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It?s not about cost any more!

Innovation need not always be a 'eureka' moment particularly when the focus is on services, writes Ganesh Natarajan.

india Updated: Sep 05, 2006 16:47 IST
IT SCOPE | Ganesh Natarajan
IT SCOPE | Ganesh Natarajan

A common refrain that is heard across boardrooms in the Western world is that the great Indian IT and BPO success story is all about cost – an Indian programmer is paid less than a third of her counterpart in the United States or Europe! Couple that with the abundant pool of talent that a billion people country with English as the preferred medium of instruction can generate, and the value proposition that Indian firms offer to the world is truly mouth watering.

However if that were the only reason for the sustenance of the Offshore Outsourcing movement across India, the industry would be in very real danger of having its party spoilt by both internal and external threats — less then ten percent of the three hundred thousand or so graduates from engineering colleges all over the country actually find employment in IT firms and the huge challenge posed by China, with its ability to make breathtaking scale of investments and train large numbers of ambitious students can be ignored only at our peril !

Add to that the challenge of salaries that go up nearly fifteen percent every year and the investment in impressive campuses that have become the price to pay to play the outsourcing game with Fortune 1000 organisations and one could argue that the high profits of the industry are merely a transient phenomenon and both revenue growth and profitability will come under increasing pressure in future! But this is where Innovation can really make the difference. And most companies have realized that this is the true differentiator – for firms within the industry, and for the industry itself to keep the lead that it has build in offshore outsourcing.

Innovation need not always be a “eureka” moment and it is not easy in a well evolved industry to discover breakthrough innovations every day, particularly when the focus is on services rather than intellectual property creation. But the focus on process understanding across IT and BPO firms is ensuring that the core value proposition of Indian firms has moved from wage arbitrage and cost to predictable and superior quality processes to sustained innovation. Innovative new service areas like Engineering Services and Remote Infrastructure Management are already being seen as holding potential larger than the present size of the entire IT industry.

Innovation in business processes too is helping productivity levels to go up at a faster clip than costs in some firms. There is substantial focus today on disaggregating the system development life cycle which will obviate the building of large campuses and enable people to collaborate across different offices, cities and even countries. The resultant reduction in time to market, cost of travel and infrastructure investments is seen as one of the many ways the industry is already researching to keep its nose ahead of the pack.

(Ganesh Natarajan is Deputy Chairman & MD of Zensar Technologies and Chairman of the NASSCOM Innovation Forum.)

First Published: Sep 05, 2006 15:42 IST