The opportunity for smaller tech firms

For many such firms, it may be feasible to continue to focus on conventional technologies; for the more ambitious, there is an opportunity to morph into a full-capability digital transformer

Digital acceleration is the need of the day for all medium and large corporations worldwide and the surge in demand for digital solutions and services shows no signs of abating in the near term. A full strength digital offerings set is the biggest opportunity for digital product, platform and services providers in India and worldwide with the consequent imperative to build capabilities and offerings which can help their customers service their own customers better.

In the first flush of results declared by the IT majors at the end of the first quarter of the current fiscal, it is becoming apparent that the period of re-adjustment to different buyer groups, shorter and smaller contracts and higher levels of flexibility to execute digital contracts, is being mastered and the growth numbers are beginning to move from the zone of worry to respectability and hopefully by the fourth quarter back to the teens in terms of percentage growth.

The road ahead seems clear enough for the billion-dollar club and while a few may get dragged down by their legacy or inability to add the design thinking, customer behaviour and user experience skills needed to compete successfully in the changing market, Indian majors are nimble enough to follow the tracks laid by Accenture, Globant and some of the Big Four and must transition to a new model for future success. Our experience at 5F World and Kalzoom working with some of the leaders in management consulting and private equity and serving both large services and cross-border mid-tier digital companies have shown that organisations need three capabilities to succeed and scale in this new world:

  • A strategy which encompasses full-stack digital solutions capability from user experience design to SMAC to IoT and cyber-security and a marketing and sales capability to sell to the C-suite.
  • Managers and consultants fully conversant with digital and armed with specialist skills in one of the core tracks of digital technology.
  • Career development, learning, mentoring and community platforms to keep sales and delivery folks continually updated with new developments in the digital world.
The question that inevitably comes up is what is the future of the
smaller firms that have competed in the past by being a nimble and often a lower cost alternative to the large firms for dual shore applications and infrastructure development and support. On last count, there were over eighty technology services firms headquartered in India with revenues between one and five billion rupees and if one adds to that firms of a similar size headquartered in the USA and English-speaking Europe, there are probably over three hundred firms competing for their share of the digital pie.

For many of these firms, it may be feasible to continue to focus on conventional technologies with a cloud orientation, develop skills in implementation of e-commerce packages and continue to be the second or third choice for digital development and support dollars.

But for the more ambitious, the opportunity exists to morph into a full capabilities digital transformer firm, with name recognition in their chosen segment. Speaking with firms who have undertaken this transformation or are planning to make it happen in this year, the following approach seems to be working which could be considered by most CEOs who would like their firm to emerge as the success stories of the new world:

For the first year, Amazon stayed focused on its initial online bookselling business but made its first move outside the category in 1998 to online videos, electronics and toys and also opened its portals to third-party retailers and started opening distribution centres across the US and beyond.

While Amazon received its initial impetus in the internet boom years at the turn of the century, the company’s fortunes also turned when the internet bust occurred with the value of its equity deals with other category leaders declining and a few analysts even predicting the demise of the company. In 2001, the formalization of a strategy process, the first significant layoffs and a thorough clean-up of their products enabled the company to become more nimble and grow. With the launch of Prime, Amazon could well have decided to ride the wave of renewed growth and mainstream adoption of online buying to stay focused on the marketplace business. But this is what differentiates a
Bezos, Ma or Musk from the ordinary entrepreneur. Ma did it with Alipay and Ant, Musk with SpaceX and Bezos has diversified in quick succession into Amazon Web Services, Unbox, Kindle, Fire, Fire Phone and Echo. Some of these have fallen by the wayside but the profitable growth of Amazon and AWS and some of the products have ensured that Amazon has stayed ahead.

The lesson for many wannabe Bezoses and Mas in India in India is simple: Keep an open mind to chase large new opportunities and even if the first hurdle has been crossed, to build a profitable and growing business, ensure that the organization stays nimble and is willing and capable of diversifying or even transforming its business model to capitalise on new opportunities in the marketplace. Entrepreneurship in India is evolving and the glory days lie ahead!