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V. Rishi Kumar

Small and medium companies can fight competition by teaming up. The bigger players might, of course, want to do it differently.

THE technology industry has changed significantly over the last two-three years, calling for innovative approaches from service providers to take on competition. And competition has become intense with major companies also bidding for relatively smaller projects, of late.

One way small companies could possibly survive is by addressing niche areas, by focussing on new service streams by building solutions on existing platforms, and by forming what is being described as Zaibatsu, a Japanese word for collaborative consortiums to take on large corporations with combined might.

The collaborative approach is perceived as a new trend that will help medium and small enterprises to provide a bouquet of services. This approach will bring in a win-win situation where vendor consolidation has become central to large global outsourcing firms.

While the current financial year has begun on a promising note, both in terms of results from leading technology companies and a lot more hiring in multiple disciplines, this mood prevails in Tier II companies as well, says Ganesh Natarajan, Deputy Chairman and Managing Director of Zensar Technologies, and Head of Nasscom SME Forum for Western region.

Highlighting issues relating to the growing number of small and medium enterprises in the country, Natarajan says, "Predictably the Infosys wannabes have faded out or decided to switch tracks. But those companies that had strong leadership and a definite point of view — like Vishwas Mahajan and his innovative firm, Compulinks, Kaushal Mehta and Gujarat's first business process outsourcing story of Motif, or Dhananjaya Datar making documentation sit up and take notice with their record management product — have earned the right to play with the big boys with their confidence and capabilities. This only illustrates that there are no shortcuts to success and the only way to address opportunities is to focus on new services, such as the technical help provider SlashSupport, or take the consortium approach for growth."

On the other hand, the Chief Executive Officer of iGate Global Solutions, Phaneesh Murthy, who was in Hyderabad recently, says there are certain clear trends emerging in the technology landscape that will drive the future for Indian companies. The addressable market for Indian software services companies has gone up from about $150 billion two-three years ago to a little over a $1 trillion because of the gradual but certain blurring of services and business process-related services.

Fundamentally, this trend according to Murthy, is accelerating to a much larger space that is still at a nascent stage. If you look at certain trends, great services companies are born when technology passes through disruptive phases that bring discontinuity to business. For instance, few companies were created in early 1990s because of client/server disruption, then some more during the e-business wave. Thereafter, the current scenario indicates that many new sets of companies are coming in due to offshore disruption addressing new streams of business such as transaction processing, high-end engineering solutions and design work.

One of the challenges companies face is to quickly and yet smartly adapt to changes that require technology services providers to handle both services as also meet the needs for operations management. For instance, if you look at the financial services sector, Murthy says nine out of the top 10 players in the business in the US have moved over to an integrated approach to technology management. Therefore, technology service providers have expanded their services portfolio by integrating operations management in their business.

For instance, within the financial services marketplace, there is an increasing trend to offshore services. This could be gauged from the fact that many more companies are adapting to this methodology. This is irrespective of the recent concerns expressed against outsourcing. There are indications to show that there are no large deals at one go and these are being gradually ramped up from small ones to relatively larger ones. When a technology services provider offers IT solutions, the logical extension of operations management through transaction-fee based solutions becomes a right strategic fit.

Citing the Greenpoint case, Murthy says this clearly illustrates how the analytics team based out of India could facilitate underwrite business. This process is purely based on transactions handled. If you look at this trend, about three years ago, Citibank adopted a similar model and this is a clear case of economic compulsion.

On the other hand, Natarajan maintains that on every conceivable area of technology operation encompassing services, ranging from Web services to knowledge management, there are quality solutions providers. This means Tier II companies will find it that much tougher to match their bigger services providers. Therefore, by combining strengths smaller companies can address a larger area and still be competitive.

Interestingly, this consortium approach was advocated by the former Director of Software Technology Parks of India (STPI), J.A. Chowdary, about two years ago for small and medium corporations finding the going tough. Though this has not taken centre stage as yet, there are indications to show this will work in the domestic e-government projects where combined strengths and skills are necessary to address projects under a common umbrella. Citing key areas of focus for the Tier II companies and the collaborative approach, Natarajan maintains that this will help companies avoid significant marketing dollar spends.

Moreover, one will not have to adopt new methodologies to compete with larger companies. Citing the Japanese practice of Zaibatsu, Natarajan says this way of providing solutions by leveraging collective competence in different areas will be ideal to meet the demands of large corporations.

vrishi@thehindu.co.in

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