Biz model more critical than technology

'Biz model more critical than technology'

Vendors embracing Web 2.0 quickly will be able to capture the most competitive advantage and establish their place on the playing field

Wednesday, May 21, 2008

The 21st edition of IDC's annual event for the ICT industry, Directions09, with the theme “Tech X.0: Mastering New Business Models and Markets,” was held in Bangalore on May 2.

The day-long event had IDC's experts presenting analysis, market forecasts and predictions that are critical to ones business models.

During the event, Pradeep Chakraborty and Dheeksha Rabindra from CyberMedia caught up with Cort Isernhagen, vice president, IDC Asia Pacific and Kapil Dev Singh, country manager, IDC India, for an interview.

Excerpts:

How do you see enterprises embracing Web 2.0 and how does it match up against India?

Cort Isernhagen: Enterprises are using Web 2.0 technology in two distant areas. One is externally as a mechanism or a channel to communicate with the customer base to collect information about the product service and measure the customer sentiment. Second, is they are using Web 2.0 internally as a tool to break down the walls of different department, different divisions and bring information that is within the four walls of the enterprise to the place where it is needed within the company.

A new breed of IT vendors are emerging. How much time would they need to align with this?

Isernhagen: It is difficult to estimate how much time it takes industry to shift. However, I would say that enterprises- specifically IT suppliers and IT vendors need to act quickly in this regard to embrace Web 2.0. They need to re-purpose and repackage product and services to cater to more specific market segments and they need to be very agile in this regard. It is those enterprises and IT vendors who can make this adoption quickly will be able to capture the most competitive advantage and establish their place on the playing field.

How has recession made CEOs in India to tighten the rope in concentrating on customer care?

Isernhagen: As the economy gets tighter and enterprises are looking more at single top-line flat growth, they have to first look at bottom line, in other words how to cut cost and manage cost. Specifically CEOs in India are looking at ways to keep the customers they have, and by improving customer service. Retaining the customers they already have is lot easier than go find new customers and it is cheaper. So, it is an interesting as well effective strategy for CEOs not only in India but also in APAC to concentrate on customer service as a strategy to continue top-line growth in this era of economic recession in the background.

Can you highlight the changes in the PP factor that has moved to Enterprise 2.0 and Consumer 2.0?

Kapil Dev Singh: PP factor sort of reflects the change that has happened when compared to the yesterday's consumer to what is today, and the change that is going to happen with respect to what kind of consumers evolve tomorrow.

PP, at one point of time, we all knew there were very few landline connections, there were very few phones, and we would give our numbers by putting PP in front of that i.e., which means 'person in particular'. That PP has translated into pre-paid and post-paid, which translates into reality for every Indian at least in the urban areas having a phone and that it is an immense shift that has happened in terms of way consumers relate to technology.

The PP factor, over a period of time, would translate into personal profile or a private place on the net, which reflects the fact that more and more consumers would be connected and would be using converged devices and they would be constantly on the look out for content that is relevant to their lives.

How is IT spending going to evolve across different Indian cities?

Singh: I think the focus of IT market so far has been on the top six or eight cities in the country and they would account for almost around 55-60 per cent of the IT spend in the country. Moving forward, when the bigger markets stagnate, vendors look out for newer opportunities and they move towards smaller and fragmented market, yet put together it's a big market.

I think as we move towards next level of growth in India more and more spending in terms of the growth will come from tier 2 and 3 towns. And it is also relevant from the fact that the consumers who will spend on such services and products they have a different profile when compared to the one in top cities.

With the hype of Green IT, what are the business issues and problems involved with it?

Isernhagen: In the industry Green IT takes on different flavors. For example, manufacturing sector is highly driven by keeping cost low and taking cost out of the supply chain. The concept of Green IT is necessarily top of the CEO agenda. However, it is those ICT vendors that can incorporate concept of Green into their product or marketing message, as an extra value-add would be successful in the particular market.

In other industries for example public sector government or healthcare the topic of Green takes on a different meaning, and in that segment they are looking at things like about consolidation and virtualization to keep the data center costs down to reduce the energy consumption of the data center. The overriding message for IT vendors and enterprises is that depending on the industry you are in, the concept of Green has very different meaning and the successful IT vendor will know enough about that industry to tailor the message accordingly.

With recession having very minimum impact to Asia Pacific market (as mentioned in your presentation in the event) what is it to India? What are the major challenges for the Indian economy?

Isernhagen: The effect of the US recession on the India IT spending market will not be as great as felt in other countries, for e.g., Korea, China or Japan, as those market are quite closely tied with the US in different economic areas. However, I think impact of the US recession on CEOs and business climate in India is very real consideration. As a matter of fact, as our survey is saying 64 percent of the India CEOs are expecting a slowdown in growth specifically due to the US slowdown.

Singh: I think the effect of the impending slowdown in the US market would have two different connotations for India market. One, export industry is heavily depended on dollar business and as rupee appreciates and the market in US slows down, it invariably affects the exports segment and the results we can see today.

The results reported by major IT vendors talk about the fact that top line though retained bottom line is hit drastically. From the domestic market perspective the impact would be marginal. Only the export driven investments is affected marginally and hence the amount of IT they use. Beyond that I think the domestic market it has also resulted in good things such as the rising oil prices the cushion provided by the appreciating rupee and hence, in an already in the challenging situation of inflation, it is going to be crucial. From exports point of view it is going to be negative, but from domestic market point of view I would say the effect would be marginal and in certain aspects also it would help the economy.

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