Social Media @ IBM – IBM Social Media adoption in the organization

IBM was the first company to embrace social media and use it successfully in knowledge management and communication with employees and clients. IBM had encouraged its employees to use internet since 1997 when most of the companies were not allowing their employees use of internet. Social Business @ IBM is an internal site that has interactive, educational and social programs which explain  IBM’s social business transformation and  educates and enables IBMers in external social media participation. Employees take personal responsibility for their social media activities and the company has set rigorous guidelines (IBM Social Computing Guidelines 2008) and objectives for its social media strategy. IBM uses forums, Blogs, wikis, Jams, hashtags, and face book styled internal social networking sites in their organization. For further reading- Social Media @ IBM

IBM developerWorks is a web-based resource and social network for millions of developers and IT professionals worldwide. It has library of over 30,000 articles, receive three and a half million page views and 1Million visitors per month. It has both encouraged the growth of the open standards development community while driving down IBM support costs. Beehive has created a sense of community at IBM and help employees make new connections, track current friends and coworkers, and renew contacts with people they have worked with in the past. Over 65,000 employees have joined the site.

IBMers started blogging since 2003 and have 17000 individual blogs and more than 100,000 users that have software project discussions to discussions about IBM’s business strategies. Through BlogCentral, IBM Employees can share their ideas by creating their own blogs, or subscribe to each other's blogs via RSS. Completed in 2005, the IBM wiki platform “Wiki Central” allows any IBMer to create a wiki with two broad benefits: collaboration and knowledge-sharing. Due to Wiki central usage by employees to collaborate and share IBM had seen a measurable decrease in e-mail traffic in those areas of between 30 and 40 percent.

IBM started the jam concept globally in 2001. Jam is like a massively parallel conference. Employees post views and suggestions on the company's intranet on issues ranging from their careers to possible innovations and how to take IBM forward. Recently in February 2011, IBM hosted Jam and report synthesizes the 2,600 discussion posts and more than 600 tweets from the Jam highlight that ROI on social media is quantifiable, adoption is slow, increasing focus of integrating social activities and business processes is essential for success. For further reading- Social Media @ IBM

IBM is following a decentralized social media approach and controls the internal social media through the employee-created guidelines. IBM does not regulate employee social media activity and instead encourages employees to collaborate and share and drive innovation. Employees are educated about the guidelines and policies and are provided the necessary social media platforms. IBM has integrated social media as an integral part of its business.

For detailed article please click here: Social Media @ IBM adoption

Outcome based Contracts/pricing by Indian IT Outsourcing Vendors- Case Study reviewing Top 5 Indian IT Outsourcing Vendors

Indian IT outsourcing vendors have moved beyond the cost and process efficiency and moved towards Outcome-based models which is being paid on performance like improving total sales, working capital reduction, bottom-line improvement, etc, rather than one based on the number of people deployed. This model is best suited when the cost of change management is high or when there is an under-utilization of people. It is also best suited when the outcome is process-oriented and when the customer have accurate baselines, well-defined, measurable service levels and performance goals, and be willing to accept the provider’s solution to meet requirements. This model is more vendors driven and they try to complete the work as soon as possible, using the most efficient processes and reducing costs. The vendor is relying on client and client on vendor for outsourcing success and risk is transferred from client to vendor. Vendor should account for transference of risk and cover that by including a risk premium in the price. Indian Vendors have realized that the golden-age of T&M and throwing people at a problem has ended and they have already moved into fixed-cost deals and outcome-based contracts are the next step.

Outcome based contracts/pricing started to come into prominence in 2007 when the Global Financial crisis started unraveling and businesses were facing slowdown and IT budgets were tightened. Businesses started looking at IT Vendors for more value. In a survey conducted by InformationWeek in early 2008, 20% of 430 IT pros working with Indian outsourcers cited the "ability to tie project costs to business goals" as a key benefit that would prompt them to work with an outsourcer again. 31 % cite "understanding our business and industry" as an area that's improved significantly over the past year. Indian Vendors were focusing more to understand the clients business as whole and not restricting themselves only to the IT department. In 2008 Outcome based contracts or pricing was in a nascent stage where IT vendors just started to understand the significance of this model and how they are going to adapt this model. Businesses too due to the financial crisis and budgetary pressures started to work closely with vendors and provide them access to their business so that the vendors become a strategic partner who will help them in achieving the organizational goals.

