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Our Bureau

Bangalore, Oct. 19 With traditional value propositions associated with offshoring such as cost arbitrage or increase in efficiency gradually losing importance, it is time for the Indian IT industry to focus on innovation that would change their client’s business execution.

The Indian IT companies would have to move beyond merely reducing cost and improving productivity to changing a client’s enterprise, said Mr Siddharth Pai, Partner and Managing Director, TPI Advisory Services Indian Pvt Ltd, an offshoring advisory firm, while speaking at the Nasscom Quality Summit 2008 here.

Cost arbitrage and process improvements were the principal advantages of offshoring, but they are now under pressure. “These value propositions are under some form of scrutiny in most client organisations,” said Mr Sudin Apte, Senior Analyst and Country Head of Forrester Research.

He said that in 2000, cheap labour comprised 80 per cent of the total value of offshoring, while by 2010, about 50 per cent of value would come from process improvement. However, by 2015, value-added IP (innovation) would contribute 50 per cent, he added.

Being an offshore service provider is no longer a differentiator. The importance of IP (intellectual property) is increasing dramatically, Mr Apte added.

Mr Pai said innovation has become a grey concept in most outsourced relationships. The differentiations might include proposed solutions to meet or exceed client requirement, changes in price and pricing methodology, added value offerings, risk allocations, transformational benefits, gain sharing structures and contracting terms and flexibility.

Mr Apte innovation needs better alignment with the client’s business need.

More Stories on : Off-shore Development | Software

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