Indian IT companies seek right platform to compete globally

Indian IT companies seek right platform to compete globally

Mumbai/Bangalore: There is a new buzzword in the Indian information technology (IT) industry—platform—that reflects the desire of large companies here to compete with multinational IT firms such as International Business Machines Corp., (IBM) and Hewlett-Packard Co. (HP).

Large Indian IT services firms are looking to offer business solutions that integrate hardware and software to create technology platforms capable of running entire business processes.

India’s largest IT services firm Tata Consultancy Services Ltd (TCS) has 14 clients on such technology platforms while the second largest, Infosys Technologies Ltd, has four “and a good pipeline". HCL Technologies Ltd declined to share the exact number of clients on such platforms, but claimed to be a first mover in the space. A Wipro Ltd spokesperson did not respond to Mint’s queries.

Analysts say given that multinational firms such as IBM and HP have been offering such integrated technology solutions for some time, Indian IT firms are playing catch-up.

The Indian firms, however, see the issue differently.

Anubhav Kumar, vice-president, global marketing, infrastructure services, HCL, claims that customer feedback reveal that services offered by larger multinational peers lacked flexibility that customers sought.

“We go beyond just offering the customer a black-box and sending them an invoice every month," Kumar said. In contrast, he added, “we gave them multiple tools to monitor and evaluate the performance of the entire platform on a continuous basis".

IBM declined to comment to Mint’s queries.

Irrespective of its success, the move to platforms indicates a clear shift in the strategy of Indian IT firms that have traditionally remained hesitant to own assets on behalf of customers—which is essentially what the model involves.

Chandrashekar Kakal, global head of enterprise solutions division at Infosys, said his company completely owns the platform and will provide services to customers much like a utility does.

The software that forms the core of the platform could be developed by the IT services firm; or it could be business software from companies such as Oracle Corp. or SAP AG customized for industries, even customers.

“For horizontal services (such as accounting, payroll or human resources) TCS believes that there are well-established ERP products, which can provide the core-technology," a TCS spokesperson said in an email.

“The way it is structured, we may not build everything from scratch, we have taken the best of the packages available in the market and built a solution around it," said Infosys’ Kakal.

As the IT services firm customizes?the?platform, ?it adds its own applications to it—building intellectual property (IP).

IP is the key to building a platform, said Surjeet Singh, chief financial officer of Patni Computers Ltd. “We (Indian IT industry) focused on (cost) arbitrage, we focused on solutions and we are now focusing on intellectual property. Without intellectual property, we can’t have true platform," Singh added.

There is demand for such service offerings, but they aren’t exactly new, said an expert.

The move to platforms “is being driven from a risk perspective by the end customer who wants one person to handle the entire IT investment and wants to ensure that things do not fall into cracks between the IT hardware provider, the software licence provider and the SI (system integrator or company that puts it all together)", said Rajarshi Sengupta, executive director and head of technology integration practice at advisory Deloitte and Touche Consulting India Pvt. Ltd.

The IT firms themselves see other benefits in the shift.

Infosys’ Kakal said profitability of platform-based efforts would increase once more clients came on board with the service provider being able to serve many of them from the same platform.

“This model, so far used by larger multinational players, gives the service provider leverage when it comes to buying software licences or data centre space in bulk," said Abhijeet Ranade, associate director, technology advisory services, at consultancy PricewaterhouseCoopers Pvt. Ltd.

Customers themselves are still not entirely comfortable about delegating control of key functions to service providers and, according to Eric Simonson of the US outsourcing advisory, Everest Group, there is a fair degree of apprehensiveness over handing the entire business processes to a single service provider.

Still, a compelling reason for companies to adopt such a model is that it allows them to move from an upfront capital expenditure (capex) model to an ongoing, operational expenditure (opex) model, or what service providers call a “pay-as-you-go" model.

“The capex to opex proposition is a very strong incentive for customers, especially SMEs," Ranade said