Tata Consultancy Services Limited (TCS)

TCS has begun using a new success-based pricing in 2006 in some of its outsourcing contracts it signed with Pearl Insurance in UK, Tata Teleservices and Chilean TranSantiAgo in the last seven-eight months. Such success-fee based contracts accounted for about 4% of TCS’s revenues in 2007. In the Pearl contract, TCS has changed the entire business process and replaced the 13-odd IT systems floating in the company with a single system. In the TranSantiAgo case, which is a transportation contract, TCS’s job is not just to find a cheaper and better way of designing the new transportation system, but even generate demand for the new system. In 2008, TCS won a project from the Ministry of External Affairs to automate passports and is paid a combination of project fee and an outcome fee based on the number of applications it processes.

TCS has been very careful in adopting this model and structuring deals around measurable goals.  In 2009 this model accounted for about 1%  of the company’s total revenue and outcome-based projects are yet to become mainstream.Recently TCS' British BPO subsidiary, Diligenta, signed a deal to take over the IT and customer services functions of the UK’s Friends Life and it is based on outcome-based pricing and TCS will charge per policy to the client. With this deal TCS has shown that it is still looking out for outcome-based model.

Infosys Limited

Infosys took first steps into the managed services sector in 2008 through a business unit based on an “outcome-based” pricing model, moving away from charging per man hour toward what it calls a “software-assisted services” model. At Infosys, 50% to 60% of deals in the enterprise services group have some kind of outcome-based pricing. Infosys do not peg all the revenue to outcome based pricing as business outcome can be measured only after a period of time and there are other variables in the environment that can impact the outcome. So part of the fees (around 10-20%) is tied to the end result or outcome and the remaining gets billed through traditional models. Infosys signed a deal to support manufacturing, supply chain, finance, HR and other applications of AstraZeneca in 2008 and  services delivered through a global shared-services model that offers “fixed price for outcome-based deliverables, and flexible, unit pricing for managing changes in the base scope of the engagement.

Infosys in 2010 signed a deal to manage internal IT services for Microsoft worldwide through an outcome based pricing model, enabling Microsoft to associate and manage IT costs directly to business variables and demand. Recently Infosys launched TalentEdge, a comprehensive talent management platform that deepens employee engagement and the platform built on state-of-the-art technology and is delivered in the Cloud on an outcome-based pricing model. The sales team is constantly encouraged to pursue outcome based billing. Infosys management has given the mandate to push up the contribution of such outcome-based contracts from 3-4 % of revenues to 20 % in three years, translating into a $1 billion target.

Wipro Limited

Wipro had invested in outcome based models since 2008 and had been seeing increased customer interest as this result based model has inherent benefits like improvement in service levels and end-user experience. FlexDelivery is one such model for managing enterprise applications and Wipro had six clients using this model out which three were added in first quarter in 2008. IT also launched Cigma (Center for Integrated Global Management of Applications) for manufacturing clients with the unique capability of providing an outcome based model based on SLA’s (service level agreements) as well as BLA’s (business level agreements) to customers. Wipro aims to get 50 percent of its sales by 2012 from orders where it shares risk with clients seeking to cap their costs to boost its own profitability.

Wipro gets major portion of the contracts worth $500 million following its acquisition of Citigroup's captive IT arm in India 2008, based on outcome-based model. Friends Provident had signed a three-year contract for the provision of IT Application Development and Support services from Wipro Limited in 2009 and the contract enables Wipro to offer increased value in an outcome based engagement model through process excellence, higher offshore leverage, and greater accountability and ownership in delivering projects. Wipro signed a 10-year total outsourcing contract with TVS in 2010 which includes the comprehensive suite of IT infrastructure and applications across the enterprise and engagement would be governed by a unique mix of milestone-based, business outcome-based and operations-based Key Performance Indicators (KPIs). In June 2011 Wipro won an outcome-based deal from Chaucer Syndicates, a specialist insurer at Lloyd’s, to develop an end-to-end regulatory compliance solution that would generate better analytics and improved management reporting for the client.

