In an interview with Nayan Chanda of YaleGlobal Online, N.R. Narayana Murthy, founder of Infosys, discusses the challenges and opportunities for firms operating in India, and also identifies the factors required for success in a global market [24 min 27 sec - April 28, 2006]. For transcripts of the interview, please visit: YaleGlobal Online.
Listen to Mr. Murthy’s opening words to the first question:
How do you account for this meteoric rise of Infosys in the context of India?
Murthy: Well, you’re right. We celebrate our 25th year this year. On 2 July of 2006, we will have completed 25 years. First of all, I must say that God has been very kind to us because, as Louis Pasteur once said, that when God decides to announce his presence, he comes in the form of chance. Having accepted that, let me say this, right from day one, when we founded the company, when we sat for four hours to discuss what we should seek in this journey, we were all unanimous that we would seek respect. We would seek respect from customers, from our employees, from our investors, from our lender departments, from the government and from the society. And we said, if we seek respect from each of these stakeholders, we will do the right thing for them. And if we do the right thing for them, then everything will fall into place. So I’m happy that the company has not swerved from that part of taking respect right from day one to now. And that is perhaps the reason we have had what little success we have had so far.
Respect. Humble and impressive. Now listen to the complete interview:
Sudin Apte, country head and senior analyst at India operations of Forrester Research, has made a quick take on the strategies of the top Indian outsourcing firms:
Infosys, Tata Consultancy Services (TCS), and Wipro — are at a strategy crossroad. Formerly undifferentiated low-cost body shops, these firms have built their own separate strategies. Wipro is continuing to focus on new ways to cut costs via efficiency boosters and low-cost labor. Infosys has placed the bet to continue leveraging the Indian cost model, while going head-to-head with the likes of Accenture. TCS will continue to leverage its size and global-delivery foot print. Evolving differentiation and concerted efforts on quality and cost reduction by the top three Indian firms will mean further marginalization of midsized and small Indian vendors, and the multinational IT providers will face continued pricing and process upgrade pressure.
neoIT, a services globalization consulting firm, today published a “how to” research paper on successfully navigating a multi-vendor services globalization strategy. Entitled “Maximizing Value and Avoiding Pitfalls of a Multi-Vendor Services Globalization Strategy”, this report addresses the complexities brought about as companies diversify their global sourcing supplier strategy.
As clients increase their use of services globalization, many are moving from a single outsourcing vendor to a multi-vendor strategy. When implemented successfully a multi-vendor sourcing approach can help to reduce costs, lower risks and increase operational efficiency. neoIT’s latest report provides insights into the advantages of multi-sourcing and addresses the possible areas of failure as companies struggle to effectively manage an increasingly complex services globalization model. The report includes a case study of a fictional company as it transitions from a single vendor to a multi-vendor sourcing strategy.
It is true that Indian IT workers are skilled and have good command over English language but clients feel more comfortable to deal with people who understand them even better than the Indians.
In order to fill this gap, the Indian IT companies have devised two new strategies. First, they have started to hire foreign workers. S Padmanabhan, Human Resources Manager, Tata Consultancy Services (TCS) has admitted that eight of every hundred of Tata’s workers are foreigners. The big names in Indian IT sectors have started to shift their attention to the foreign workers to meet up the demands of their clients and make them feel more comfortable in dealing with the company.
IBM Chairman, President & CEO Samuel J. Palmisano announces agreements with Chinese ministries to develop services science curriculum for universities and program to improve regional medical care.
Chairman, President and CEO Samuel J. Palmisano today launched a major initiative to bring IBM’s global information technology services expertise and capabilities to China to enable company and government innovation in support of the country’s increased focus on developing its services industry.
As part of that initiative, Mr. Palmisano announced that IBM will:
Work with the Ministry of Education to introduce a services science curriculum within Chinese universities;
Coordinate development of a pilot program with the Ministry of Health to use information technology to improve the quality of regional medical services throughout the country;
Expand industry-specific business services through the use of Services Oriented Architecture (SOA);
Increase focus within the China Research Lab on services specifically linked to small and medium-size businesses.
“IBM has a long history of collaborating with our Chinese clients and with the government of China in support of the country’s rapid economic development,” Mr. Palmisano said. “This services initiative will strengthen our role as China’s innovation partner based on our portfolio of the world’s best technology combined with our business management and services skills. The announcements we are making today strengthen our ability to help develop future services skills in China while providing solutions now to meet the needs of the evolving Chinese economy.”
