Global Delivery’s Next Big Thing? Egypt Makes a Play

Hello all -- Salam Alaikum -- Dana here. Welcome to Cairo. I’ve been snaking through traffic and shiny service delivery centers this week as a guest of Egypt’s Information Technology Industry Development Agency (ITIDA). We’re a motley assortment of analysts and advisors, global tech companies, local service provider upstarts, and government officials, all discussing the relative merits and drawbacks of technology and BPO service delivery out of Egypt.

Can Cloud transform Outsourcing?

By Phil Fersht

What I detest most about recessions is when firms put all their focus on short-term cost-reduction measures and take their eye off the ball with initiatives that can reap much more lucrative efficiencies over a longer period.  I am somewhat hopeful this recession is a little different: shaving a few percentage points off the bottom-line is unlikely to make a huge difference when your very survival is at stake, and several companies are exploring more radical, longer-term strategies that will lift them above the depressed morass.  Moreover, many smart executives are seeking to tie themselves to longer-term projects that give them added job security and enhance their own roles in changing times. 

Cloud computing has all the attributes and potential to support a global outsourcing environment with lower infrastructure costs, lower energy costs from eliminating hardware boxes, and much better scaleability to provide computing resources to meet demand in an unpredictable global market.  My view is that we are in a global delivery continuum, where many organizations will originally evolve from crude BPO environments (a lot of lift and shift), explore SaaS delivery to optimize that environment, and ultimately dabble with SaaS apps that be deployed in a Cloud "plug-in" model.  A flashy diagram will likely ensue, but that's the nuts-and-bolts of how this continuum will eventually play out.  Bottom-line, those service providers which persist in a labor-arbitrage-only service model and ignore the benefits and cost-efficiences of SaaS and Cloud, will get left behind.

"I just knew the mainframe would make a comeback", said an excited industry veteran on Cloud computing recently. He's actually right, but the difference in today's world, is we are creating the applications and the development environment to run real business applications in a cloud environment.

We're not there yet, but smart organizations need to start exploring service provider relationships where Cloud is on the horizon.  Cloud computing is not only rapidly emerging as an infrastructure option that is relatively inexpensive; it is also becoming a buyers' market.

Cloud has come a long way since being a small blip on the radar in 2007 when the likes of Microsoft, HP, Google

NASSCOM: Green Shoots Amidst the Gloom

Greetings -- Dana here, finishing up the Mumbai portion of my India visit. My panel at NASSCOM this past week, “Market Spiral: Bottoming Out?”, turned out to be a slightly gloomy affair. I felt bad – I was the one injecting the gloom – alongside Gartner’s Peter Redshaw and Nelson Hall’s John Wilmott. Our moderator, NIIT’s irrepressible Chairman, Rajendra Pawar, wouldn’t give up.

As we wrapped up, he asked us to identify potential “green shoots” that looked promising. I reiterated my belief, based on current data and client sentiment, that SaaS, BPO, cloud, and other non-traditional service models are going to find more takers in the near-to-medium term. I went farther than that, actually. I said people are finished with big enterprise software, as the religion has traditionally been practiced.

This had percolating in our research for a while, and was enforced by most meetings I had at NASSCOM. While there’s no denying there’s a lot of runway left in the ERP services market, the next big wave of enterprise capability adoption will be SaaS, platform-BPO, and mobile device-based. I was about to find out there is no better place to potentially watch this unfold than India itself.

Shortly after the panel, I had the opportunity to meet with Mr. Pawar’s colleague, NIIT CEO Arvind Thakur. I talked to Mr. Thakur about alternate delivery models potentially being the “green shoots” Mr. Pawar was looking for and what do you know? He sat down and showed me his company’s plans for alternate delivery models and promoting non-linear growth at NIIT.

The strategy has little to do with standard IT services. Instead, for the Indian market, NIIT already sells on-demand procurement services to government agencies. It also has an on-demand sales & distribution system for equipment OEMs to push out to their dealer networks. In the works are a revenue accounting system for the travel industry and a policy administration solution for insurance companies.

Mr. Thakur told me that NIIT has 20% of its revenues accruing from this business model today. By 2012, the plan is to have 40% of revenues generated this way. NIIT is only one of nearly 15 companies I met with at NASSCOM where we discussed non-linear growth strategies and platform-based services, but it does appear to be one of the more advanced. Had I known this when I was doing the panel, I could have asked Mr. Pawar to tell the audience about the green shoots growing in his own back yard.

NASSCOM: Breakfast with the Elephant

Dana Stiffler’s NASSCOM adventures continue, as she looks for more straight talk on yesterday’s non-topic, Satyam, and what the company's troubles mean for the Indian services industry.

The elephant in the room did come out today, bright and early this morning, in fact, as I shared breakfast with NASSCOM President Som Mittal, Chairman Ganesh Natarajan, and Vice-Chairman Pramod Bhasin. Yesterday, I was somewhat disappointed and concerned at the lack of focus on increased financial transparency and disclosure in the main sessions. In retrospect, since NASSCOM is really by vendors, for vendors, it would have been uncharacteristic for anyone to shine a light on the issue any more than necessary. Especially with all the press this event gets.