Cognizant Technology Solutions Corp

Cognizant is also using an ‘outcome’ or ‘effect-based’ model to provide services by leveraging its global delivery network, talent pool and best practices. Outcome-based pricing is a very small piece of Cognizant portfolio and it expects that this model will evolve in future as the customers believe the vendors are capable of providing the relevant services and business value and manage the risk efficiently. Cognizant’s earliest projects based on outcome were with pharmaceutical company AstraZeneca and with Sanofi Pasteur, where there was an increase in effectiveness as measured by time. For 3M too, Cognizant used an outcome-based, managed service engagement model with productivity benefits over the long term.

HCL Technologies Limited

HCL Technologies missed the Y2K boat and therefore pioneered the use of ‘outcome-based’ pricing.HCL Technologies has a higher risk appetite and has a large proportion of its revenue coming from outcome-based pricing — a model where larger the profit for the customer, larger the revenue gain for the IT vendor. HCL earns 25% of its revenue from the Infrastructure service segment and the outcome-based model had helped them win big contracts. HCL has a revenue sharing arrangement with Cisco, CA and an output-based pricing arrangement to develop software for Boeing 787 Dreamliner. HCL has transformed its scope of public sector services and its open view toward outcome-based contracting is well-appreciated by governments in their bid to address greater efficiencies and as part of business and technology risks mitigation. HCL Technologies sees a trend in UK towards outcome-based contracts.

Outcome-based Contracts/pricing not yet picked up
Analysts estimate that while less than 5% of offshore contracts are currently outcome-based, this trend will pick up in 2011. NASSCOM estimates that 10% of total revenue is coming from outcome-based contracts/pricing for the Indian Outsourcing Industry. Nasscom believes that the industry is beginning to move beyond time-and-materials pricing. About 40% of the industry's total transaction value now comes from fixed-price deals (irrespective of the number of man hours spent). Despite the outcome-based model in prominence since last four years, the volume did not pick up in India. This model is best suited for existing clients and for new clients who have a clear understanding of the model and in this models both vendors and clients should ensure that the scope of the engagement and the outcomes are clearly defined.

The success of this model lies in the understanding of the customer’s business model, operations and industry nuances and how to manage risk involved at all stages. Risk is high for the vendors and they charge premium and since they cannot wait for payments till the business outcomes, only apportion of the revenues are being done on the outcome-based pricing. Business outcomes are time consuming. The clients and vendors should have a common basis for future value creation and vendors should be clear as to how much risk he can bear and how well he knows his own processes and business. Other external variables also have to be taken into account and for the model to succeed both the client and vendor should have a strong and open relationship between them so that they can achieve the planned common outcome. Customers prefer such billing models because they can keep their costs entirely variable and dependant on their own revenue growth.

Discussion Points:

1. Why is Outcome-based Contracts/Pricing not picking up in Indian IT Outsourcing Industry?
2. What percentage of revenues should come from the outcome-based model?
3. How to manage the higher risk by the Vendors and are they equipped to manage such risks?
4. Has Indian IT outsourcing Vendors matured enough to tackle the complexities involved in outcome-based model?
5. What should be the strategy of clients/consumers in the outcome-based model?

Innovation @ Tata Consultancy Services Limited (TCS) Case study

TCS understand that innovation is the lifeline of business and it is a very complex process. IT is always regarded as the company’s innovation champion and IT managers want to help their businesses succeed through innovation. Businesses identify innovation critical for business growth and performance and there is still some apprehension about the return on investment on the innovation front. TCS believes innovation can be broadly defined as an idea that makes a material difference to an organization’s current capabilities or creates a future capability. TCS believes that innovation must come from all parts of its organization and it has to be part of the organization DNA and can’t only be restricted to R&D departments in the organizations. TCS also believes that other stakeholders like clients, academic institutions, peers, other technology firms etc play a critical role in the innovation process and they have to be actively involved. TCS Innovation initiatives are discussed in this article.

Clayton Christensen Innovation Framework

According to Harvard Business School professor and author Clayton Christensen who also serves on the board of directors of TCS, innovation can then be divided into three discrete subsets: “derivative innovation,” “platform innovation,” and “breakthrough innovation.” These segments require different environments and support systems to emerge and create maximum business value. TCS apply Professor Christensen’s segmentation (please see figure below) as follows: Derivative or sustaining innovation that continually provides improvements on current services and solutions, Transformational improvement or platform innovation that facilitates a swift move to ‘visible adjacencies’ in terms of emerging technologies as well as markets and Disruptive or breakthrough innovation that enables customers to access potentially game-changing or/and new market business models. Derivative or sustaining innovations are handled and funded by the business unit in which the idea originated and Platform-level innovations that might extend an existing offering are directed to one of the company’s 19 global innovation labs. Disruptive ideas often originate in the labs, but if one emerged from a business unit it would be directed to a lab or funded through an incubator fund run by the CTO’s office.

