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What's next for India's outsourcing industry?

Stephanie Overby | Jan. 8, 2014 talked to Som Mittal, departing president of India's National Association of Software and Services Companies, about immigration policy and protectionist politics in the U.S., political and economic instability at home, and what the future holds for the Indian IT services industry.

In the 25 years since India's most well-known IT services trade group National Association of Software and Services Companies (NASSCOM) was formed, the country's global outsourcing industry has experienced tremendous growth, but also its share of ups and downs.

Outgoing NASSCOM president Som Mittal, who took office in 2008, led the group during a particularly tumultuous time for the industry, from the global economic crisis to the Mumbai terrorist attacks to the introduction of cloud computing and automation technologies that threatened the country's traditional outsourcing model.

As Mittal prepared to hand the NASSCOM reigns over to R. Chandraschekhar, talked to the IT industry veteran (who previously held leadership positions at HP, Digital, and Wipro) about immigration policy and protectionist politics in the U.S., political and economic instability at home, and what the future may hold for the Indian IT services industry. What did the Indian IT industry learn from the global economic downturn?
Som Mittal, former president of NASSCOM: For our industry this was the first-ever headwinds we saw. Previously, we had seen only sequential quarter-over-quarter growth. It impacted not just the Indian companies here but the multinational companies and captive centers in India as well. I don't think anybody was prepared for the surprise of that nature.

Fortunately the industry realised that it was too valuable a crisis to lose. IT service providers took it as an opportunity to change their business models. They became more nimble footed. They changed the way they hired. They changed their structures from tech-driven to more verticalized.

They evolved from full-time employee (FTE) based pricing to outcome based pricing. The entire sector has come out stronger now. During this period, there was a lot of innovation. Some of that was driven by our customers who were transforming themselves. How will the proliferation of cloud-based solutions and increasing automation challenge the India services model of leveraging large number or relative cheap and skilled resources? Will India lose its advantage?
Mittal: Our industry is 25-years-old. It has matured a lot. Cheaper, better, faster is now a given. Customers are looking beyond costs. Technology has become consumerised, whether you're talking about social media, cloud computing, analytics, or mobility. All of these are now getting integrated into IT services.

There might be a presumption that these will cannibalise some of our business. But we're actually seeing the opposite. Revenues are increasing because of cloud computing.

Our industry had previously been focused on the Fortune 500 and then the Fortune 1000. But now we're seeing more opportunity with helping small to medium-sized enterprises leverage this new technology. Is India's old sourcing model dead? Will outsourcing firms now move to as-a-service type pricing?
Mittal: There's an evolution going on. There is work that still happens on FTE basis. More and more companies are shifting their focus from FTE and SLAs to outcomes. Large customers in the last few years are saying, "You've done what we have told you to do. Please tell us what more can you do for us?"


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