IBM currently has 8,300 employees in China. Third quarter revenue increased 27 percent compared to the same period last year. Announcement of the services initiative caps a month in which IBM has:
Announced the transfer of its global procurement headquarters to Shenzhen;
Created a $180 million China Investment Fund in an alliance with Lehman Brothers;
Opened an SOA Solutions Center in Beijing.
Mr. Palmisano cited the results of a recent IBM study of 100 China CEOs focused on innovation in China. Participants noted the importance of integrating business processes and technology to achieve an innovative business model that puts them ahead of competitors. IBM’s services initiative will enable IBM clients to achieve such integration by adapting best practices from IBM’s global operations to meet the specific requirements of the China marketplace.
How CIOs can thrive amidst high levels of MA&D activity
Chief Information Officers (CIOs) who approach organisational mergers, acquisitions and divestments (MA&Ds) as an opportunity to grow staff and strengthen IT assets put their companies at significant advantage over those who view MA&Ds with trepidation, according to new research from Gartner. In a report entitled ‘Timing Is Everything in Mergers, Acquisitions and Divestments’, results from a survey by Gartner Executive Programs (EXP) reveal that CIOs who take on the role of integrator from an early stage in the process can improve the success of the overall deal. It also highlights 10 distinguishing practices of MA&D experienced CIOs.
“Integrating the IT systems of two or more enterprises is a vast, complex and potentially costly process and it is a major challenge for the IS organisation,” said Dave Aron, vice president and research director at Gartner EXP. “However, if the process is handled in the right way, it can provide the opportunity to upgrade and update existing systems for overall business benefit. Proactive CIO involvement in the MA&D process can also play a significant role in identifying and reducing information and process-based risks that span multiple business areas, as well as spotting opportunities related to that information.”
A positive approach and attitude towards mergers and acquisitions is one of 10 powerful practices identified by Gartner in MA & D-savvy CIOs. “IS organisations which are MA&D-ready tend to have a CIO who has been engaged in the process from an early stage,” said Mr Aron. “In such cases, the CIO is ideally placed to both maximise the value of future integrated systems and retain employees who will be of long-term value to the organisation. With MA&D deals on the rise again, CIOs need to understand and influence their enterprise’s MA&D agenda,” said Mr Aron.”
IBM today announced the relocation of its global procurement headquarters to Shenzhen, China as the company continues its strategy to draw more efficiently on its global capabilities and capitalize on emerging market opportunities.
The decision to move Chief Procurement Officer John Paterson’s office from Somers, NY, to China marks the first time the headquarters of an IBM corporate-wide organization has been located outside the U.S. This move illustrates a shift underway at IBM from a multinational corporation to a new model — a globally integrated enterprise.
“In a multinational model, many functions of a corporation were replicated around the world — but each addressing only its local market,” said Mr. Paterson. “In a globally integrated enterprise, for the first time, a company’s worldwide capability can be located wherever in the world it makes the most sense, based on the imperatives of economics, expertise and open environments.”
Starting in January 2007, Siemens will bundle its worldwide IT solutions, IT services and software activities. The activities of Siemens Business Services (SBS) will be pooled into one Group including four software development entities Program and System Engineering (PSE) and Siemens Information Systems Ltd. (SISL), Development Innovation and Projects (DIP) and the Business Innovation Center (BIC). Given its tasks and the geographic distribution of employees, Siemens IT Solutions and Services (SIS) will be handled from Munich and Vienna.
Dr. Christoph Kollatz, currently Group President of SBS, will be the Group President. A key prerequisite for the creation of the Group is the rigorous continuation and the successful completion of the comprehensive turnaround program.
Most financial institutions face pressure to improve their levels of service while cutting costs. At the same time, they must be increasingly nimble in responding to customer demands and enhancing their competitive advantage. Sourcing, and in particular outsourcing, is often heralded as a solution to these challenges. Yet too many sourcing initiatives fail to deliver on their intended benefits. Instead, they result in dysfunctional operating models that lock in existing inefficiencies without addressing the root causes of poor performance or the future needs of the institution.
