Almost every IT service provider is rushing to be part of the 'digital transformation' within the clients as they focus on the social, mobility, analytics and cloud (SMAC) suite of technologies.
Samiron Ghoshal, partner and leader (IT advisory services) at Ernst & Young, talks to Bibhu Ranjan Mishra about the shift that is happening in the market place and how well-positioned the Indian IT services providers are. Excerpts:
Most service providers have been aggressive on SMAC, showing this is the way to go forward. Have Indian enterprises started embracing digital transformation and SMAC?
To be honest, there are various parts to it. In technology, we have terms called 'leading edge' and 'bleeding edge' technologies. Typically, if you look at the spent pattern and size in an emerging market, people probably don't spend money that easily on bleeding-edge technologies unlike in developed markets.
However, there are exceptions. In the Indian context, we are seeing players in areas such as financial services and healthcare adopting cloud and mobility solutions quite faster.
Do you agree with the perception that cloud and mobility restrict service providers' ability to offshore is low and the deal sizes are small?
Offshore comes into the picture wherever there are building blocks in the technology space which can be done out of sight. Typically, in any leading edge area, the technology lifecycle gets shorter.
Secondly, a clear demarcation of blocks which can be offshored is difficult. If you have to make a mobility solution which does not have the past and future, and you have to design and build it from the scratch, it becomes difficult to offshore.
Where does the Indian players stand in this whole game?
In our IT industry, ADM (application development and maintenance) and infrastructure services account for 80-85 per cent of the overall work. So we are still playing in that nuts and bolts area. With cloud and mobility, that whole model is going to change.
For the Indian players to move up the value chain in the whole pyramid, they need to be there right from the beginning instead of waiting for the SAPs, Googles, Oracles and Amazons of the world to create the model and then look for offshorable elements after five years. It, in fact, requires a significant amount of investments in terms of people, process and skills.
What is this model?
The biggest change that is happening today in the technology spend area globally is the empowerment of the business users to make decisions, bypassing the CTO (chief technology officer). Tomorrow, with cloud and mobility, applications are going to be available on a subscription basis - the way you buy electricity.
That means, a lot of these apps will be front-end enabled where employees will buy their apps. So, the play is changing. Tomorrow, there may be so big infrastructure or apps to maintain. This would put a big question mark on the future of the IT players who just focus on the bottom of the demand pyramid.
Most Indian IT players believe the demand for offshore IT services is bouncing back. Is it so?
Demand is bouncing back in the medium term. There is also pent-up demand since many of the Fortune 1000 companies in the developed markets did not spend that much during the last five years, because of bad times. This will be there at least for the next five to seven years.
But there is certainly a change. Before Y2K, IT was just about body shopping. After Y2K, the world proved that offshoring-based development and maintenance can be successfully done. That is when Indian companies took off. The next phase is starting. If somebody does not align to it, you don't know what the shape will be after five years.
