I was speaking to a former colleague of mine the other day. Someone who has significant experience selling IT services to the Indian Public sector market. I asked him about the unique challenges of that market and he proceeded to unwind a long list of maladies: Corruption, unprofessional culture, political dynamics, nepotism and commodity focus.

Stephanie Overby's great summary (price focus, brutal SLAs, tactical approach, internal inertia) of the maladies of public sector outsourcing in the US resonates well with what I learnt from my friend.

We started off with customer satisfaction. Not satisfied we decided we needed to delight them.

 It seems Apple has taken it (not by design - pun intended) to a whole new level. UK based gadget insurer, Supercover Insurance says "For short periods around new model or upgrade launches, claims for lost, stolen or damaged iPhones go through the roof. The issue appears to be that most iPhone owners can only go for so long realising that they're a generation behind the latest must-have spec before they resort to extreme measures."

Here are the top ten wildest claims:
1. I dropped it from a hot air balloon
2. I lost it while sky diving
3. It broke when my son used it as a table tennis racket
4. I lost it while building a sand castle for the kids
5. I accidentally buried it in the garden
6. It fell into the kettle
7. I dropped it in a food blender
8.  My dog chewed it to pieces
9. Juice from a defrosting piece of meat leaked into it
10. It flew out of the car window

Nielsen Media has an interesting report on demographics and the chart on income levels of iPhone users is interesting.

80% of all iPhone users make more than 50,000 USD and only 13% are below the 35K mark. So money is not the problem.

Now, fraud is obviously something wrong, but how many companies can claim their customers are desperately crazy about their products ? I don't own a single Apple product but after writing this I am in love with them.

A US senator has called Infosys a "chop shop" (I thought he really mean 'body shop'). Infosys and the rest of the industry including clients have hit back. I think the senator is just playing to the galleries before the polls. Regardless of intent, this is sure to impact the industry. What do you think the impact on the industry will be ?

Wipro's Jt.CEO Girish Paranjpe on Creating competitive advantage.

Cognizant's Q2 2010 earnings call transcript. Good overview of the demand picture.

Nasscom on the H1B visa hike.

Android no jacket ad.

Bugs in the bed. End the week with a laugh. Ha ha ha!

"If at first, the idea is not absurd, then there is no hope for it." ~Albert Einstein

Clients expect many things from vendors. There are hygiene factors like good delivery, reliable resourcing and honesty in dealing with problems. These are the building blocks. Going back 15 years, getting these hygiene factors right was all that mattered. Certifications like CMM and ISO were supposed to reassure. As the industry has matured, "thought leadership" has emerged as a major expectation. Sudhakar Ram over at Sramana Mitra's blog calls companies that can do this as Wave 3 companies. The website of every major outsourcer seems to have a section on this topic. So how does one go about implementing this on the ground? How does one deliver thought leadership to clients?

     
Photo by Dierk Schaefer

JP has an interesting post where he says "don't focus on the business model, but think of ways to create value". I think this is very relevant to delivering thought leadership and innovation in a practical, actionable way. So very often we take an outside in approach to innovation. Start with an industry problem > Create a solution > Link it to the client's problem > Sell the benefits and hope it sticks. The problem with this approach to innovation is three fold:
  Priority: With budgets being what they are, every client is trying to do more with less. The problem maybe real. Solution maybe good but it might rank too low on the roster. Great idea. Thanks but not right now.
  Relationships: Deals and won and sold on relationships. Outside in propositions tend to be politically dicey. Technical buyers feel threatened. Objections on why it won't work are easy to raise and sometimes relationships get strained.
  Context: Most outside in solutions look cool on the flyer. Great ROI, strong credentials, vendor is willing to invest. However, what clients are really interested in is :How does this solution fit into my IT environment ? I have an in-house tool that can be extended to do the same thing! I don't think this platform aligns with my goal state. IT environments are too complex to allow any outside solution to easily integrate. 

So that leaves us with the problem of generating ideas from the inside. Here are five steps to help you get there.

Create the vision: Create a common vision that both clients (not just at VP level) and your own team can relate to. What do "Innovation" and "Thought leadership" mean to the customer ? How does it relate to known strategic initiatives ? What does this mean for someone who is managing a Java project to create a portal for Insurance agents ? Give specific examples of what this can be at a role level. How can a developer or a project manager bring thought leadership into their day to day activities ? People need to be able relate to the vision and see themselves as meaningful contributors.

Share it: Share it with the client and the team, including leaders outside the account. Get the whole organization aligned and create the internal marketing buzz needed to make it a success.

Photo by Ivanpw.

Create and publish a thought leadership register: This is a formal registry of value generated and accepted by the customer that each team should update. Dollarize the value where ever possible. This is the acid test as no idea can go it till the client accepts that this has been of value to her.

Incentivize people: Align performance plans and appraisals. Create quarterly awards for the best idea. Celebrate the winners. The tools are many. Objective is to motivate.
 

• Added 35 new clients, the top 10 clients grew 5.9%.
• Revenue increase sequentially, volumes increased sequentially, pricing stable, utilization improved.
• Net increase in employees this quarter.
• Expect the budgets to be flat next year
• Better traction in BFSI, retail, and energy and utilities.
• Better traction in business process management, infrastructure management and in system integration.
• Consulting and package implementation has come down marginally this quarter.
• US has gone up and Europe has marginally come down.
• Pricing stable. It increased by 0.4%, but in terms of constant currency, it declined by 1.1%.
• For the next two quarters, the upper end of the guidance assumes 1% revenue growth.

