IT sanctuaries

India’s IT companies becoming sanctuaries for visually challenged. The initiatives are certainly charitable and let’s not go into IT vendors’ workaday compulsions arising from acute talent shortage, spiraling wage costs, dire predicaments resulting from high levels of attrition and a seemingly endless economic turbulence that urges them to cut corners to survive.

Just as an aside. Any let ups in SLA non-compliance by these IT vendors will now likely merit a compassionate review by clients, as well. Just kidding! Here is Michael Krigsmann listing out twelve early warning signs that signal IT project failure. You can see he is compassionate already :-)

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The merger effect

In the software industry, M&A are known to the fastest way to ramp up customer & product stack portfolio. It occasionally creates shareholder value too, though not guaranteed. But hardly does anyone concern how the customer sees it. Agreed, making predictions is a tricky business to begin with. But in the case of the business intelligence (BI) market, recent consolidation has made the task even more difficult than usual and left industry experts largely at odds.

Within the last year, Oracle has acquired Hyperion, SAP acquired Business Objects and IBM acquired Cognos. The only agreement is that until "mega-vendors" SAP, IBM and Oracle announce integration strategies for their recently acquired BI technologies -- expected to happen sometime in the next six to 12 months -- customers have little more to rely on than their wits when making BI buying decisions. Even then, the only sure bet is that they will have to make some difficult choices. The toughest decisions will fall to customers of Business Objects, Cognos and Hyperion, whose IT infrastructures are not based on the technology of the acquiring vendor -- SAP, IBM and Oracle, respectively.

Exactly why I say it makes sense for open source BI companies like Pentaho to come up with expansion plans to take on the significant consolidation in the estimated $6.25 billion business intelligence industry. Hopefully, it will tempt the big enterprise players not to raise prices for upgrades and maintenance.

But then in their post-merger avatars, will they remain the darling of SMB’s…? What do you think…?

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Not so soon, dude....

Tata Consultancy Services (TCS), one of the largest Indian outsource consulting firms, with $4.3 billion in revenue, has released new IT failure research, based on survey results of 800 middle and senior IT managers from large companies.

According to the study findings:

a) 62% of organizations experienced IT projects that failed to meet their schedules
b) 49% suffered from budget overruns
c) 47% had higher-than-expected maintenance costs
d) 41% failed to deliver the expected business value and ROI

Business-critical software and services projects are clearly failing to deliver on the business objectives they set out to achieve. They take too long, cost too much and are riddled with defects.

1 in 3 companies’ IT projects fail to perform against expectations…

I suggest the local vendors should go back and take a look at their project commitments and under-achievements. A neat, honest compilation would highlight where they go wrong and the shortfalls that led to them. If you are too shy to do it, learn from others and bridge the knowledge gap – Michael Krigsman interviewing N.Chandrasekaran of TCS. Some candid admissions there.

Then I read this report today. It kinda’ pats the Indian IT vendors and tells the investors to go long on Indian IT. They seem to say it is still a good bet despite the rising Rupee and falling margins / stock prices. I say don’t get deluded – if local vendors don’t start listening to the customer. The customer speaks thro his CIO who in turn sounds more like LOB executive. Spend some time understanding customer’s LOB and be a strategic partner besides just being a bodyshop or an off-shore vendor. If you don’t, you are sure to be outdone by an IBM, Accenture or an EDS at the next pitch.

If the Indian vendors still aren’t convinced, Wall Street (ADRs are listed at Nasdaq and NYSE) and Dalal Street (counterpart at Mumbai, India, where their underlying shares are listed) will talk to them. They will understand that language anyway. You decide which option is better.

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Boy, do I have a sixth sense….

Hey, hey, hey….get a load o’ this…! Just last night did I make this post on the changing IT services landscape, I am looking at this article in Economic Times today. [it's US time shown here and I am writing it from India when it's 11:08 a.m, April 20]

“Infosys planning new biz models….” screams the title. Hmmm, what would you call that ? Intuition ? Horse sense ? Just don’t bother, may be it’s just an incredible coincidence. I would’ve rather gone to town with it, but instinct tells me not to let go off the opportunity to display my rare brand of modesty for a change :)

My previous post had touched upon the need to rethink IT service delivery models since large corporations are increasingly micro straining their IT needs with a fine filter. Threat from smaller SaaS vendors and the capability of large clients to break down large scale requirements into modules for assigning to multiple vendors have all been cited as reasons in there. ISVs have been of late, feeling the heat despite co-location companies, managed services providers, systems integrators, and consultants all sense an opportunity to help them build the data center and hosting infrastructure they need to deliver their applications through a web-based services model, as well as advise them on their pricing, billing, and go-to-market strategy.

The latest article is a rant from Nandan Nilekani of Infosys that talent crunch and high attrition rates in the domestic IT industry has prompted Infosys to look at creating new business models that are not all that people-intensive

Quote –

“We are looking at creating other business models as not all business models need to be people-intensive. But the new models will take some time to evolve. These could be more about products and price points and not necessarily the number of people you use”, said chief executive officer and managing director of Infosys Nandan Nilekani.

The $3 billion technology services company employs over 64,000 people worldwide. Responding to a query on whether the company would continue to hire employees at a scorching pace, Nilakeni said that Infosys will look at other models that are not people intensive. “We will leverage on our new assets like brand, intellectual property, customers, technology and presence”, he said.

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IT companies in India directly employ around 1.3 million people and the number is expected to touch 2.6 million in the next three to four years. However, over the couple of years, domestic IT firms have been facing s talent crunch. Compounded with this has been the problem of high attrition — estimated at around 30%.

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According to a Nasscom-McKinsey report on IT and BPO sector (2005), only around 25% of technical gradutaes and 10-15% of general college graduates are suitable for employment in off shore IT and BPO industries. India needs around 2.3 million IT/BPO workforce by 2010 to retain its current market share.

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End -----

A couple of more coincidences (oh boy, I hate that word) and I will switch my profession to that of full time fortune teller. Intend to restrict my services only to hedge funds / Investment Banks that may come sniffing for new strategies to beat the market :)

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