'The IT industry needs to start sharing risks with customers'

by Jamsheed Gandhi    Feb 25, 2011

The global financial meltdown caused many IT companies to re-think their position and strategy. IT changed the way IT outsourcing was conducted. So how exactly do IT companies realign themselves in this new environment? Arun Jain, Chairman & CEO, Polaris Software Lab, gives his views.

How has the outsourcing scenario changed in the last couple of years?
There are two kinds of changes that we have seen this year. The financial sector was just recovering last year and now they want products and services together, they want outcome-based outsourcing. Outcome is becoming really important for CIOs and CEOs.

So, how do you think should IT companies evolve?
I think the industry has to start sharing risks with customers, business models have to change. Intellectual property has to be the focus because without it you cannot create $225 billion. Pure services will get cut at some point of time. So I think investment in R&D is critical at this juncture and we are looking at government support in this.

What kind of business models are you talking about?
We could look at different business models like outcome-based payments where we are sharing the risk with the customer. Or we could also create a tiered infrastructure like cloud computing with sharing of infrastructure between the mid-level players. So we can create different payment and stock options for different kinds of customers.

How is Polaris positioning itself in this changing scenario?
Back in March 2009 we started to look at geographical expansion; because there is a market beyond the UK and USA. These geographies only occupy 10% of the world population. There is a huge scope for expanding into other regions like Latin America, Africa, and Eastern Europe.

And how has this been progressing so far?
We have already started with our geographical expansion. We have started operations in Africa, Bangladesh, and Sri Lanka. Another objective is to ensure that our product revenue should be 30% of our total revenue. Last quarter it was around 23% and now we need to figure out how to increase it to 30%. Another dimension is to develop more key relations like the one we have with CitiBank. The aim is to have 50 such relations in the coming year, where we can invest more time and money.