence was looked with a lot of suspicion, even after recovery. This time, the crisis was caused by the misadventure by the financial services industry, so IT really stands for what it is: something that drives efficiency and productivity.

But all that is still on the supply side. It is difficult to believe a recovery will happen without demands picking up.

Interestingly, there too, a consensus is emerging that the two markets, India and China, hold the key to that elusive recovery of demand. It is not misplaced. In January 2009, India added 15.26 mn mobile subscribers in a single month. That is a world record in terms of monthly addition; at the time of the worlds biggest recession! That is because in many areas, the basic need is driving demand in India (and China). Like telecom, there is still a boom period in many consumer sectors such as education, healthcare, insurance, and utilities. In infrastructure too, the government spend ensures that the sector is seeing a lot of investment. It is only in areas which require discretionary spending by the consumerssuch as apparels, white goods, etcthat have seen some sort of a slowdown. It is not surprising that the global businesses see these markets as something of a savior.

India plays another important role for many businesses. India is far more diverse and open than China. Indias diversity makes it a microcosm of the emerging markets. It has one of the highest number of billionaires; yet it has one of the largest number of people below the poverty line. It has more multiple languages and dialects. All this has made India a testbed for new technologies and applications. Companies like Google and Cisco are already using India for this purpose. While its diversity makes for a great testbed for creating robust and resilient solutions, its better integration with the world economy (as compared to say China) ensures than they are smoothly portable and can be expected to work in other areas of the world.

So, all the threethe offshoring prowess (call it the talent base, if you like), its own huge market potential, and its unique characteristic of being a microcosm for the emerging worldmake India part of a solution.

Now the challenge is to devise the solution where the whole is larger than the sum of the parts. To be fair, this is something which is not new as an idea. Most of the technology companiesincluding big names like IBM, Microsoft, Yahoo!, Cisco, Oracle, and Googlehave, to some extent, been trying this out. Many other industries can also benefit from this useful combination but may not be in a state to do that by themselves.

The challenge, nay, the opportunity, before the Indian IT services industry is to help them in that. For that, it has to rediscover itself first.

Understanding Changing Needs
This sounds clich. But guess how many service providers do it well! In a panel discussion organized jointly by Nasscom and Dataquest, in the sidelines of the Nasscom Leadership Summit 2009 (a detailed report is in page .), panelists from BT, Standard Chartered, Credit Suisse and Southern Watersall prolific users of India outsourcingcomplained that Indian service providers are not flexible enough. Most of them agreed that Indian service providers are not flexible in terms of pricing. But, more importantly, a few said that Indian firms do not show interest in taking up new, untested areas, unless they get an outright assurance that it would be scaled up significantly in a definite time period.

At the time of a slowdown, many said they would like to speed up outsourcing to India, if the service providers realize that the times are different and the contract conditions cannot be the same as they were a year back.

All this requires a definite change of attitude, but some change in strategy too.

For example, two years back, most BPO companies got into new high value areas such as analytics and research, as knowledge process outsourcing or KPO became a buzzword. While most KPO firms were small start-ups, many established BPO firms also expanded aggressively into this. One such company was WNS Global Services. Today, its CEO, Neeraj Bhargava admits that traditional BPO such as transaction processing is back. We are back in 2001-2002 levels; people want us to do more of traditional BPO and do it better. KPO, that requires more discretionary spending, has suffered, while demand for BPO is very high, he says.

Genpact, the BPO company, that had started expanding in the IT services area, too sees a similar issue. While IT demand has slowed down, the demand for traditional transaction processing has gone up. The company is adjusting its plans accordingly.

In IT services too, the traditional strength of Indian service providers have typically been application development and maintenance (ADM) and to some extent package implementation. Both these are areas that require discretionary spending. While ongoing projects many continue in these, most new contracts can come from areas like BPO and managed services.

The slowdown also presents an opportunity to acquire talent in the target markets, especially in the verticals that the firms sell to.

Page(s)   1  2