Whenever there is an economic slowdown in the West, nervous watchers and analysts of the IT industry start asking fundamental questions about the sustainability of the Indian outsourcing model and wondering if a complete rethink is called for.

The new tremors in the first half of this calendar year were caused primarily by the prolonged slowdown in the US, Europe and Japan, and the US immigration Bill hanging like the proverbial sword of Damocles over Indian industry.

The Senate version of the Bill is cause for concern. Apart from the significant increase in visa fees and the move towards the 50:50 regime where at least half the employees of Indian firms in the US would need to be citizens or permanent residents, the troubling clauses were those pertaining to outplacement and displacement.

The outplacement clause would inhibit the placement of consultants on visas at client sites which could obviate the very reason why they had been sent to the US in the first place. And the displacement clause would necessitate both the Indian firms and their clients signing an undertaking that no American citizen would be displaced from a job now or in the future by a visa-holder.

This version, if signed into law, could have meant tens of thousands of Indian visa-holders being sent back within the prescribed time-frame, putting significant pressure on profits and capabilities to service American customers through on-site consulting services. But there is reason to believe that the final Bill, if and when it sees the light of day, will be much more reasonable and will not prohibit outplacement.

Hence, changes in the business model, if any, would be more gradual and the transition to a larger local workforce would happen over a more relaxed time-frame. In a sense, this would work to the benefits of Indian service providers too, as the experiences of Zensar in South Africa have shown.

Workable models

The Zensar Learnership model established in Johannesburg three years ago has seen the induction of young black Africans from townships such as Soweto and Alexandria, trained for three months at a centre set up by the company and for a further period on projects in India.

The success of the programme can be seen from the statistics — over 200 young people trained, 90 plus directly employed by the company, and 40 plus working with the company’s clients in Africa.

After the success of this experiment, the company entered into an equity partnership with a majority black group and livelihood trust to further establish its “proudly South African” credentials and expand its learnership activities.

In the coming months, efforts are under way to spread this programme to the Middle East, Europe and the US with the vision of having a majority local workforce in every part of the world by 2017. This is not a CSR or defensive ploy, but a necessary step in the journey to true workforce diversity and inclusion.

Local workforce development may be a gradual process in response to influences in the countries where a company operates. But there are also significant pulls coming from new strategies in retailing.

It will not be long before apparel stores become year-round fashion shows and food stores conduct cooking competitions and displays to get customers into the store for new experiences, while the actual commercial transaction is completed from the comfort of home through a smartphone or some other device. Manufacturers will integrate their IT systems all the way from the shop floor to the top floor and connect supply and demand chains around the world.

And insurance companies and banks will automate product and service choices and rarely, if ever, have to invite a customer for a face to face interaction. The rapid pace of device proliferation, cloud adoption and incorporation of mobility, social media and big data into the business processes of an enterprise will see the creation of new “digital enterprises” and new expectations emerging from all the industry’s customers.

Major transformation

The ubiquitous spread of the Internet is today transforming human behaviour and social contexts beyond recognition. Coupled with the rise of smartphones and highspeed networks, new ways of collaborating, purchasing and interacting are being discovered everyday.

It is arguable that companies that do not build the skills to service these new areas and integrate them into their overall services portfolio will fade into oblivion. This can cause an even more rapid rediscovery of business models than the push factor of economic slowdown and restriction of workforce mobility.

A stunning presentation by Mary Meeker of the leading VC firm Kleiner Perkins provides two industry examples that bring this transformation into sharp focus.

New startups such as ChaseMobile, Lending Club and Bitcoin will sooner rather than later put cash, credit cards, and loyalty cards and coupons out of circulation. And in the education sector, the MOOCs (massively open online courses) movement is a game-changer; millions of new students enrolling online every month in new courses will mean a paradigm shift in the way the over trillion dollar education spend in the US alone will evolve in the coming months and years.

The third shift in business model will be the realisation many larger firms will arrive at -- that it is no longer feasible to invent and build everything on their own.

The development of an innovation eco-system of “cool” startups which they can take to market as part of new value propositions is inevitable. This will be a welcome inclusion opportunity for many startups, which will hopefully get an additional fillip through Nasscom’s Ten Thousand startup programme to enable collaborations.

All these will cause product process and business model changes in the IT industry, not suddenly but very deliberately and surely as the new era of growth begins!

(The author is CEO, Zensar, and member, Chairmen’s Council of Nasscom.)

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