I’m currently working on a report entitled “IP-Based Solutions Will Transform The Global IT Services Industry.” In a nutshell, I believe that the business model of IT services firms (consulting firms, systems integrators, and outsourcing firms) will transform from a traditional human capital-intensive model to a software capital-intensive model over the next five years. As I will detail in my report, I believe this transformation will have far-reaching implications on the IT services firms’ organizations, including their sales, marketing, portfolio management, and delivery capabilities.
As I’m based in India, I also see this change as a major disruption for India’s export-oriented IT services industry (AKA “offshore services”). I believe that the growth model for India’s IT/ITeS industry’s in the next 20 years will be much different than it has been for the past 20 years. Software assets — what I also call IP-based solutions — will become critical to the competitiveness of the Indian IT services industry. The recent investments of companies like Infosys, HCL, and NIIT Technologies in such IP-based offerings are strong proof points.
This means a couple of things for the Indian industry:
- The Indian IT/ITeS industry will create far fewer jobs than in the past. This is what some Indian firms refer to as “non-linear” business models.
- The skills in this new model will be very different from traditional IT services skills. In particular, the new model will call for skills that are closer to product engineering than to application development. And India does not seem ready for this: A recent report showed that less than 3% of engineering graduates are employable by IT product companies.
In order to be successful in this IP era, Nasscom and other IT trade associations in India will have to work collaboratively in order to:
- Invest in skills development, especially around software product engineering, business analytics, domain (industry) expertise, consulting, and program management capabilities.
- Foster innovation and level the playing field for smaller organizations to succeed — in particular local software organizations around cloud, mobility, social networking, and business analytics, but also as pertains to business process management and automation capabilities.
The Nasscom Industry Leadership Forum (NILF) celebrated its 20th anniversary two weeks ago in Mumbai. With a 19% growth rate expected in the fiscal year ending in March 2012, we cannot say that the industry is going through a “youth crisis.” Still, during my interactions with executives from IT services firms there, I felt that the industry is getting more anxious about its future, as its main value proposition — labor arbitrage — is slowly but surely losing traction. At the same time, it received four amazing anniversary gifts: big data, cloud, mobility, and social computing. I am curious and eager to see how it will leverage these gifts on the road to adulthood and IP-based solutions.