Scenario Building - Harva Method

Context :Global competency of Indian IT consulting firms

Step I

Present Scenario:

The IT services industry is shaped like a pyramid.

Ð'„Ð'« The top level space consists of IT consultants:

o Both established players like Accenture, IBM Global Services as well as small to mid-sized firms like Sapient and Keane Consulting.

Ð'„Ð'« Right on top, are the business and strategy consulting companies.

Ð'„Ð'« As one moves up the pyramid, the value-add increases; as does the per person productivity.

Ð'„Ð'« The billing rates at this level vary from 6 to 10 times that of Indian pure players.

Ð'„Ð'« The Indian companies

o Have already reached a dominant position in the off-shoring and application management space

o Have now made the logical move up the value chain.

o Have a very well refined global delivery engine which can be leveraged to obtain downstream work from high value consulting

Ð'„Ð'« InfosysÐ'ÐŽÐ'¦ revenues from consulting have grown from 1.6% of total revenues in 2000 to 4.2 percent in 2002.

Indian companies have learnt the hard way that cost arbitrage and skilled manpower can never be sustainable competitive advantages. And in the face of growing challenges from countries like China and Philippines, it is important for India to play at a level where these challengers cannot reach. This move is specifically important since Indian companies have been losing clients regularly, mostly on the basis of cost.

Advantages for Indian Companies:

Ð'„Ð'« Lower overall cost structure - both in billable labor overhead, relative to

US/European MNCs.

Ð'„Ð'« Focus on quality boosts credibility. The Tier 1 vendors all possess or are close to

possessing certification for all of the major industry benchmarks/rankings Ð'ÐŽV

SEICMM level 4-5, ISO900X certifications, and Six-Sigma initiatives.

Ð'„Ð'« The Tier-1 vendors all possess strong (US-level) processes, methodologies, and

management tools.

Ð'„Ð'« Strong financials enable making the right investments for organic as well as the

inorganic growth.

Ð'„Ð'« Consulting, tightly aligned with a Global Delivery Model engine, provides far

higher returns on every business consulting dollar spent.

Ð'„Ð'« Absence of expensive infrastructure and partner/management overhead.

Weaknesses of Indian Companies:

Ð'„Ð'« Absence of strong vertical/industry expertise.

Ð'„Ð'« Lack of CEO-level mind-space and credibility for complex consulting assignments in the absence of proven track record for such projects.

Ð'„Ð'« Absence of Strong Project Management Skills required in executing complex

assignments. Strength remains in less complex application development and staff

augmentation projects

Ð'„Ð'« Difficult to make headway in U.S. federal and state government markets.

Ð'„Ð'« Change of employee mindset from a focus on technology to business outcomes massive task given the high employee numbers.

Ð'„Ð'« Ability to attract and retain consulting talent and their integration with the Globally

Ð'„Ð'« Distributed Delivery model and culture of Indian companies.

Ð'„Ð'« Margins will come under pressure as investments are made in hiring higher value,

more expensive consultants and sales and marketing infrastructure; increased

costs due to more onsite-bodies required by consulting projects.

Ð'„Ð'« Supply-Demand mismatch of good quality management students to take up

consulting roles in the country.

Ð'„Ð'« IndiaÐ'ÐŽÐ'¦s infrastructure, in particular the mass transportation system, remains poor.

Step II

Trend Scenario

Points of potential fulfillment for Indian Companies:

Ð'Ñ"Ð"¦ Established global delivery model and client base provide strong fundamentals

which could be leveraged to win higher value consulting engagements.

Ð'Ñ"Ð"¦ Established players like Deloitte and EDS possess antiquated models with high

overheads due to hierarchies built up over time and setting up of offshore

capabilities would lead to significant revenue cannibalization for these firms.

Ð'Ñ"Ð"¦ Huge IT Services and consulting market of nearly 48.06 Billion $s expected to grow at 6% year-on-year.

Ð'Ñ"Ð"¦ Since consulting infrastructure is being built from ground up, Indian companies

start from a position of advantage and are unlikely to repeat the mistakes of

traditional consulting companies with huge overheads.

Points