March 1, 2018 / by Somak Roy / IT Services Industry Dynamics / No Comments

The offshore services industry needs a 2.0

On the surface, all is well with the offshore services industry. It is a heavyweight that
can still sprint. A run rate of US$150 billion of IT and BPO engagements delivered
from India, with a growth of 10-12%, is nothing to be sniggered at. However, when
one digs deeper the challenges are immense. In fact, a few look insurmountable
without some fundamental changes in the business model.

One area of concern is that offshore providers are often relegated to tech services
that are old and commoditised. As one COO of a large systems integrator told me
recently "every salesperson we employ, if she has a US$20 million portfolio, US$2
million, or 10% of it is about the future, such as AI and automation. We struggle to
have that 10% conversation. We are good at the rest, but this US$2 million will be
the US$20 million of the future." Big ticket innovation is often the purview of western-
heritage providers. Only after the all-important question of what is to be built has
been settled do outsourcing principal turns to the India-heritage provider with a clear
scope of work. Price and SLAs dominate the conversation, not how the service
provider can help the client transition to the next-generation business models, or how
the former can help the latter move the needle on revenues.

Apart from big ticket innovation, the other complaint clients have is the lack of
ongoing innovation. In an earlier life as an analyst I spoke to easily over 100
enterprises that work with India-heritage providers. Almost universally, they said the
folks offshore and the folks who come over are good at executing on the work order,
but do not score well on proactively proposing new ideas, or pushing back. Often, an
exasperated CIO would tell me, "they know my applications, they know my
environment, they know my processes, they are the ones who should be telling us
what is to be done. But all the ideas come from our team".

An unfortunate self-reinforcing process has been underway in the offshore services
industry since at least the turn of the century. In the pursuit of scale, the industry
shunned the craftsman, the developer who can straddle multiple layers of the stack
and technologies, and can quickly grasp the broader context in which work happens.
As the assembly line-style of recruiting and managing programmers replaced the
craftsman model, the nature of engagement that the industry could conceivably win
took a particular turn, which necessitated an even more extreme assembly line
approach to keep costs low. This relentless focus on costs and scale worked well,
but essentially precluded the most innovative projects that excite the Fortune 1,000
CIO, CMO, and CDO. There have been attempts at improving the state of affairs
without making any bold, fundamental changes to the model. Design thinking training
for all and sundry is part of such incremental thinking. There is no reason to believe
thus far that such a slow and steady approach to change is making a dent.

We at Litmus7 are approaching the services problem differently. The average
Litmus7 developer has an industry experience of eight years. We like to say, we
manage “the diamond”, not the dreaded pyramid. Developers with 6-10 years
account of 50% of team size, forming the bulge of the diamond. It crowns out with
the most experienced layer – 15% of our technical workforce are veterans with over
ten years’ experience. The diamond approach is resonating with some of the largest
and most sophisticated companies in the world. We are often brought in to fix
catastrophic errors made by those learning on the job. Fortune 100 retailers dial
Litmus7 when their site must sail through the holiday season, when an environment
must be stabilized after an e-commerce platform upgrade, and when an
implementation must be gotten right the first time.
This is a first of series of blogs on the Litmus7 approach to offshore services. Stay

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