I had one of the greatest privileges you could imagine in the software industry - of selling real products to big System Integrators of the Indian IT market. The famed SWITCH. As a sales manager at Pramati Technologies, a small enterprise software product maker, I had the opportunity to interact with many project teams at all of the famous Indian IT firms. I could observe them at close quarters and compare their organizational makeup with Pramati's own. Pramati had a culture of innovation - based on products, whereas many of the firms that I visited were purely static projects driven slaughterhouses that worked like assembly lines with little or no creativity. I loathed their very existence and could only pity their dismal justification as India's leading IT shops. I always had a gut feel that their model was not sustainable. This gut feel stemmed from the fact that there was absolutely no effort to innovate and move up the value chain. A call that is being made now by NASSCOM - what a no brainer!
Most often, I was ridiculed at these firms for being "product" oriented. I cannot help but laugh at it after 7 years, because, now there are calls for all these firms to reinvent themselves. They have to face the biggest demon they had created - an organizational culture based merely on best practices using someone else's products. They had dug themselves a hole by a lack of focus on building products. By building a business model that revolved around "lowering costs" alone, they can go only so far, because when a firm's revenue model is based on labor it cannot drive costs to zero. Whereas, if it had invested in codifying knowledge and packaging it into a product, it could have in fact theoretically driven costs to zero! Hello ! Does anyone know what Oracle or Microsoft is!
Read one of my earlier posts on Infy's model here. The price of their ADR at that point in time (Jan19, 2007) was a cool USD 56.13. They are priced at USD 41.16 as of closing today. Read more about how the market was not impressed by Infy's 25% growth in net profits here. There is nothing more beneficial for an organization that invest in "innovation" itself. A firm that settles down into making money is a cash cow and not a star! It is time to get out, if you are an investor!