Moving away from IT services to products

While the last two decades saw the Indian IT industry grow into a $100-billion industry, the sector missed out on developing software products and an opportunity to differentiate in the face of global competition.Earlier this year N.R. Narayana Murthy pointed out the need to position India as an innovation destination, build products and add value by strengthening its existing areas and looking at new ones. This clarion call is resonating amongst others in the Indian industry at a time when winning deals and getting Fortune 500 companies to open up their technology budgets are getting harder.

Analysts and industry watchers are of the view that despite growth in the sectors contribution to Indias GDP, from 1.2 per cent in fiscal 1998 to 7.5 per cent in the 2012 fiscal, the sector still missed out on opportunities to position India.The two most often cited areas are software products and the ability to go beyond body shopping and cost arbitrage. When I look at Indian IT services players, I cant distinguish one from the other, says a US-based outsourcing advisor who does not wish to be identified as he works with some Indian IT companies.

The differentiation, he adds, can come by working closely with outsourcers and identifying new ways in which those companies can improve their top- or bottom-line. Industry watchers feel that methods that worked in the past will not work in the future.Customers around the world complain that Indian sales people continue to confuse aggressiveness with inquisitiveness. In other words, instead of trying to understand, anticipate and pro-actively shape customer issues that can drive future demand, they assume that the answer to sales growth rests in simply calling upon a customer more frequently, says Peter Schumacher, CEO, Value Leadership Group. This, in effect, sums up the sector.Products can offer some differentiation. Indian companies were never serious about building products and that needs to change, according to Pradeep Mukherji, President and Managing Partner, Avasant.

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