IT firms’ biz model could pose threat to growth

The $70-billion Indian information technology services industry has very clearly recognised that products and platforms as a vertical is the way ahead as the current way of doing business involving time and material contracts, addition of headcount in a linear fashion and other mundane tasks are increasingly getting commoditised.

However, Indian IT services companies like Tata Consultancy Services, Infosys, Wipro and Mahindra Satyam that have undertaken a ride on the tough terrains of software products will find very steep challenges in terms of conflicting business models. Sharad Sharma, former R&D head of Yahoo and Nasscom product forum chair, said that the business model of running a services company and a product-type business is completely different and companies will really struggle to make this transition.

According to industry observers, the product story in many Indian IT companies has always been subservient to services because of unpredictable revenue cycles and long gestation periods.

From a strategy perspective, one major area where the firms have failed was in ensuring separate, dedicated organisations for the products and services businesses. Senior management support, product business unit branding and its leadership have also not been consistent with the rest of the organisation.

While welcoming the move by companies such as Infosys and Wipro in forming

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