Ganesh: What are you hearing from your clients? I believe young companies are being told “no longer talk to the CIO but talk to the Chief Marketing Officer or the Chief of Supply Chain etc”. So, how are customer dynamics changing in the IT Sector?
Ramesh: If you look at the entrepreneurs in India who have set up IT Services companies; they have modeled themselves on the Big Six – Infosys, Wipro etc. These companies really grew up in the early 2000s where they built their model on whatever the customer told them. Initially smaller companies followed this success mantra. However, in the last few years, the sand is slipping from under their feet.
They are finding that customers believe that this model is old school. Furthermore, the CIOs are no longer controlling the larger part of the budgets. As a result, these companies are not seeing the same growth as their larger peers saw in the early years. This is confusing the young companies
Ganesh: A lot of stuff is being punched as digital, whether it is the cloud, mobility etc. Let’s say you have a client running a 200 crore company and he says in the next 500 crores, I want 90% to be digital. So where do they find the additional 300 crores? What strategies would you advise young companies to take to build successful digital businesses?
Ramesh: First of all, we tell our clients – look at where the budget is going. Is the budget is now going to the Chief Marketing Officers or the Chief Sales Officers and so on? So first of all, follow the budget! That’s a great way to build a business
Then, figure out what value can you provide to them. Let’s say, if one of our smaller clients is pitching to a medium-sized company, let’s say, a 500 million dollar company and then try to understand, what is the vertical segment they are in? Let’s say if they are a mid size insurance company. Then we advise them to understand what is changing in the insurance space? For example: The insurance sector is now going on “pay per use”. So, can you be ahead of the curve and help your client build a business model that addresses the “pay per use” insurance business. So you build a strong competency in the vertical space and help your clients address the entire gamut of the business from producing to selling and build your capability in a way that you get a very strong niche.
The other option is that you can really pick up a horizontal service. For example, you define the user experience. You become the leader in defining the user experience for your industry and then you will find companies mostly in that sector, but you’ll also find companies that learn from this, and say that we want to work with you because you are the ultimate guys in user experience or you are the analytics company.
Ganesh: So if I hear you right, you are saying, there are two opportunities for the 200 crore company to build the next 500 crores. One is to choose a very specific vertical domain and build a whole capability in digital for that domain. And the second option is to choose a core horizontal, build the best width and depth in terms of Technology, Expertise, and Consulting. Are you saying both are equally valid options?
Ramesh: Yes, both are equally valid options. You have to pick one of the two. Generally, we found that most of our companies being smaller, they can’t do both – they can’t be all things to all people. So if they pick one of these two strategies, it generally leads them to success.
Ganesh: That’s a great opportunity for young companies. But then tell me, I was hosting the CEO of one of the most successful digital companies – Globant, which is now 400 million dollar company trading at 1.6 billion on the New York Stock Exchange. Martín Migoya, their CEO was with us and he said that we don’t even have a perfect point of view on digital. When Disney or Southwest Airlines comes to us, we first set up a pod that could be purely based on people with experience in customer behavior. And the next pod we setup may have little more to do with analytics, the third pod would be very heavy technology and the fourth is implementation. So he is saying that literally, like a chameleon, we are changing our colors every time a new customer requirement emerges. So this needs graphics skills, this needs behavioral skills. Do you really think our smaller companies and indeed even the larger companies in IT services are prepared for this kind of change in the profile of the people they employ? Are IT companies prepared for the changing nature of skills required?
Ramesh: Well, you know, no one is perfectly prepared for it. Globant is a great example. They have focused on horizontal specialization. They tell their clients – we don’t know your vertical, but we will learn it fast because we have set up multi-skilled, multi-functional teams that can come in and set up the pods and transfer the learning quickly and efficiently.
However, no one is perfect. Smaller companies have greater opportunities to bring the behavioral scientist that they need or the user experience experts that they need, without the legacy burden that the larger companies have in terms of their compensation structure, the culture and so on.
Ganesh: So, the good news is – there’s opportunity. I think what you heard Ramesh Mirakhur say is “choose your playing field”. It could be a vertical or it could be a specialization that you’re going after.
Don’t think that because you’re a small company your only customers are going to be small and medium firms. There is no reason why young companies can’t compete with the biggest, so long as you have the confidence to be able to go out and define your value proposition and make something happen in a very thoughtful, very sustained and very systematic manner. So all the best to all the smaller companies. It’s still a great market opportunity and I am sure you will be very successful.