India’s $70 bn IT industry has been saying that it’s “cautiously optimistic” about the future for over 4 years ever since the recession hit in 2008. That’s a long time to be cautiously optimistic.
Instead of undercutting rates and tweaking the labor arbitrage pyramid, what they should probably do is create a sustainable culture of innovation or invest in platforms, inside or outside the company.
As Eric Ries points out in “The Lean Startup,” the amount of time a company can hold on to market leadership is shrinking and hence the imperative for even the most entrenched companies to invest in innovation.
Between the four IT services companies in India, nearly $9 bn is lying idle, earning fixed deposit rates. This rent seeking mentality needs to change. Here’s some unsolicited advice. Imagine what you could build with that kind of money!
Ries, in his book, alludes to a mantra for big corporations: Change how you measure progress. Why not measure progress against number of customers using products that didn’t exist three years ago and the percentage of revenue coming from offerings that did not exist three years ago. The way we do it now is by measuring the number of repeat clients, incremental revenues from existing clients and new clients from existing services.
Here’s some more. Double down on product innovation. Some of the largest IT services companies have come out in public and said that they will setup startup funds to invest or acquire startups. This has largely been lip service. None of them have made a serious attempt yet.
Also, tech entrepreneurs of the previous generation, who made billions of dollars from the services boom, must now seriously focus on software product startup. They are in a position to understand tech products and also package it better with their existing offerings. But instead, they end up investing in retail chains, micro finance & real estate!