A FUTURE IN THE CLOUD

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2 WELCOME TO THE FUTURE OF GLOBAL SOURCING Over the past decade, our work and relationships with business and IT leaders have offered us a unique perspective on the growing influence of technology on business, the changing role of IT organisations, and most crucially, the transformation of the global sourcing industry. Since its early beginnings, global sourcing has always been seen as a cost-optimising activity. And until recently, the role of an IT organisation within a commercial enterprise was primarily viewed as that of a support function. Its primary focus was to provide the enterprise with stable IT systems at an optimum cost, and its business participation in technology decisions tended to be relatively limited. Global sourcing became a platform for effectively solving IT and business cost preoccupations. But while cost containment remains important, everything else is changing. Digital transformation and cloud technologies have turned traditional business models on their heads. Established companies such as Apple and Google, and start-ups such as Uber and Airbnb have disrupted traditional business models in ways that were unthinkable a decade ago. Messaging applications such as WhatsApp and Snapchat have eroded the text messaging revenue streams of large telecommunications operators. And services run by companies such as AppleTV and Netflix directly challenge the traditional business models of cable companies. Even the way we shop has been radically transformed by companies such as Amazon, whose perfect aggregation of shops are available at our fingertips. Initially, the impact of aggregated online retail was limited to the music and book publishing industries, but today, its ripple effects can be felt throughout. Taking a page from online retail, most commercial airlines now offer their consumers a single site for flight bookings, car rentals, hotels, and tour packages. Changing business models have changed consumer expectations, provoking companies to rethink 5

3 the way they do business. Cloud technologies are transforming the way technology is deployed and consumed. Enterprises are no longer required to own infrastructure assets, but can instead consume services based on a subscription model. The number of applications offered on cloud grow rapidly, while the cost of services constantly diminishes as more users get on board. This, in turn, means less in-house development and less reliance on resources, and therefore presents both opportunities and threats to the global sourcing industry. In this context, A Future in the Cloud draws together perspectives from leaders in the global sourcing industry, reflecting on a transforming sourcing eco-system. The essays illuminate the following key themes: The traditional global sourcing business model, based on cost optimisation and long-term contracts, is slowly waning. Digital and cloud technologies are increasingly becoming key priorities for IT service providers. The technology services buyer group is extending beyond the IT organisation to include business and marketing units. The industrialisation of services, and game-changing productivity tools such as autonomics, must become a part of every global sourcing provider s DNA. As the nature of their partnerships with customers evolve, providers will have to successfully transform themselves in terms of culture, and how services are offered in the marketplace. These leaders believe that the market for demand and supply of IT services is far from saturated; in fact, disruptive new models will create new opportunities for small and large IT service providers and customers. Cost arbitrage will remain an important factor, but it may no longer be the driving factor in an enterprise s business decision. In order to prevail, global sourcing providers must step up to deliver services that meet their customers changing needs. The global sourcing industry s growth story has seen many challenges on its journey over the past 25 years, but this period may prove to be its most critical yet. It is certain that the industry will look radically different in five years, and the voices in this book paint a clear vision for its future. In many ways, this is the moment of truth for all players: can they transform and thrive in a landscape of disruptive business and technology? Sridhar Vedala and Ali Toure Co-Founders QS Advisory 6

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5 MANAGING CHANGE THROUGH VOLATILITY SRIKAR REDDY MD AND CEO SONATA SOFTWARE SRIKAR REDDY is Managing Director and Chief Executive Officer, and a member of the Board of Directors of Sonata Software Limited and Sonata Information Technology Limited. Ever since he joined the company in 1986, Reddy has been pivotal in building Sonata s global profile as a trusted IT services partner, and as a high-value, solutions-driven company. Reddy has an engineering degree from the Regional Engineering College (now the National Institute of Technology), Tiruchirapalli, and a post graduate degree in management from IIM, Kolkata. Organisational transformation will require effectively responding to change while setting a roadmap for the future that goes beyond the existing paradigm. 50 India s IT industry has been confronted by some tough truths of late. The context for the Indian IT services industry has radically changed, along with changing demands of enterprise customers and rapidly evolving technologies. The industry s customers, who are from all over the world, earlier came to India because of lower costs. Today, these customers are confronted by a complete change in the way new technologies are redefining their businesses in a digitally disrupted world. As each industry segment sees internet- and mobile-driven upstarts offer customers new ways of consuming products and services, incumbent large businesses find that they are no longer able to address their new business challenges with old business models and outdated technologies. The importance given to technology and IT strategy within organisations has also grown, and business is now increasingly involved in helping set the strategy and make technology decisions for the organisation. Customers expectations of IT service providers have, therefore, also changed. Increasingly, they demand solutions and innovation rather than mere skilled resources. The previous practice of customers owning capital expenditure and assets such as servers, with no risk-sharing with providers, is no longer considered best practice. The pace at which change has increased in the past three to five years has been dramatic. India s IT industry in general has not responded quickly enough to external market changes to identify new opportunities that are being rapidly created by changing customer requirements. Indian IT service providers have delivered value additions of operational efficiency and process improvements in IT service delivery, but the game going ahead is very different driven by expertise and innovation in harnessing new technology to new ways of serving end consumers and running business processes. And this needs to happen at the level of specific industry segments even sub segments and business processes. The reason is that incumbent businesses cannot afford the luxury of time, as the competitive landscape changes rapidly with technology. Proactive IT service providers who can leverage their past familiarity

