Reverse outsourcing? Ugh.

The other day I was chatting with somebody about outsourcing industry. The conversation turned to the term that has been widely been used recently - “reverse outsourcing” - Indian companies opening software development centers overseas. My friend argued that the main driver for this trend was that cheap labor was not available in India anymore due to rupee depreciation and wage increases; hence Indian IT companies are forced to look elsewhere.

Though there is some truth to this argument, I felt that it was simpleton logic. No doubt, Indian companies are encountering a slate of market challenges – maturing landscape, depressing margins, and talent crunch. There are other forces that are outside their control such as currency fluctuations, work visa issues etc. However, cost savings alone is not the driving force behind this.

This discussion got me thinking if the phrase “reverse outsourcing” had an implicit negative connotation. For me, reverse outsourcing by Indian companies is the next logical progression of their global growth strategy. Build global organizations, tap into new markets, get close to the customer’s business and execute better and more intimately. The game has changed from cost savings to providing overall value – no more hiding behind the low-cost model. This image makeover from world’s cheap back-office to strategic partner has been long due.

Over the years, outsourcing has become synonymous with “stealing local jobs and shipping off to India”. Though this perception has been changing, it is still looked down upon by general public. I understand media outside India using this phrase but I cringe whenever I see Indian media uses this phrase. Whenever a TCS or Wipro or Infosys opens an overseas development center, reverse outsourcing is generously used to report it. I’m not sure if it is a deliberate attempt by Indian media to get political mileage out of “creating local jobs” in US or Europe.

I may be nitpicking but I would rather use the phrase “global expansion” instead of reverse outsourcing. Thank you.

2008 Black Book Outsourcing Survey: Customer service is a strategic differentiator!

The results of 2008 Black Book Survey are out and its overwhelming theme is that "customer" is back again. News flash to Indian IT service companies – Customer Service IS still a strategic differentiator.

A big so-called surprise in the survey results? The free fall of Infosys. The wheels seem to have come off at Infosys which has been pounded by customers– it slipped from a top ten placing last year to an ignominious 59th position this year. It goes to show that past achievements can carry your marketing message only so far.

No one can dispute the fact that Infosys has worked very hard to create a global Indian brand. Unfortunately, they may be the victims of their own success. My personal opinion, although unsubstantiated, is that Infosys has been focusing more on “marketing a message” than on “creating the right message”. They have squeezed every last ounce of life from the “World is Flat” phrase. If I had a penny for every time a top Infosys executive used this phrase so far, I would have given Warren Buffet a run for his money :)

What Customer Service?

However, I think this malaise is not limited to just Infosys. Some other Indian IT companies may have been placed near the top in this survey but they are still a long way from being classified as truly customer-oriented. Being services companies, you would imagine customer service would be at the forefront of their growth strategy. Yet, it is surprising that for companies with revenues $3B or $4B, “customer service” is an after-thought for the most part. Sure, there are customer satisfaction surveys that are sent out periodically. Sure, the executives meet with customers on a regular basis. Sure, the sales/marketing teams reach out and treat the prospective customers royally. However, this responsibility is peanut-buttered across multiple units making it difficult to have a holistic and strategic focus. At fault is the this new culture of quarter-to-quarter focus that blinds them to what is good for customer and nickel-and-diming that encourages shortcuts.

Customer service is strategic.

The past decade has been very forgiving for Indian IT companies because of the availability of cheap labor and an early-mover advantage. I once heard somebody say that Indian IT companies are successful “despite themselves” - they have been riding the outsourcing wave at its peak and competition at its weakest. Now that outsourcing process has been commoditized wth fierce competition, most of the companies are ending up with similar service offerings. While moving up the value chain, building new revenue streams etc are critical to organizations survival so is customer service. A unique and top-class customer service could be the key to breaking this homogeneity and differentiate from the crowd.

Indian IT companies could start addressing the problem of fragmented customer service responsibility by making customer service, a strategic business unit, to own the overall responsibility of customer experience.

They also have to “engage” the customers as opposed just communicating with them. While the rest of the world is moving to next level of service through various web 2.0 tools, most of the Indian IT companies are still stuck in the old way of doing things.

Should there be a Chief Customer Officer in Indian IT companies any time soon?

Video Game Consoles - Top Energy Gluttons

Going Green is probably the most fashionable thing to do - right after owning the latest gaming gizmo. There is universal support for green causes these days (tree-hugger isn't an anathema anymore) and no demographic is more vocal on these issues than the younger generation.

