Pretzel Logic – Social and Collaborative Business

The Economic Times has a story today about how Indian Offshore companies are finding it difficult to outbid global competitors such as Accenture due to a lack of domain expertise. Says the article:

“Multinational companies have presence in multiple geographies, economies of scale, in-depth understanding of client’s business and a global view for many industries and this is where Indian service providers lack. These factors may work against Indian service providers when bidding for a project in the current scenario,” said Mark Toon, chief executive officer, Equaterra, during an ET round-table panel discussion held on the sideline of India Leadership Forum organised by Nasscom in Mumbai.”

I’m sorry but I had to check the date stamp on this article a few times to make sure that its current. Are we in 1999? Indian IT Offshore companies have been working on “domain expertise” for almost a decade now and there’s easily 200 articles out there, dating back 5 years that talk about how competing on price is not sustainable and how Indian services providers are working on becoming more strategic. Its baffling to me that after a decade of amazing gains in market share and the creation of companies that have a market cap of ~ $10-15 billion (Wipro and Infosys respectively), we’re still having this discussion.

The article goes on to say:

From the very beginning, Indian companies have taken up maintenance or secondary application development in most cases. And such a move has resulted in lesser domain knowledge and product development capability. “Indian companies lack experience in green-field application development, which needs very deep domain knowledge,” said Dana Stiffler of AMR Research.

If the last round of technology innovation required services providers to have domain expertise, you ain’t seen nothing yet. As I’ve said before, in my opinion, true Enterprise 2.0 transformation won’t take place in the IT organization. Rather, business groups will take the lead as they see benefits to the process of sales, marketing, HR, etc with the proliferation of participatory media technologies that blow open collaboration opportunities across geographical/functional silos and provide unprecedented levels of insight into a prospects purchase intentions. The need to have business/domain expertise and the required agility to help customers experiment with new approaches to leverage these emerging concepts means much much more focus on business transformation and not just cost savings. Cost savings (as most of them know) is not sustainable, and a new trend explained in this post by Vinnie Mirchandani about reverse offshoring adds additional market pressures.

For the record, I do believe that Indian IT services firms have made good progress in this area and but clearly there’s a lot more to be done. It’s time for Offshore services providers to stop playing catch up on the opportunity of the last decade and to start thinking of what a customer’s business is going to look like tomorrow. Skate to where the puck is going to be.