This morning, Mr. Mittal talked frankly about Satyam and shared additional details on the resurrected ethics and governance committee. He also touched on geopolitical risk, highlighted the Indian government’s efforts on border security, and said that NASSCOM is in involved with detailed security planning with government agencies, though he could not expose details.

He added that NASSCOM’s security data council is one of the group’s busiest, and is working with outside cybercrime specialists. All of these efforts are crucial, not only in light of recent events, but with the heightened sensitivity to risk that all services buyers have as they rely more and more on offshore partners to run higher-value business processes and handle sensitive data.

NASSCOM: Pushing the Reset Button on an Industry, But Hush-Hush on Satyam

We are priveleged this year to have AMR's own Dana Stiffler at the NASSCOM show in Mumbai.  What a time to be at the heart of the Indian services industry with the recent Mumbai terror events, the Satyam saga and the current economic crisis...  How is India Inc. responding? Over you to Dana:

NASSCOM President Som Mittal opened the group’s 17th annual leadership conference with praise for the resilient city of Mumbai, as the packed house observed a moment of silence for the victims of the city’s terrorist attacks last November. It’s a watershed moment for NASSCOM and the industry in general and Mr. Mittal struck just the right tone in his opening comments: cheerful, welcoming, resolute. Addressing the attacks and Satyam’s challenges up front, he told us it was time to reset expectations.

As for specifics, Mr. Mittal announced that NASSCOM will reconvene its ethics and governance committee. He also highlighted green technology as a new opportunity and responsibility for NASSCOM members, and reminded the group that NASSCOM’s work is now truly a global affair. Members from 22 countries are participating this year. 

Cisco CEO John Chambers delivered the event’s keynote. Mr. Chambers proved the ideal man for the task, given the ups and downs he’s experienced in his tenure at Cisco. His umbrella topics were global competitiveness and collaboration, accompanied, naturally, by a big plug for Cisco’s TelePresence technology. But it was his anecdote about Jack Welch telling him that “you’ll never have a great company until you have a near-death experience” that probably resonated best with the audience, most of whom have never been through a major downturn.

Indian Minister for Commerce and Industry Kamal Nath came next, charging NASSCOM to use the global economic crisis as a time to look inward to the Indian market opportunity. India’s IT sector has been heavily export focused, the largest players even more so. This has left much of the Indian IT opportunity, especially at the enterprise level, open to rivals IBM and HP. I agree with Minister Nath that Indian IT needs to be stronger domestically for another reason as well: the multinationals we work with all have emerging market IT strategies. Today, Accenture, HP, and IBM are better-positioned to advise on and support these operations than Indian service providers.

Then, finally, the session I had been anticipating the most: a panel discussion featuring Vineet Nayar, Nandan Nilekani, and S. Ramadorai, top executives of HCL Technologies, Infosys, and Tata Consultancy Services, respectively. TPI’s Dennis McGuire was there for buyer insight and color commentary as well. I was less interested in what the panel had to say than in how they would said it. Indeed, it was fairly predictable, if reassuring stuff – there is no question these companies will be around for the long haul. All agreed that there is a lot of efficiency to be wrung out of current operations and that uncertainty and volatility are the new normal. Mssrs. Ramadorai and Nilekani talked about deepening client relationships and helping them leverage existing scenarios while Mr. Nayar made no bones about aggressively seeking market share, i.e. “eating someone else’s lunch.”

Presumably it is Satyam’s lunch that we are talking about. But we didn’t talk about Satyam -- none of the panelists even mentioned the company’s name, though the moderator did in a few joking asides. Of the ten or so questions from the floor, none were about increased client concerns with vendor financial transparency and viability.  The panel missed a major opportunity, perhaps the event’s only main stage opportunity, to address the biggest elephant in the room.

And so, while NASSCOM’s first day was reassuring, even inspiring, on many levels, there’s a lot more that needs to be said. I look forward to your comments and questions as the event unfolds -- tomorrow brings the likely emergence of said elephant as I’m having breakfast with NASSCOM leadership and participating on two panels. Stay tuned.

We are priveleged this year to have AMR's own Dana Stiffler at the NASSCOM show in Mumbai.  What a time to be at the heart of the Indian services industry with the recent Mumbai terror events, the Satyam saga and the current economic crisis...  How is India Inc. responding? Over you to Dana:

NASSCOM President Som Mittal opened the group’s 17th annual leadership conference with praise for the resilient city of Mumbai, as the packed house observed a moment of silence for the victims of the city’s terrorist attacks last November. It’s a watershed moment for NASSCOM and the industry in general and Mr. Mittal struck just the right tone in his opening comments: cheerful, welcoming, resolute. Addressing the attacks and Satyam’s challenges up front, he told us it was time to reset expectations.

As for specifics, Mr. Mittal announced that NASSCOM will reconvene its ethics and governance committee. He also highlighted green technology as a new opportunity and responsibility for NASSCOM members, and reminded the group that NASSCOM’s work is now truly a global affair. Members from 22 countries are participating this year. 

