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The Coming Death Of Indian Outsourcing ; Need to go up the value chain

Here is a good article from FORBES on the "danger of death" for Indian outsourcing.

CLick Here for the article from FORBES

I totally agree with the author's views. It is time for the top management of Indian SOftware Houses to think beyond the low end services game and move up the value chain by start producing innovative products. This fact is very evident if one looks at the balance sheets of these large Indian comapnies like INFOSYS, TCS, WIPRO, SATYAM etc. The revenues from products is 0 to 2%.

Innovation is one part of the story. Some of these companies did come up with some software products in the past but never were successful in creating the global brands. It is not easy for the management and sales force to adopt to this new business model. It is not a rocket science but needs focus, commitment and will to take risk. There are handful of Indians who has this expertise. These sales experts cannot do much when they do no thave mamageemnt support. Today, they all go afetr easy money with short sales cyles.

The sales cycle for a body shop could be anywhere from 1 day to 1 month, where as for an outsurcing project it could be anywhere from 1 month to 6 months depending on the size of the deal.

The product sales cycle could easily be anywhere from 1 yr to 5 yrs, depending on the customer profile. One has to invest in time and money in marketing, building the prodct brand, acceptance of the product by the customers, testimonials from customers etc before one takes off.

Americal companies and the teams are masters in executing this business model, over the time. Indian companies need to learn this game. One way to do this is to induct and integrate the American expertise. This is where the Indian companies are still struggling. It is easier said than done to do this due to many factors. The long sales cycles of the products is something a company with outsoucing business model ( short sales cycle) can not digest easily. The associated cultural changes pose problems too. It took 25 yrs for Korean gaints like Samsung to understand, overcome the cultural barriers, integrate and finally win the US markets. Do the Indian companies have such persitance? I think they have no option.



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