More details are here.

IBM downgraded on limited revenue growth potential. Elephant has stopped dancing ?

Another $100M for twitter. Anaytics dashboard? Hmm.

US tech industry lost 115K jobs in H1. Did someone say recovery?

Facebook and the enterprise. Great post by JP.

Sadagopan on the changing face of enterprise software.

Frank Scavo has a nice post on the downsides of vendor consolidation in the enterprise software space. His arguments are centered around vendor lock in and he writes:

• "Consolidate to a single vendor for worldwide financials, but standardize operational systems on another vendor's platform. Always leave the option open to replace one with the other.
• Consolidate to a single vendor for centralized CRM and order management, while allowing one or two different vendors to provide operational systems at the plant level, perhaps one for large plants and one for small plants.
• Revive a best of breed approach. Leave HR, asset management, and other non-core systems outside the scope of the primary vendor's implementation.
• Test vendors' touted SOA capabilities to build composite applications. If these capabilities really are what vendors say they are, they ought to allow "seamless integration" with third party applications."

Very true.

What of software services ? Vendor consolidation is low hanging fruit for both vendor and client.
The classic approach is to get a offshoring biggie to come in and clean house. Lock in is not such a big issue. Offshoring and process efficiencies that come with consolidation are big wins. But there are things to watch out for. Here are a few:

    - Keep the larger sourcing picture in mind : There are things that the offshore model is simply not suited for. Niche skill areas, choppy demand that fluctuates very frequently and onshore staff augmentation are a few things that come to mind. It's better to consolidate such requirements and give it to one local vendor - rather than to an offshore player.
    - Understand where your star contractors figure :  Great performance, good cultural fit, strong skill sets, loyal to your organization BUT offshorable. Vendor consolidation might be a good time to really examine the type of work these loyal stars are doing. Do they understand your business? Do they really have strategic value? Have they ended up managing the business relationship? If the answer is yes, consider hiring them rather than firing and replacing with an offshore provider. But think twice if you want these stars to continue to be domestic contractors and expect them to work with new resources from the offshore provider. The inherent conflict of interest could jeopardize your budding offshore relationship.
     - Closely examine productivity claims: It's easy to show improvement when your nose is in the dirt. Consider today's economy. People seem to be thrilled just because we are improving. If you are at an 80 year bottom the only way is up! Productivity norms of the current team of contractors should be base lined and the offshore provider should go up against this baseline. Also consider the fact that offshore work hours are usually longer than those of your local contractors. Apart from improvement, benchmark the norms against best in class.
      -Sign short term contracts with rewards and penalites: Vendors might give you an overall better deal if sign up a long term, 5 year contract at the outset. Guess what? You'll get an even better deal if you sign up for a year and then renew. Throw in six monthly reward and penalties and the deal becomes even sweeter.

 Financial times : " Cloud computing is threatening the business model of the Indian IT outsourcing ….". As if we needed one more negative story with all the bad news about the economy. There are two sides to this cloud thing. Let's do a reality check.

- Hit on the package implementation business : SAP goes the single instance multi tenant way. Nobody spends millions doing SAP implementations and a handful of administrators configure a single instance for many customers. This will surely kill the customization revenue that outsourcers enjoy. Reality check - The "On demand" buzz is really aimed at expanding the market to small and medium sized businesses. Here's a snippet from the SAP website " SAP Business ByDesign is fully integrated business management software designed for midsize companies or small businesses that want the benefits of large-scale business applications without the need for a large IT infrastructure. It enables preconfigured process best practices for managing financials, customer relationships, human resources, projects, procurement, and the supply chain. SAP takes care of installation, maintenance, and upgrades – so you can focus on your business, not on IT."

Two things stand out : a).Midsize and small businesses and b). Preconfigured processes. I have in the past blogged about the focus Indian outsourcers have on large clients. In fact >70% of the revenues come from clients that contribute >$10M to revenues. Surely not SMB's. Secondly, "preconfigured"  business processes imply a certain level of commoditization. The availability of a "preconfigured" SAAS alternative for a business process does not change the reasons that made you spend many millions customizing it before the SAAS alternative came along. SAAS is good for the commodity processes but not for something that is your secret sauce. Indian outsourcers make money by helping large customers with complex package customizations and that market is not getting "SAASified".

-Hit on the maintenance revenue stream: Before Clouds you'd have 10 teams of 10 people each maintaining 10 apps for 10 customers. If these 10 customers were to sign up for one Cloud based solution, you'd have 1 team of 20 people maintaining one instance for these 10 customers. Very plausible for commodity processes like email, but what about the systems integration revenue for integrating the cloud based app to what's in house ? Cloud can give offshore vendors a fresh revenue stream through systems integration.

-Private Clouds: If the secret sauce business processes need to get a cloud fillip, most large enterprises would prefer a private cloud. Outsourcers like Wipro Technologies with data centers in the US and deep existing relationships are ideally positioned to leverage the private cloud opportunity. This increases the value of the outsourcing relationship.

Full disclosure: I am an employee of Wipro Technologies.