There's a recent interview with Wipro CEO TK Kurien with all the usual stuff about firms in transition, the trauma of effecting change, and other such things. However, embedded in there are three observations that give us a glimpse into a brave new world for software services firms.
1. "We may decide to create a separate structure to manage as a service outside of our current business. While we sell to the same client base and go after the new client base, as a service will become a critical component for us."
Cloud is of course the new, hip word rolling off the tongues of everyone, even if they were resistant to it at first. For IT services firms, the big question is if there's a meaty role there for them as companies start migrating to the cloud. Those companies with critical legacy systems that need to get transported to the cloud will need IT services companies to engineer an integrated solution. But what happens when, in a few years' time, these companies don't need any hand holding and are able to avail of dirt-cheap, off-the-shelf products?
How do you compete in this world if companies can pull HR, workflow, or storage solutions off the net for a fraction of what it would cost if they were to seek an enterprise solution instead?
"The more challenging aspects entail shifts to a marketing- and product-driven business model, where IT services firms have no experience or marginal experience at best," said Alok Shende, founder-director and principal analyst, Ascentius Consulting, in this Mint article.
2. "We're going to invest much more on the front end of the business."
What Kurien is talking about highlights another major shift in strategy for Indian IT services companies — that of hiring more and more people onsite (locally) instead of shipping people from India to work on projects.
Recently, Wipro's CFO Suresh Senapaty also said: "If it happens we have to pay, we have no choice. But going forward, we are looking more at local hiring on onsite and depending less on visas. While the majority of the work can be done offshore, whatever work needs to be done at the client site can be done by locals, and we will not look at deputation."
This, no doubt, is the fallout from the "great visa debacle" of the previous years in addition to the usual complaints of "stolen" jobs due to outsourcing. The biggest casualty of this was Infosys, when US authorities began investigating whether the company committed "fraud" by using short-term visas to bring workers into the country rather than applying for longer-term ones that entailed a more protracted process. While denying and disputing these claims, Infosys decided to pay $35 million as a settlement, clarifying that there were no criminal charges or court rulings against the company.
Of course, Wipro isn't the only one looking at onsite hiring in these tougher climes. Tata Consultancy Service (TCS) is also planning to do so, announcing an increasing of its 1,500-member workforce in the US to 2,000. Almost all the other IT companies are planning similar increases as onsite hiring may just prove to be more cost effective when you add up court settlements and cost of visas, as well as travel and accommodation.
3. "Automation is a reality, and we are going to find a lot more of that happen."
No surprise here. IT services businesses are already being commoditized much like the voice BPO business has been (or, in another category, like the PC business has). The one way to stay alive is automation, which brings down manpower costs and perhaps also reduces human error. For some idea as to where this is headed — remember when cars were completely assembled by human hands? Neither do I.