Substantially higher investments in R&D as well as re-skilling of delivery and sales persons to meet customer engagement needs are imperative
With the slowdown across economies and the unexpected election of Donald Trump as the next president of the USA, a cautious mood prevails in the IT and business process services industry. The initial fears that there could be sweeping immigration reforms and visa barriers erected all over the country may be abating somewhat, but the world still waits to see what Pence and team will put together as the new team in the White House and what will be the response to the Trump rhetoric about large corporate buyers of technology design and business process management services from our industry.
In this era of external uncertainty, what is more important is that providers should continue on the path of transforming their engagement models, delivery capabilities and go-to market approach to suit the fast-changing needs of digital transformation. The prescriptions are flying fast and thick as every firm looks at the challenge and wonders what it can do to retain territory while acquiring the image of a digital specialist and win new business in existing and new markets. An acquisition here, new verbiage on the SMAC stack and digital marketing and putting up a pedigree of capabilities in cloud transitions, mobile applications development and predictive analytics offerings are all very well. But these are predictable responses for firms which are getting beaten up by the inability to sustain the double-digit growth numbers that got them impressive market valuations for years. A lot more will be expected by way of transformation to sustain and enhance market interest—both customer markets and stock markets!
To understand the transformation journey that service providers have to undertake, a good place to start would be in the boardrooms of the customers themselves. Having worked closely with this category in the last few months, this writer for one believes that in both India and traditional Western markets and in the very advanced digital market places of the Asean region and China, the sophistication of thinking is of a very high order among many user firms, particularly in the banking, insurance and consumer goods industries. In manufacturing, retail and healthcare, the Indian market is yet to really attain the levels of sophistication of our counterparts in the West and East but this will no doubt happen in the near future.
What are the directions in which these local and global customers are betting their digital dollar investments? In a path-breaking article published in August this year, three members of Mckinsey’s Digital practice had listed some imperatives for firms choosing to lead in the era of digital globalisation. Key among these is the adoption of the ‘Two Speed IT approach’ and much higher reliance on data to enable predictive and prescriptive analytics in planning customer and partner journeys of the future. Many leading practitioners of digital are already planning platforms and adopting “everything as a service” models for functions like marketing, learning and development and supply chains while starting the search for micro-services and external APIs to change the way technology is plugged into business processes with speed and low friction.
What will be the impact of these trends on the solutions and services that the service provider community will be expected to deliver? The obvious first step will be for every company and management team to prioritise the domains in which they would want to develop and deliver compelling end-to-end platforms as well as point solutions. These offerings would enable customers in those domains to accelerate their own transformation. In building these platforms, it may be important to do joint workshops with clients to determine if the customer wants to be just a user of a multi-tenant platform offered by the service provider or would actually want to co-create a platform that would be jointly offered to end clients. And of course, the more traditional model of a customer asking for a custom-built platform which they can launch for their clients might still be the most prevalent model, at least in the short term.
Once the domains to play in are identified, each firm must decide which areas of capability will be its future strong points since the erstwhile technical skills will just be a commodity. Will it be consumer bahaviour understanding, user interface design, cyber-security or a combination of all three that will differentiate the firm from competition? Whichever way one looks at it, substantially higher investments in research and development, as well as a complete re-skilling of all delivery and sales persons to meet the new needs for customer engagement will become an imperative.
A case in point of an incumbent making this transition extremely well is Accenture, whose platform business is galloping, taking the digital percentage of its revenues on a growth slope that is substantially higher than that of many large Indian IT players. Add to this, the digital native firms that are nipping away at large clients and one can see the double challenges that face the industry today. New winners will emerge in 2017 and beyond, but the space is really changing at a fascinating pace!
The writer is chairman of Global Talent Track and 5F World and an investor in start-ups, skills and social enterprises