The remedy involves taking a strategic and holistic view of sourcing. With such an approach sourcing can act as a true enabler of operational and IT excellence, recognizing that the optimum operating model may span multiple functions and geographies which do not lend themselves to a “one size fits all” approach and involve a number of different sourcing solutions. This approach can lead to more significant and sustainable benefits than tackling processes through a series of isolated, tactical outsourcing decisions.
CEOs in the process of evaluating new outsourcing partnerships should look beyond physical resources such as people and technologies and concentrate instead on companies’ ability to turn those resources into capabilities such as leadership, behaviour management, governance and process improvement. This is the main finding of a new research-based whitepaper by Leslie Willcocks, Professor of Technology, Work and Globalisation at the London School of Economics and sponsored by LogicaCMG. The whitepaper also highlights the risks associated with the ‘winner’s curse’ – deals that excessively favour the client at the expense of the supplier but do not work to the client’s advantage in the long run.
The whitepaper identifies twelve capabilities that supplier companies should be able to display from the outset that can be combined to create high-level competencies to achieve business benefits for the customer. They include the capability to retain and apply professional knowledge, the ability to access resources as needed and the aptitude to design and implement successful organisational arrangements.
I’m not convinced of putting wings to captives. Traditional internal IT departments of large enterprizes are seldom good at playing on the global fields of outsourcing and offshoring. It is often a chance for third parties and professional outsourcing service providers to gain momentum and influence at the newbie. But however, GM gives it a try …
Gentleman, start your engines. The largest private sector information technology outsourcing deal in history is off and running in a big way. Starting in June, General Motors began the first phase of a $15 billion deal to create a single global IT organization for the company.
To that end, in the first two months alone, GM and its six main outsourcing partners have performed 160,000 transition tasks, trained 8,100 people on 29 standardized work processes, redeployed 2,800 personnel, re-mapped 1.2 million assets to new contracts and aligned 15,000 additional supplier personnel to support requirements. Two weeks from now, GM’s partners will get together to figure out how they can collaborate not only on business processes, but also from an architectural point of view.
GM announced in February the goal to create a single worldwide IT organization instead of having disparate regional processes. It tapped EDS, Hewlett-Packard, IBM, Capgemini, Compuware Covisint and WiPro for a combined $7.5 billion over five years to improve IT operations and integration, with another $7.5 billion set aside for other contracts. Other major IT companies, including SAP, Cisco and Microsoft each bring an additional presence by helping over a two-year period to create a set of standard processes to which GM’s outsourcing partners will have to adhere.
There are essentially two ways to innovate, and if you’re lucky, then you do both of them at the same time:
Innovate in your business model, do what others haven’t done before.
Innovate in your execution, produce things that others have not produced before.
When you’re producing an application that’s been done 20x over before you started (web-based calendar) you have no choice but to pick #2 and innovate in your execution.
So ask yourself how you can innovate your outsourcing and offshoring business model. What would you do to break the reign of the Big Six outsourcers? Do you have a global chance as a niche player and specialist? If you are innovative - sure. It is your only chance you have. Find and create new ideas, methods or devices. Discover and explore new markets.
Bain applies a broad strategic perspective, asking not “What should clients outsource?” but “Given that everything can be outsourced, what should they insource because they’re the best at it?”
To give a honest answer to this question is really tough for most of the inhouse IT departments.
George F. Colony, founder and CEO of Forrester Research, believes it’s high time to replace the outmoded term IT (information technology) a more accurate one: BT (business technology). He has just written “My View: IT To BT.” A discussion board is included — He would love to hear from you, including your assessment of his assessment:
A little history: The discipline of running computers in large companies was once called “data processing” (DP). The name made sense because it was all about mainframe computers spitting out piles of green bar paper inscribed with numbers. As word processors, personal computers, minicomputers, and other interlopers came on the scene in the early 1980s, the DP term was dropped in favor of “management information systems” (MIS). In the early 1990s, the cool new term became “information technology” (IT). This moniker in no way conveyed the explosion of the Web, mobile devices, mobile phones, email, or eCommerce that techies were called on to manage — but it stuck.
In the old days of DP, MIS, and IT, the use of computers in companies was about tracking the business. Computers provided a retrospective snapshot (think financials or sales records) but were not used to actively operate the business — e.g., developing products, selling, manufacturing, or touching the customer.
Basman | Explore: IT Outsourcing is devoted solely to the daily monitoring, discussion and critique of international IT sourcing in all its manifestations and across all categories, countries and industries.
Feel free to join the conversation and make the world richer.
