The Indian IT wonder has become an old dinosaur – giving new entrepreneurial possibilities

by Magnus Penker on September 19, 2010

Having invested in, worked with, sold and project lead Indian IT projects, I can state that Offshoring is here to stay. But not in the hands of Indian large companies, and nether to be used as a strategic tool by waver European business leaders.

De Jure, outsourcing and offshoring, is about creating a flexible organization in terms of capabilities and knowledge, but it has been perceived by many buyers and seller as low cost labor. Indian IT Companies has had 40-60% profit now being challenged by Chinese companies pushing the margins by offering even lower prices and more talented staff. Generally spoken, Indian IT companies have not made their homework; they are now on a commodity market moving from oligopolistic characteristics towards monoploistic competition, not being differentiated through earlier R&D and innovation work, leading to diminishing margins and at the end not being able to sell large volumes due to too high labor cost compared with other emerging markets.

De Facto, offshoring and outsourcing is increasing and it is driven by global supply and differentiation. Services like www.odesk.com where global talents offering their services for a 1/5 of the Indian price list, with high degree of transparency and direct connections with the producers, are changing the industry value chain cutting the middle man in Europe as well as in India and China. The new kind of values chain establishing is build upon personal trust, transparency and reputation on micro level serving as the building blocks of new networks acting as global player. This new network of global talents, in conjunction with established and innovative flexible companies, are lean and mean organization moving fast using cloud technologies as their ecosystem challenging the thinking of large monolithic systems with ton of ITL documents.

At the end of the day, the Indian dinosaur has been challenged by its own people and the people of the non-triad countries cutting the industry value creating and striving for more flexibility, lower prices, more trust and more social responsibility.  Most likely, in the direction of the tangent, we will see clusters raising up around the world, geographical or virtual, creating comparative advantaged on the global market through innovation work, R&D, skills and knowledge but also, and maybe most important, through reputation and trust.

About Magnus Penker :

Director-level consultant defines corporate strategy, sets direction, executes growth and turnaround business plans. Read more at http://www.linkedin.com/in/magnuspenker

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