Innovation Lifecycle- Adopted from Prof Clayton Christensen. Source: TCS white paper Innovation Networks: Casting a Wider Net for IT

TCS Innovation Labs

The Tata Research Development and Design Centre (TRDDC) was established in 1981 as a division TCS and is the largest R&D facility among the network of Innovation Labs at TCS. TRDDC has three R&D labs: Process Engineering, Software Engineering and Systems Research and had built a  collaborative and open innovation environment for engaging with industry partners and clients in various domains, academia, strategic technology partners, startups, standards organizations, etc. Since the year 2000, TCS has set up Innovation Labs that create value for clients and foster an innovation network in the organization for the successful development and commercialization of new ideas, technologies and best practices.

TCS has 19 Innovation Labs based in three countries including TRDDC’s three R&D labs. TCS Innovation labs have 800 associates in R&D and provide an environment for complex IT research in leading-edge technologies as well as in various domains. TCS labs work on areas like Life sciences, Open source technologies, enterprise architecture, wireless technologies, performance engineering, etc. TCS Innovation labs are customer aligned and metrics driven and scientists and researchers continually publish/present research papers and publications. Some of the products created by TCS Innovation labs are mKrishi, DBProdem, Jensor, Wanem, Scrutinet, SmartTest Manager, etc.

TCS’ Co-Innovation Network (COIN™)

TCS set up COIN in 2004, based on the book -The Future of Competition: Co-Creating Unique Value with Customers, co-authored by the late management guru C.K. Prahalad and Prof. Venkat Ramaswamy that talked about “co-creation” as a strategy for companies to satisfy customers and sustain profitable growth. Co-Innovation network consists is led by TCS Innovation Labs and includes academic institutions like Stanford, MIT, IITs,etc, start-ups like Cicero and WorkLight, venture funds like Helios, Sequoia, Amadeus, etc, strategic alliance partners like Intel, SAP, HP, Cisco, etc, multilateral organizations and key clients. COIN brings to the businesses innovative solutions; customized to the client’s needs, disruptive technologies, risk mitigation which is spreading the risk among multiple partners and simplification of technologies. The company now has 24 active TCS co-innovation partners and is generating revenue through 75 solutions developed jointly with various partners in the last five years.

Other Initiatives

TCS Leadership has set up systems for encouraging innovative thinking and processing of ideas and created multiple channels, and managers are trained how to direct an employee’s idea. Innovation is also part of the employees formal annual review process and employees who provided innovative ideas are thoroughly rewarded. IdeaMax, a Digg-like social network that lets any employee submit, comment, and vote on ideas is the platform provided to the employees for innovation. Innovations are a critical component of the formal training programs for the employees and managers and are encouraged to think creatively. Innovation events like “Innovation Days” help key customers and TCS researchers to collaborate on research toward specific solutions and “Innovations Forums” held annually in the UK and USA serve as confluences of thought leaders and researchers.

TCS Innovation success – Frugal Innovation

TCS innovation initiatives have started generating significant amount of revenues but it is still looking for a disruptive offering that will be major part of revenues. TCS has been able to instill an innovative environment within the organization and has developed successful innovative offerings. The company has already invested significant resources in the innovation initiatives and is looking for future growth and performance through them.

Recently the company is also talking about ‘frugal innovation’ in to capture more business in the emerging markets. Frugal Innovation is derived from Frugal Engineering or Gandhian Engineering is the science of breaking up complex engineering processes/products into basic components and then rebuilding the product in the most economical manner possible. Frugal engineering results in simpler and easier to handle processes and cheaper products with necessary features. Tata Nano the cheapest car in the world today, is held up as an example of successful frugal engineering. The term 'frugal engineering' was first used by Carlos Ghosn, the joint chief of Renault and Nissan. (Source: Wikipedia)

Discussion Points:

1. Will the overall Innovation strategy of TCS drive business growth?
2. Will frugal innovation work for TCS?
3. What should TCS do for increasing its revenues through innovation?

