Indian IT industry must move from a ‘culture of waste’ to industrialisation
D.Murali
Chennai: What are the vulnerabilities of the Indian IT industry, and what can be the countermeasures?
Pat comes the reply from Rahul Patwardhan (Pat), CEO Global Service Delivery (GSD) India and Director – Application Services, LogicaCMG, thus: “The Indian IT (information technology) industry is currently resting on its laurels. It has to think ahead and move away from the current unipolar thinking.”
Indian IT companies need to look internal to their business and see how they can reduce manpower on the bench (currently at average of 30 per cent), adds Pat, during the course of a rapid telephonic conversation with Business Line recently.
“The industry needs to strive for an utilisation that is similar to the manufacturing sector. IT seems to have gotten used to a ‘culture of waste’ and productivity has taken a backseat,” he rues.
“Unless there is introspection, external variables like the rupee appreciation will continue to plague the industry and we will always be in a panic mode. What IT requires is industrialisation,” Pat elaborates, over a subsequent e-mail interaction.
Excerpts from the interview.
First, a fact sheet about GSD in the company, its growth, share in total headcount, revenues; and also the larger picture, about LogicaCMG, its other divisions and the company’s place in the global IT map.
LogicaCMG is a major international force in IT and business services. It employs around 40,000 people across 41 countries. The Global Service Delivery (GSD) organisation is close to 10,000 people with 2,500 of them based in India.
India as a market is of strategic importance to us. One of our key objectives is to have 30-40 per cent of group revenues to come from value-based outsourcing. Our focus is on service delivery and marketing our India capabilities to the global markets, and for the same we will therefore ramp up our capabilities at GSD, India.
Our solutions and services span consultancy, design, systems integration and value-based applications and business process outsourcing. Our business is structured around five core vertical market sectors, viz. energy and utilities; financial services; industry, distribution and transport (IDT); space and defence; and telecom and media and public sector. Such industry focus means that our services and solutions are tailored for the challenges that our customers face in their specific markets.
Headquartered in Europe, LogicaCMG is listed on both the London Stock Exchange and Euronext (Amsterdam) and traded on the Xternal List of the Nordic Exchange in Stockholm.
How has GSD evolved over the years?
Though the concept of offshore delivery is over a decade old, GSD is relatively new. It has evolved in the industry really over the last five years. The industry is still perfecting the model and it will be crucial during the consolidation phase that the IT industry will face.
The pure offshore model followed by many companies involves large-scale delivery centres in low-cost locations with very minimal presence on site. In this model, the on-site location is considered as a cost centre and is staffed quite often with people who are not familiar with the local culture. This results in challenges to address the cultural and communication gaps especially in Europe.
‘Blended delivery’ is a unique model where delivery is provided through an optimal mix of on-site, near-shore, and offshore resources to deliver a seamless and consistent service, which is in compliance with client requirements, cost factors and skill sets required.
When customer complexity or risk is high, the service is delivered on-site, and as the complexity and risk becomes lower, near-shore and offshore delivery locations are utilised. The blended delivery model perfectly addresses the unique requirements of the European outsourcing market.
This approach helps ensure that the right degree of customer intimacy is retained on-site and that quality services are delivered from the right global sourcing location to meet the client’s service delivery requirements at an acceptable price.
What is different in your model of GSD?
Some of the key differences in our GSD model are as follows:
· Integrated, common window to access whole of global services production facilities for a sales person in any country. Country units do not need to deal with multiple offshore units directly.
· Deliberately globally distributed (not over-weighted on one country).
· Adopts shared services model for all activities by organising all competencies globally as a single unified global “plant” for each competence, fully tooled to act as ONE PLANT.
· Blending on the fly across locations.
· Output service unit pricing rather than input effort based pricing.
· Third generation industrialisation of IT services production – ahead of industry.
· Paradigm differences in factory management: such as, low bench (less than 10 per cent instead of 30 per cent bench prevalent in industry), and daily capture of production statistics unlike the prevalent monthly- and project-based metrics capture in the industry.
A success story that showcases the best of your potential.
Let me tell you about our work for InBev, the world’s leading brewer active in over 130 countries and employing more than 86,000 people worldwide. The company is transforming itself into a leading global business: a strategy that implies more streamlined and centralised IT services.
To help realise its vision, it sought out suitable external partners. LogicaCMG’s close understanding of InBev’s business, its flexible approach and a previous successful relationship in Germany were all cited when InBev made LogicaCMG its strategic partner for application management.
InBev wanted to focus first on its regional capabilities. It signed a 70 million euro five-year contract with LogicaCMG in June 2006 to manage its Western Europe and global headquarters business systems. Six months later, the contract was extended to cover Central and Eastern Europe.
Under the agreement LogicaCMG manages InBev’s core applications, including a new SAP-based ERP system. It also supervises subcontractors and other service providers. LogicaCMG also took on 110 InBev employees.
The result was an application service environment that harmonises operations in 17 countries spanning 12 time zones from County Cork to Bering Strait. A significant amount of the delivery solution involved an India component. InBev has reduced operational costs, improved service levels and is gaining broad business benefits.
Was there a trigger for the innovation in GSD that you talked about?
The main trigger for innovation in GSD is the need to shorten the time to market for our products and services and gain competitive advantage in the marketplace. Innovation in LogicaCMG is considered as ‘the growth engine for future revenue streams and basis for sustainable development of the business of our clients and our own’.
As a global organisation, we believe in leveraging talent on a global basis to meet the business requirements. The GSD organisation has a key role to play in leveraging innovation across the centres we have in the UK, the Netherlands, India, the Philippines, the Czech Republic, and Morocco.
We leveraged the product engineering talent available in In