Indian IT industry - from services to branded products

Abstract

EXECUTIVE SUMMARY The appreciating Rupee, emergence of China and Russia as alternate outsourcing locations and the aggressive hiring by MNC IT Service providers in India have all resulted in pressures on the Indian IT Service Providers to move up the value chain and look beyond being cost leaders. The current focus of the industry is to move into technology consulting and solutions space. We try to present another alternative in the form of IT products and study the viability of these products in the market. Looking at the Indian IT service providers we see that revenues have grown steadily in the past decade on the basis of a strong outsourcing wave in the West. But the larger Indian IT firms have all concentrated all their efforts in the service space, developing software which firms would traditionally have developed in-house. None of the major players (namely Infosys, Wipro, Tata Consultancy Services, HCL and Satyam) has tried to focus on one particular domain; and are servicing customers in areas as diverse as Banking and Financial Services, Telecom and Product Engineering, Retail and Manufacturing. Most of the software development is highly customized software application development for one particular client only. There is very little focus on integrating the various applications into a single product offering which can be marketed to the customers. Infosys broke this mould with its Finacle product and i-Flex followed with FLEXCUBE and both have been reasonably successful. Traditional software development involves considerable time in development from scratch and hence increased costs. Packaged software products eliminate most of the development time since the customization cycle is usually smaller and are hence implemented sooner. We looked at three different Indian IT products organizations 1. Subex Azure India : A startup focusing on telecom revenue leakage space 2. Yantra Corp. : Incubated and spin-off from Infosys 3. Sasken Technologies: Providing both Product and Service offerings in the telecom space. Each of these players has carved out a niche for itself by focusing B2B customers in niche domains and their success serves as roadmaps for entry of Indian IT services organizations into the IT products space. B2C IT products are not feasible for Indian IT firms as they involve the kind of strong marketing muscle needed to take on existing players that Indian IT services organizations don’t have.