A new study by Australian consumer agency, Choice may prick the conscience of Generation 2.0. The study rates most of the electronic devices and household appliances in their energy use. It has found that a Sony PS3 console when left running, will consume five times more energy than your average refrigerator! Other energy hogs were Xbox 360, Plasma TV sets, Desktop PCs. The study draws a debatable comparison between Apple iMac and a monitor-less PC saying that iMac uses only two-thirds of energy compared to a PC. The report also advocates a series of energy saving tips. The full report is available here.

As is in any developing market, the first few years are spent on getting things in working order. Efficiency kicks in when the industry has matured and every bit of productivity makes a difference to the bottom line. I hope reports like this create more consumer awareness and eventually force these companies to adopt much greener products.

On the other side, we are always outraged by our higher energy costs and almost always put the blame on anybody but us. We all need to go on a different kind of diet! Can we all watch our energy consumption like single-minded focus we bring to watching our weight? Turning off all electronic items when not in use may the first step.

Facebook open-sources developer platform

Facebook recently announced that it has open-sourced a significant part of its Facebook platform, including most of the code that runs Facebook Platform plus implementations of many of the most-used methods and tags. This is a good move but it may have come a little too late for Facebook.

This is an anti-incumbent move what with Google having already established OpenSocial as a strong common platform candidate. With its more popular developer platform, Facebook was in a great position to create a loyal and thriving developer/application ecosystem. Instead, it is OpenSocial that boasts of a strong club membership with MySpace, Yahoo, AOL, Hi5 etc. Bebo is probably one of the exceptions that support both FaceBook and OpenSocial. While ostentatiously, Facebook wants "to give back to the developer community", it is more of a desperate attempt at playing catch-up with Google. The fact that it did not have any "launch" partners to go with is testament to the urgency with which Facebook scrambled to get this initiative going.

Despite its late entry to the party, it is still a significant move from Facebook. After all, it is one of the biggest social platforms out there before OpenSocial came along. This move attempts to provide the required counter-balance to OpenSocial which did not start out as auspiciously as Google would have liked even though it beat Facebook in the initial sprint. Too many teething problems marred its beginning stages. There are still a lot of open questions around OpenSocial and some of its members have conflicting priorities with the Google partnership. In any case, this move forces both the companies to improve their platforms to become the platform of choice.

How are developers likely to receive this? Facebook loyalists will no doubt rejoice but a lot of developers will now also be torn between two platforms. It doesn't make sense for developers to have competing platforms for the same applications. Developers should be worried about the delivery of value through applications rather than getting bogged down with compatibility issue or having to maintain multiple code-bases.

If Facebook doesn't keep the developers interested and OpenSocial steadily gains acceptance, it is likely that OpenSocial will become the de-facto standard. With that, Google moves one more step closer to creating an internet operating system.

In the midst of all I find one trend heartening - the walled-gardens are slowly giving in.

Microsoft Unveils Multi-Touch Technology For Windows 7

A couple of days ago Microsoft showed a limited demo of multi-touch technology for their upcoming Windows 7 operating system. Microsoft's next operating system with built-in multi-touch technology is expected to enable a whole new set of host of touch-screen applications. Microsoft Chairman Bill Gates said, "Today almost all the interaction is keyboard-mouse. Over years to come, the role of speech, vision, ink - all of those things - will be huge." The news has a lot of people excited for the future of multi-touch technology, if not for Microsoft itself!

Touch the future

Touch-screen technologies have been in development for a couple of decades now. They are already in use in ATMs, retail outlets, check-in kiosks, tablet PCs, cell phones, GPS devices etc. iSuppli, a market research firm predicts that touch-screen technology market will double to $4.4B by 2012. The roaring success of iPhone validated consumers’ appetite for new, easy and intuitive ways of interaction. Its mass adoption is also testament to the fact that touch-screen technologies are now becoming main stream.

It is not new. Then, why is this development significant?

Most of the current applications of touch-screen technologies have been around the hardware - screens, touch pads, tablets, cell phones etc. This development is significant in the sense that Microsoft is now proposing the integration of these technologies into the operating system. Well, Microsoft is not blazing an altogether new trail. While Apple & Microsoft tried to put in multi-touch support in their previous operating systems to some extent, they haven't really taken to fundamentally building an operating system with strong support for these technologies.

Who is going to be the winner?

It is a moot point whether Microsoft can deliver Windows 7 as promised. Apple having already had experience with these technologies, can't be far behind. In fact, it may even beat Microsoft in this race. However, Microsoft has the lion's share of the current PC market with its Windows operating system. With internet platforms and online software applications such as Google Docs already eating into its Windows pie, Microsoft needs to exploit this technology which could potentially resurrect its position in personal computing software market.

With its impressive ecosystem of partners and relentless marketing arm, Microsoft can propel this technology to the next level and hasten its mass adoption in personal computing space. The key is whether Microsoft can do a half decent job with this new operating system.

My fingers are crossed.