Innovation @ Infosys Limited - Case study

Innovation is a vital component for business strategy and in order to stay ahead, companies should increase the speed of innovation, be focused on the customer experience, understand their behavior, and co-create with customers and partners. Infosys believed in this and Innovation at Infosys is built on the intellectual capital of employees and the processes to rigorously train employees for innovation. Infosys took that idea (from GE) and created the world’s largest employee training facility. Infosys believes innovations is important for future growth and differentiate from the competition. Products, platforms and new engagement models are part of innovation strategy in Infosys. Innovation is not a new focus for Infosys as it had been focusing on innovation since 1999 when it set up SETLabs (Software Engineering and Technology Labs). Infosys invites some of its top producers under the age of 30 each year to its senior management council meetings. The young employees are invited to share their ideas with senior managers.

Innovation Strategy 2011 – Infosys 3.0

As part of its strategic initiative “Infosys 3.0”, Infosys is expecting to achieve 1/3rd of the revenues from Innovation which currently accounts for 7.3% of revenue. In order to achieve this innovation target revenue Infosys is taking an inorganic route to strengthen its product portfolio along with its in house R&D. Infosys is planning to appoint a business innovation head for each of its four verticals (Financial services & Insurance, Manufacturing, Energy, Utilities, communication and services and Retail, CPG, Logistics and Life sciences) to identify product opportunities within the sectors and build business plans. The Business Innovation group is focusing on non linear revenues which are attempts to de-link the revenue growth from people growth. The four innovation heads would have a dual reporting structure: they would be accountable to their respective vertical heads as well as Business Head of Innovations. Once Innovation heads identify ideas respective verticals will fund the development of the products. It will be a federated structure. A central innovation group will help engineer a product while product management and sales can be decentralized.

Co-Creation since 2005

Co-creation is the practice of developing systems, products, or services based upon innovative ideas from stakeholder experiences, that enhance strategic capital, increase returns, and expand market opportunities. The concept is based on the book published in 2004 “The Future of Competition: Co-Creating Unique Value with Customers" by Prof Venkat Ramaswamy and management guru the late C K Prahalad. Customer experience is central to enterprise value creation, innovation, strategy and executive leadership and such changes in society and businesses necessitated co-creation, the authors argued. The types of co-creation can be viewed in terms of two basic dimensions: Who are the stakeholders and what is the engagement area of co-creation? The stakeholders include customers, employees, partners, suppliers, investors, regulators, volunteers, citizens, and others. Co-creation opens up any management process and includes innovation management, which includes process innovation, product innovation, and business innovation.

Infosys' SETLabs incubated the Innovation Lab in collaboration with Prof. Venkat Ramaswamy in 2005 as part of its research and innovation capability. Since then Infosys had been working with its partners and clients in several forms of Innovation Co-creation such as joint research, joint innovation centers, joint Intellectual Property (IP) licensing, joint product development and early adaptor programs. The Infosys Innovation Lab has built several capabilities to enable the practice of Innovation Co-creation by enterprises, which include processes, platforms, engagement models, networks, etc. Also critical are the tools that foster dialogic, transparent, accessible, and reflexive interactions are essential to co-creation.  Successful co-Creation cases highlighted on Infosys website are

1. Infosys and BT have collaborated involving researchers conducting joint R&D and prototyping. It has led to the creation of new IP that Infosys and BT jointly take to the market.
2. Nomura Securities derived 150 times application performance improvement. The performance of the interest rate risk analysis application was amplified by more than 15,000 per cent using the Infosys HiPC solution IP.
3. Infosys has co-created with ACDI/VOCA a solution to connect Indian farmers to the global retail supply. It also provided to the organized retail sector access to a reliable small-holder production base and decreased market-to-farm losses, which were estimated at 30-40 per cent on certain products.

Infosys SETLabs since 1999

SETLabs are internally divided as Strategic Business Units called Centers of Excellence (CoEs). SETLabs has developed several process frameworks, methodologies, service platforms, etc. Initial COEs are The Convergence CoE that pursues multiple R&D projects in pervasive computing, Grid Computing CoE’s vision is to create an adaptive services grid through service-oriented architectural constructs and platform, Service oriented Architecture CoE pursues multiple projects on a variety of practical topics related to SOA, The Data Warehouse and Business Intelligence CoE distills information from projects executed, identifies technology trends and provides thought leadership, J2EE CoE helps enterprises realize benefits of leveraging J2EE technology and Microsoft Technology Center aids in adoption of Microsoft technologies within Infosys and by its customers. Added lately is Cloud Computing CoE to enable Infosys' enterprise customers achieve operational excellence by leveraging cloud computing platforms.