6 with an industry vertical, pick up new technology skills quickly, and engineer innovative new solutions that are a step ahead of the industry norm will win with enterprise customers. To win in this context needs a very different mind set on the part of IT providers. Investments in industry knowledge, design thinking, new technology skills, end consumer research, and the instinct to help shape a future solution rather than waiting for it to come as part of an RFP is needed. Being able to judge emerging technology and work with new age vendors in partnerships that shape new platforms and products will be key. You have to take your bets and build something bigger that can more completely address a critical customer business need. The talent and organisational processes required to make this happen, and to continue to evolve in step with the pace of change in technology and industry is very different from the traditional scale- and efficiency-oriented IT service business structure. For example, the emphasis on consulting, solution architecture, and pre-sales processes can be vastly enhanced. Technology trends in service delivery automation, and the vast range of pre-built, hosted core technology solutions, such as mobile development and analytics platforms now available, also point to a lot of traditional head count in an IT project becoming irrelevant, and the availability of people being less of a factor. Sonata, as a smaller provider focused on more value-added engineering and development work, is conscious that there is a unique position we can take in this emerging scenario. Over the last three years, we have been on a transformational journey as a company, where enhanced focus on our core industry verticals, such as Travel, Retail, Consumer Goods and ISVs, complemented with specific horizontal strengths in areas such as omni-channel commerce and SMAC, has seen us win strategic new customers and emerge as one of the fastest growing IT companies. We have been able to contribute significantly to the digital engagement and application modernisation initiatives of some of the world s leading companies. But the pace of change in the industry today is such that, despite this recent success, it is already time to move on. Some of the change factors that we identified earlier already point us in a new direction. Our vision for the future is to offer IT platforms that can then be deployed with required customisations what we call IP led services for our focus industry sub-segments that will help our customers leapfrog the technology cycle and stay ahead ready for future opportunities at any time. The approach to this involves investing in understanding and ideating for the next generation of a consumer s experience of products and services offered by a firm and how this can be shaped with technology. These applications will be built on emerging core technology platforms across omni-channel commerce, analytics, mobility and social, with pre-defined integrations in a hosted environment. In this manner, we will move beyond technology platforms to specialised industry and business process level platforms. The end benefits will be give enterprises speed, reliability, and flexibility in adopting up-to-date technology and best-inclass business processes that are continuously upgraded. This is not just a technology-driven vision for us. To us, this is clearly a very important strategic direction in which the future of enterprise IT and sourcing of technology solutions is headed. As rapid changes in technology-led competition introduce an element of volatility for businesses globally, they will have to respond more nimbly to emerging scenarios. An IT solutions provider specialising in a specific industry with platform-based solutions that evolve more rapidly than the traditional approach of services done ground up, and the capability of a partner to innovate with technology will all become very critical to success. IT service providers will, of course, have to balance this with some very practical opportunities that are more immediate. Better customer account, relationship, and quality management processes, improved productivity through automation, and more strategic marketing in terms of targeting the right segments with an enhanced value proposition: all these have significant value to add to IT service providers. However, true leadership will involve being able to do this while also setting a roadmap for the future that goes beyond existing paradigms. Deeper strategic focus on industries and technology, a turnkey platform-based solutions approach, new talent with wider skill sets, organisations that are more responsive and innovative, and an instinct to compete to create the future: this will be what it takes for Indian IT service providers to take advantage of the enormous opportunities that are being created today. Read the full book at: 51

7 ABOUT QS ADVISORY QS Advisory is a sourcing advisory firm with a distinct focus on global sourcing. Our consultants bring a unique combination of global sourcing consulting and hands-on delivery experience. These skills have been honed over the years by supporting clients in Europe and past experience at some of the leading service providers in Europe and Asia Pac. We enable our clients to implement complex outsourcing initiatives to bring about transformation by achieving sustained cost savings and improved productivity QS Advisory. ALL RIGHTS RESERVED. Copyright in whole and in part of this document belongs to QS Advisory. This work may not be used, sold, transferred, adapted, abridged, copied or reproduced in whole or in part in any manner or form or in any media without the prior written consent of QS Advisory.

A FUTURE IN THE CLOUD

A FUTURE IN THE CLOUD CONTENTS INTRODUCTION WELCOME TO THE FUTURE OF GLOBAL SOURCING 5 Sridhar Vedala and Ali Toure Co-Founder QS Advisory INNOVATION WILL DRIVE GROWTH IN OUTSOURCING 7 Dr. Srini Srinivasan Managing Director

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