The Hindu Business Line : Indian IT service providers may lose contracts to MNCs: Forrester Research

Shying away
The Indian vendors are reluctant to step in as advisors
Western companies such as IBM Corp, Accenture Ltd and Capgemini are selling vision and imagination to the clients
The Indian vendors are all waiting for others to make the first move

Shamik Paul

Bangalore, May 13

The Indian IT service providers are shy, uncomfortable working with clients on business strategies, and, therefore, are in danger of losing contracts to their MNC big brothers.

Mr Navi Radjou, Vice-President, Forrester Research Inc, said the Indian companies are uncomfortable telling their clients what to do and lack the willingness to push back and debate, which is now disappointing for clients in the US.

Revenue source

Clients in the US, especially now because of the recession, are looking for business innovations and transformational services, Mr Radjou said. But the Indian vendors are reluctant to step in as advisors.

For most Indian IT vendors, a large part of their revenue still comes from application development and maintenance. For Infosys Technologies, it is 45.2 per cent of total revenue, while for Tata Consultancy Services it is 46.2 per cent.

Mr Radjou said only about 60 per cent of clients would be satisfied with the existing business models. About 40 per cent of clients are looking for more personalised services adapted to their specific companies. They are also looking for cross pollination - best practices from other regions and industries.

Personalised services

And this is where western companies such as IBM Corp, Accenture Ltd and Capgemini are stepping in. They are selling vision and imagination to the clients, he said. The Indian vendors are all waiting for others to make the first move, he added.

Mr Avinash Vashistha, Chairman and Chief Executive, Tholons, an off-shoring advisory firm, said some years ago, MNCs did not have significant offshore presence. The Indian companies knew off shoring very well and this was their advantage.

But the MNCs understood their clients very well and had a global footprint, which the Indian IT vendors lacked. The MNCs knew how to put themselves in the clients’ shoes.

The main challenge for the Indian companies was to know their clients, and for the MNCs it was to develop offshore capabilities, Mr Vashistha said.

Understanding

Currently, the MNCs have developed very significant offshore presence (much more than they had planned), but the Indian companies have not been able to significantly increase their engagement with clients, Mr Vashistha said.

Also, they do not have large global footprint.

The Indian vendors are largely in touch with the Chief Information Officers only, and, therefore, must forgo the opportunity to bring value propositions, transformational ideas to business executives, Mr Radjou said.

Most of the CIOs (about 60 per cent) would continue to pitch the Indian vendors against the western companies and among themselves to get the best cost benefit.

Growth strategy

But the business executives of these companies would hire the likes of IBMs and Accentures to help them chalk their growth strategy, he said.

The Indian vendors would have to rethink their clients and cultivate relationship with business executives, he added.

Mr Radjou said rather than being functional, some of the vendors are offering end-to-end processes such as the supply chain process or the order to cash process. But what they are doing is a droplet, he said.

He said vendors should be re-inventing processes rather than just managing them.