We have barely scratched the surface

Updated: Dec 31 2007, 05:55am hrs
It is becoming apparent that services is a most critical economic driver for the foreseeable future. More than 65% or $28 trillion of the $43 trillion the world created in value last year came from services. Some of the best minds in large numbers are available in locations other than where a service is being consumed is a given. Technology and communications are making virtual delivery of services a reality. What is not being fathomed is that over 25% of these $28 trillion can be used anywhere and delivered from anywhere. That is a tidy $7 trillion in 2006 value.

Back in the 1950s, the telephone operators that patched calls in New York moved up the state before moving to Nebraska and today, to the Philippines and India. From voice assistance to managing plant floors from across the world, services is naturally much more mobile than manufacturing will ever be.

As developing economies start to participate in the global trade of services, they begin by leveraging their base-cost arbitrage. It is clear that the time has come to recognise where the best and largest talent pools lie, where the opportunity for value creation is significantly higher and where the quality, responsiveness and productivity of the service provided will create new standards. In effect, the real value driver will be innovation in the creation and delivery of services.

Expansion in the services sector has improved job opportunities in India and is beginning to improve it in China. Such econo-mies will soon exercise their comparative advantage if they havent already. These young professionals will play an increasingly important role in a new wave of global professional development. The biggest and most important change is, thus far, virtual delivery of services in IT and basic forms of BPO.

Going forward, legal services, actuarial services, accounting services, research services, design services, innovation services, services related to managing manufacturing will all get delivered to increasing degrees virtually. The scope of what is possible is deep. The talent pools of countries companies such as ours want to operate from is making this a reality faster than ever. In essence, we have barely scratched the surface. The global scaling in the virtual delivery of services is just about beginning and we shall see the blooming of sectors in forms that were never imagined.

Education, knowledge, human development processes, quality assurance frameworks and networked innovation will be essential elements to leverage a better-connected world. However, each of these areas will undergo sea changes in the way they get offered. One will have to capitalise on technology to maximise value from these basic frameworks of a better tomorrow.

The economic value of virtual services will drive entrepreneurs to distant lands and create opportunities as exciting as what the manufacturing sector did over the last several decades. Several institutes are conducting research on this new-found reality. What India has achieved in IT services is just a tip of an iceberg. The Massachusetts Institute of Technology offers free courses along with six leading publications to more than 600 institutions in developing economies. Networked innovation will allow over two hundred companies from around the world to create cheap, energy-efficient and greener vehicles.

The emerging world of opportunities is creating yet another challenge. The war for talent is becoming intense as opportunities abound. Newer ideas and opportunities are as much a need in developing economies. Newer opportunities are bringing the Chinese to work in Australia while Americans seek job opportunities in India and China.

What has resulted is quite amazingcompanies such as Huawei and Haier are becoming serious players in the markets they serve. Companies such as TCS, Infosys, Wipro and Satyam have achieved Top Ten value status among their peers in IT and BPO services. As they get to serve the largest and best on the planet, the level of services globalisation increasingly becomes a reality.

A weakening dollar is a reality. A steadier dollar in the last month is also a reality. These short-term changes are market forces that companies such as ours deal with increasingly. Most often, we are well prepared to deal with these issues sharply. We will remain balanced in our approach so that we are not taking undue risks. Subprime is affecting markets in the USA but has not shown any impact on companies such as ours as yet.

In fact, in the short term, the need to use our services will only increase. We are ensuring that annuity business, increased business in non-dollar markets and greater delivery capability in several developing countries outside India creates a differentiated comparative advantage for us. We continue to watch these issues closely so that we are responsive to the needs of all our stakeholders.

(The writer is founder and chairman, Satyam Computer Services)