The 600-member technology and domain-focused team has developed products like ELIXIR: Middleware for Wireless Sensor Networks, NIMBUS: Context- Aware Pervasive Computing, MANTRA: A software maintenance platform and MConnect: A middleware to create mobile applications faster. The firm had developed Flypp, a mobile applications platform and iEngage, which is powering social media marketing and employee engagement for five global 500 companies, ShoppingTrip360 service transforms in-store shopping by enabling collaboration between shoppers, retailers and CPG companies in real-time, etc. SETLabs enables Infosys to work with standards bodies on future technologies, share best practices and maintain peer relationships with academic bodies, industry forums, conferences, and journals.

Infosys Innovation Success

Innovation initiatives in Infosys not only created products and services but also gained reputation for the company as one of the most innovative company. Infosys constantly figured in the Innovative companies lists compiled by various sources. Recently in August, company has been ranked #15 in Forbes List of The World’s Most Innovative Companies. The list was based on “innovation premium,” a metric of stock market valuation by investors in anticipation of sustainable innovation. “It is defined as the proportion of a company’s market value that cannot be accounted for from cash flows of its current products in its current markets.”

The company's new management under K V Kamath and S D Shibulal is planning to set up a separate company focused on IT products, platforms and intellectual property-driven solutions. Employees at Infosys who are already involved on the innovation side, which includes products and platforms, would move to this new firm. The other option is to make an acquisition of an existing company that is involved in areas where Infosys is looking to innovate. Infosys has been emphasizing business innovation as a strategy and through innovation it is planning to drive business transformation of its clients.

Discussion Points:

1. Will the overall Innovation strategy of Infosys drive business growth?
2. Will the strategy to set up separate company for IT products, platforms and intellectual property-driven solutions work? What are the risks involved?
3. What will be the impact of business innovation on the company and outsourcing industry as a whole?
4. What are the challenges for management for fostering innovation in the organization? People, Process, Infrastructure, and Financial related challenges.

Innovation @ Wipro Limited - Case study

Innovation is a critical factor for success in outsourcing industry. Vendors have to constantly innovate and offer services to clients that help them to increase their profitability. Innovation is must in the highly competitive outsourcing industry where vendors are fighting for clients and clients are looking for vendors that have innovation frameworks in their organizations and have successfully provided innovative services to clients that not only reduce costs and improve process efficiency but also increase profitability for both Wipro and clients. Wipro technologies have created a culture that regarded the quest for innovation as its norm. Some of the Innovation initiatives at Wipro Limited are discussed in this article.

Innovation Clock Since year 2000

Innovation initiatives were developed based on a study of innovation methods in companies like Nike, 3M, and Home Depot that were reputed for their innovative practices. Wipro considered commercial viability of the ideas as critical to good innovation. Top management developed a framework for innovation and the framework provided guidelines right from the idea generation stage to commercialization of that idea. The innovation process at Wipro was represented through the Innovation Clock which consisted of 12 steps. Creation of an innovation framework followed by identifying the themes to be worked on is the first step. Generating ideas from employees and validation of those ideas by the customer is next. Wipro also realized rewards and recognition will motivate employees to come up with innovative ideas and framed a detailed rewards policy.

Wipro Intranet Web enabled the whole innovation process and was the place where employees posted their ideas. Wipro constituted innovation teams, conducted workshops, and issued innovation process guidelines to all its managers and business group heads. Wipro set up an Innovation council with five gate ways in all its business groups. Innovation council consists of CTO and five permanent members whose responsibility is to evaluate idea and its commercial viability. The five gateways are Idea gate (idea generation), Evaluation gate (idea screening), Commitment gate (resource commitment), Development gate (customer order, business plan & projected revenues) and Volume gate (commercialization of idea). For Wipro Innovation Clock Graphic please refer to end of the post.

Wipro conducted an Annual event called TechForum where employees present papers and conduct demos on their ideas. It set up Innovation center in Bangalore that employed around 200 people in 2003 and provided funds and infrastructure to nurture innovative ideas and turn them into products. Wipro also set up Centers of Excellence that are R&D centers for future technological challenges. By 2003 Wipro through these innovation initiatives have developed innovative products like Flow-Brix, workflow solutions for publishing, i-Desk, Collaboration tool for HR management, etc.

