Can you tell your customer to insource?

There are analysts. And right among this bevy of experts are analysts who will show you the future sans any jargon. This rare 'keep it simple silly' breed will proffer a forecast but will also peel off the esoteric layer to give you a sense of not just 'what' will happen, but 'why' will it happen? What to make of the trend called  Insourcing; where are IT spends drifting next; or whose plate would billion-dollar deals go to; everything answered here in this interview with Karthik Ananth, Director, Zinnov Management Consulting. It’s indeed refreshing to have a conversation where you can forget the charts and instead catch the waves underneath the graphs. Read on.

Let me talk about verticals first. The trends are often geo-specific but telecom has started to see stability. Retail is very mature in US but in India, a lot of growth remains to be tapped. Maximum potential resides in Oil and Energy because that’s where IT can influence refining margins and hence profitability a lot. What more, IT can do that in a very measurable and tangible way. Meanwhile, Africa will see the next big things in five years.

That part can be understood with a rough customer pyramid model. This pyramid is dominated at the top by Fortune 500 companies which in turn give the power to the usual big boys (the likes of IBM, Accenture, EDS). Then there are mid-market companies, the small companies and then very small start-ups. Indian vendors have so far mostly got piecemeal work in IT deals, the application development and testing kind. But what happens next would be driven by both demand side and supply side of the scale. Vendor consolidation is visible. Also, top 2000 companies contribute 40 to 60 per cent of overall spends. IT is non-core for them. That is driving the need for deeper controls, multiple-engagement models etc. Now, on the supply side, consolidation is visible too. As the scale of a vendor goes up, end-to-end services become the trend. And that’s exactly what is driving vertical-led and larger contracts. 

It depends a lot of core, and on competitive differentiator of a company. Do you want to keep your differentiator with yourself or not? Yesterday what was non-core could be the core stuff today. You may not cut out the work because the vendor is not doing his job but because of competitive concerns. In fact, as an IT service provider, if you are proactive, you will yourself tell the customer that “you should move this part of work back to your desk”. Indian vendors very rarely do that. You have to be really customer-centric to be able to say that. 

Take the example of Amazon. They decided what they do best and went ahead to offer Cloud. There’s a lot that has been talked for quite some time, but the twist is that now, all that can actually be possible because of so many technology changes. Ten years back the technology, mobile or Cloud delivery and cost aspects were not that plausible. Today, all that is possible.

It depends on customer base. A small company that does not have the baggage of a traditional model may be a quick adopter here. This hinges on the ability of an ERP product to grow along with the company. 

Yes, convergence is something everyone knows, but few have understood its power. It is passively missed out on. It would be the biggest fundamental driver in media and entertainment. People are tracking a cricket match, news updates, and paying bills simultaneously on tablet-sized things. I guess in another 18 to 20 months, we would see a lot coming out of convergence.