Cisco CEO John Chambers delivered the event’s keynote. Mr. Chambers proved the ideal man for the task, given the ups and downs he’s experienced in his tenure at Cisco. His umbrella topics were global competitiveness and collaboration, accompanied, naturally, by a big plug for Cisco’s TelePresence technology. But it was his anecdote about Jack Welch telling him that “you’ll never have a great company until you have a near-death experience” that probably resonated best with the audience, most of whom have never been through a major downturn.

Indian Minister for Commerce and Industry Kamal Nath came next, charging NASSCOM to use the global economic crisis as a time to look inward to the Indian market opportunity. India’s IT sector has been heavily export focused, the largest players even more so. This has left much of the Indian IT opportunity, especially at the enterprise level, open to rivals IBM and HP. I agree with Minister Nath that Indian IT needs to be stronger domestically for another reason as well: the multinationals we work with all have emerging market IT strategies. Today, Accenture, HP, and IBM are better-positioned to advise on and support these operations than Indian service providers.

Then, finally, the session I had been anticipating the most: a panel discussion featuring Vineet Nayar, Nandan Nilekani, and S. Ramadorai, top executives of HCL Technologies, Infosys, and Tata Consultancy Services, respectively. TPI’s Dennis McGuire was there for buyer insight and color commentary as well. I was less interested in what the panel had to say than in how they would said it. Indeed, it was fairly predictable, if reassuring stuff – there is no question these companies will be around for the long haul. All agreed that there is a lot of efficiency to be wrung out of current operations and that uncertainty and volatility are the new normal. Mssrs. Ramadorai and Nilekani talked about deepening client relationships and helping them leverage existing scenarios while Mr. Nayar made no bones about aggressively seeking market share, i.e. “eating someone else’s lunch.”

Presumably it is Satyam’s lunch that we are talking about. But we didn’t talk about Satyam -- none of the panelists even mentioned the company’s name, though the moderator did in a few joking asides. Of the ten or so questions from the floor, none were about increased client concerns with vendor financial transparency and viability.  The panel missed a major opportunity, perhaps the event’s only main stage opportunity, to address the biggest elephant in the room.

And so, while NASSCOM’s first day was reassuring, even inspiring, on many levels, there’s a lot more that needs to be said. I look forward to your comments and questions as the event unfolds -- tomorrow brings the likely emergence of said elephant as I’m having breakfast with NASSCOM leadership and participating on two panels. Stay tuned.

Everything will change

I've been avidly following Robert Peston's coverage of the economic crisis.  Peston is the BBC's business editor and has built a stellar reputation for reporting the key facts on what went so massively wrong and what we can do to emerge from this crisis. His recent BBC radio discussion with Robert Wolf, Financial Times's chief economic commentator, Richard Lambert, director general of the CBI and Roger Carr, the chairman of Centrica and Cadbury, is well worth hearing.  Key points discussed:

• * The UK is the most vulnerable economy, due to its unprecedented housing bubble and over-reliance on the financial services sector.

• * The strong sense of denial is fading - there aren't going to be any winners out of all this, just relative advantage. 

• * Not everyone yet grasps this is a massive structural change - we're not going back to 2006.  The massive consumer-led debt boom cannot be repeated.  We might go back to fast growth, but the whole pattern of global demand will have to be different for that to happen.  The world economy will have to be re-balanced in different ways.

• * We've done a very good job of driving short-term stimulus and saved the banking system, but the long-term solution has to be the restoration of healthy private sector demand across the world: that is the next stage of getting back to a healthy economy...but does the private sector understand this?  There is an increasing awareness that we are interdependent.  Unless the strong support the frail we will have continuing difficulty.

• * We must protects the emerging economies now and change the way we finance them.  The IMF resources need to be bigger to protect developing economies.

• * We need to have serious intelligent dialog with the Chinese on how to make their growth more compatible with global stability.

All-in-all, you can really start to guage how crucial the role global sourcing has to play as we emerge in a new economic structure.  The inter-dependencies across economies and businesses can be managed more effectively by firms adopting multi-cultural, multi-lingual and multi-regional delivery models. Both governments and businesses need to embrace both local and global talent to restore private sector demand over the long-term.  What is abundantly clear is that we don't fully realize how this structure will ultimately develop, but we are quickly understanding the basics of what needs to change.  The next stage is for both governments and business to work together on stimulating long-term demand and making these inter-dependencies really function effectively.

Want to offshore yourself?

IBM is now offering employees, who would otherwise face layoffs from their North American jobs, the chance to work abroad through 'Project Match'. Destinations include Argentina, Brazil, China, Czech Republic, Hungary, Mexico, Poland, Romania, Slovakia, Slovenia, South Africa, Turkey, and United Arab Emirates. IBM will also help with moving costs and provide visa assistance. While some cynics will sneer at this scheme, at least Big Blue is doing something proactive to support at-risk staff, and also promote moving much-needed onshore talent into their emerging country delivery centers. Furthermore, maybe they'll pick up some good work habits and bring them home to the States when the economy improves?