Is Microsoft's Live Search Cashback Doomed? Not so fast.

(Also posted here)
There has been a lot of buzz around Microsoft's Live Search Cashback program that was announced recently. Most of the commentary has been along the expected lines - Microsoft is the perennial villain and anything it does has to be ridiculed. Consequently, there are very few positive reactions to this move from Microsoft. If the roles between Google and Microsoft were reversed, everybody would be bending over backwards to shower Google with praises like "paradigm shift", "out-of-the-box thinking", "game-changing" the dreaded "innovation" etc.

While I don't have any extra love for Microsoft, I do think that Microsoft has not been given enough credit for this great move. Google has been dominating the search market for a while now. Microsoft needed to do something drastic to be competitive in this area and I personally believe this offering will allow Microsoft to take the fight to Google.

Disruptive Model

While there is no doubt that Microsoft needs to innovate in search technology, this is still a brilliant innovation in the model. At the same time, I concede that there is no single silver-bullet that Microsoft can come up with to challenge Google. Microsoft will need a series of such disruptive innovations - either in technology or in search models to take the fight forward.

Microsoft can withstand the losses

As has been analyzed to death, this program is not going to generate immediate returns for Microsoft. It may even be difficult to keep it profitable for a long time. Nonetheless, Microsoft is sitting on a pile of cash and it can afford to lose some revenue if it means it can attract more traffic. Remember, search is bread-and-butter for Google. Microsoft has other strong revenue streams apart from ad-revenue from search. Microsoft can bleed a little in this secondary revenue stream if it means it can make Google bleed more in their primary market. Hasn't Google been trying to do the same to Microsoft with their web-based software?

Will Google and Yahoo sit idle? Absolutely not. Is this initiative a winner? Can't say. It may still end up a flop. In any case, the search market is about to get competitive again. As most would agree, that will only benefit the users, consumers and advertisers.

Telepresence - Can It Transform Offshore Delivery Model?

(Original post here)
We have been hearing about Telepresence for some time now. Its primitive form, video-conferencing, has been around for a while. Now I think we are at an inflection point in the technology maturity level. Admittedly, Telepresence technology has a better use in other industries than in IT Services/BPO.

New Opportunities
Indian IT companies have hit a slow growth path due to a variety of factors such as rupee appreciation, slow economy, and increased competition in outsourcing. It is true that Indian IT companies arguably pioneered the offshore model. However, US-based IT services companies have quickly learned to play the same game. The current traditional Global Delivery Model has matured and is no more a key differentiator. Onshore, Offshore, Nearshore, Right Shore, Anyshore are passé. It is time to have a "shore-proof" delivery model.

I personally feel that the Telepresence technology is one that has the potential to trigger some innovation in the offshore service delivery models. Of course, technology alone can't provide a competitive advantage if commoditized - an exception being early adoption. It is how one uses the technology that brings out the differentiation.

Current Offshore Delivery Model and Challenges
By its nature, global delivery model involves people from different geographies, cultures and social backgrounds. Most of the communication in the current model happens over e-mails, long early-morning or late-evening telecons, web conferences, instant messages etc. Videoconference is very rarely used in most offshore companies. Talk to anybody that works in a global delivery model, and they are sure to blame the "other-shore" team for any problems in the projects/programs/products.

Can Telepresence Improve It?
Most of the current challenges are related to communicating with e-mail or phones. Teams miss precious non-verbal clues such as body language, moods, and cultural nuances when communicating over these traditional channels.

Some of the immediate effects with the adoption of telepresence technology could be:

• More effective communication between the teams leading to better execution and improved team dynamics


• Reduced travel costs - Initial knowledge transition or requirements gathering phase can happen without the teams traveling; Project/Program/Customer Reviews; Sales presentations; Conceivable elimination or reduction of the role of a pure onsite "coordinator"


• Team meetings - Brain-storming with customer, onsite, offshore teams

Prohibitive Cost
No doubt that these systems are expensive at $200K-400K and upwards, not to mention the maintenance costs. Connecting key development centers in different geographies may be the first step. These can act as hubs servicing multiple customers, projects and teams. An account review where 2-3 executives from an offshoring company travel across the globe for a day or two, will cost about $20,000. I think a basic telepresence pays for itself after 15-20 such virtual meetings.

Indian IT industry uses a convenient the excuse that they have competitive edge over China and other alternative offshoring destinations because of its large pool of English-speaking engineers. While it is true to some extent, that gap is narrowing very quickly. If you add technologies like this to the mix, communication becomes less of a hassle. China or Vietnam or Malaysia could see this as a disruptive technology to challenge Indian IT companies.

Should Indian IT companies such as TCS or Wipro or Infosys seriously consider it or is it too soon to think about it?