IT Majors Move Beyond Traditional Biz Models

by CXOtoday News Desk    Mar 18, 2014

IT major

Indian IT outsourcing majors are realizing that in order to thrive in the fast-changing business landscape and meet new demands of overseas customers, they need to move beyond traditional application development. India’s third largest IT services firm Wipro has just announced the company’s plans to export an innovative business model for greater profitability. The new model will become a one-stop shop for many customers in the United States, reads an ET report.

Traditionally, India’s $118 outsourcing industry, led by TCS, Infosys and Wipro, focused on application development and maintenance (ADM). At present it brings in about two-thirds of the sector’s revenue. But with the US mid-market becoming an increasingly attractive proposition for these firms, they are revamping the nature of their business models.

Wipro: For Wipro, the ET report points out that combination of experience gained in India and the Middle East and greater awareness among US customers of Indians’ capabilities, and therefore their own outsourcing options, is resulting in strong interest in a vendor who can takeover the headache of building their entire back office.

“This has been so successful in India, now we’re extending this even to the global world. We will sell software, hardware, implement and roll it out,” said Soumitro Ghosh, chief executive of Wipro’s India and Middle East business division, Wipro Infotech in the report. The $1.3 billion unit that has implemented core banking software for 10 Indian banks and built back offices for two telecom companies that entered the Indian market compete against companies both domestic and international rivals, contributed close to 9% of Wipro’s overall revenues.

Currently, companies like Wipro and TCS in India are going a step further to win important contracts in globally. on one hand, they are acting like a consultant and on the other hand, they are the Sis, who would bye, build and put together everything needed by way of information and communications technology.

[Read: Wipro Creates Impact with Digital Marketing Strategy]

In an attempt to accelerate the company’s growth, Wipro is now identifying the verticalized structure operations and customers that are most important and have the most potential, similar to a process former CEO TK Kurien initiated two years ago. “We are now almost identical in structure. The message is, from a competency perspective, what gets done in the US gets cross sold here. Vice-versa is also true,” Ghosh told ET.

Infosys: If Wipro to looking to innovate new business model, its rival Infosys is not far behind. In a meeting with global investment bank Barclay last month, the company informed that it is reworking its existing global delivery model to substantially reduce costs for its clients and become more competitive, yet again. Infosys calls this model the Value Global Delivery Model or VGDM through which it will focus on a new model of reducing costs by trimming the number of senior employees and subcontractors it employs at on-site locations, and initiate more night shifts in its offshore facilities in India.

[Read: Will Infosys' new strategy pay off?]

Infosys CEO S D Shibulal also informed investors that the company has embarked on a transformational journey where a number of internal changes focused on cost optimization, increase in productivity and quality and other changes will happen by the creation of a new global delivery model although these initiatives are very much in the early stages and will take some time for the results to show up.

TCS: As part of building a sustainable business models, in December 2013, India’s biggest IT firm, TCS also sees SMAC (social, mobile, analytics and cloud) technologies as a key area of growth, which can be combined with the sustainable model..

“We see strong evidence that SMAC is the next secular shift in computing. This new IT model blends multiple technologies to promote productivity and competitiveness,” Cognizant CEO Francisco D’Souza mentions in a statement.

[Read: Cognizant on a hiring spree to meet SMAC demand]