Quantum Innovation Program 2006

The project designed and implemented by Erehwon Innovation Consulting Pvt. Ltd was expected to generate new ideas to drive business growth and motivate people within the company. By 2007 Erehwon Innovation has helped design more than 50 projects, of which four have been initiated, including the Mission 10X program that aims to train 10,000 faculty members at engineering colleges countrywide by 2010.

Applied Innovation Framework

Applied Innovation is the ability to infuse newer ideas and newer ways of doing things into all parts of the organization, and improve business outcomes, often without major disruptive change. It is a 360-degree business approach covering process, delivery, business and technology innovations that help Wipro to work collaboratively with clients for cost take-outs, speed-to-market and new business opportunities. This approach is backed by a 25-year heritage in providing domain-intensive technology solutions. Based on this framework Wipro has internally developed products like eCargo suite (Airline Industry), TINA platform (SOA), etc.

Wipro and EMC alliance unites Wipro's applied innovation framework for developing new solutions and services around EMC's industry-leading information infrastructure technologies to enable more organizations, specifically in targeted growth markets, to optimize their infrastructures, secure and protect their information, and leverage their information to unlock its full potential. Wipro and EMC intend to explore collaboration of industry and application specific solutions in key business areas that solve customer needs related to storage management, information management, content management, and information security.

Innovation Centre on SecondLife.com

Wipro was the first Indian Company in 2007 to set up an Offshore Development Center (ODC) model campus with facilities like client engagement centre, learning centre, 3 floor ODC setup with cubicles, security desk at the campus entrance gate, etc in Secondlife.com. In 2008 Wipro launched a SOA solutions lab – which gives customers an opportunity to explore the impact of SOA in transforming their organizations. In 2009 Wipro launched its 'Innovation Centre' for Testing Services on SecondLife.com, the popular virtual world. The Innovation center will be a replica of the actual lab that is situated at Wipro campus in Electronic City, Bangalore and will provide a one stop virtual view of IP powered solutions offered by Wipro that includes consultancy, test lifecycle accelerators, pre-certification and certification in the areas of Wi-Fi and mobile handsets, test design solutions in banking, securities and Point of Sale, performance engineering and telecom testing.

Innovation Evangelism

Pavan Soni defines an Innovation Evangelist in an organizational context as one who generates awareness of the need to innovate; builds a belief amongst people that anyone can innovate; and provides sufficient facilitation to enable innovation. At Wipro Technologies, Innovation Evangelism happens through a series of vehicles that include: Wipro’s Innovation Camp, Innovation Bazaar, Story Book on Innovation, Systematic Creativity Workshops, and Inflection Point newsletter, etc. Each of these started as experiments and then through learning got institutionalized. Key learning are: enrollment of the stakeholders; creating a semi-structure knowledge sharing environment; enabling a market of ideas, talent and capital; having a constant and consistent communication; transparency in operations; and taking a more scientific approach towards creativity; among others. One of the areas of further investigation is on measuring the direct and indirect returns of investment for each of these vehicles.

Global Innovation Tournament

Wipro Technologies and Knowledge@Wharton together started conducting this tournament in 2010 which selects the most innovative managerial "tools" that companies can use to improve their business by increasing revenues, reducing expenditures and improving customer experience. The goal of an innovation tournament is to pit competing opportunities against one another. The judges consistently filter out the weakest ones until only those with the highest profit potential remain. Karl Ulrich says the panel judged the innovations on four dimensions: Novelty, Feasibility, Track record and Overall potential.

The Innovation Tournament is the brainchild of two Penn business school professors, Christian Terwiesch and Karl Ulrich who authored the book entitled “Innovation Tournaments:Creating and Selecting Exceptional Opportunities.” The book’s premise is companies should view and structure the innovation process “as a collection of opportunities.” After the success of first tournament in 2010 Wipro is conducting the tournament again 2011.

Wipro Innovation Success

Wipro believes businesses are facing challenges and opportunities which are very different to what they were a decade ago or even a year ago and the world is looking up to innovation in the triangle of technology, sociology and the environment to help them deal with these changes. Wipro believes it can leverage on its institutionalized innovation culture to push the boundaries for delivering solutions that provide enhanced value and direct impact for their customers. Innovations like India's most powerful supercomputer, a cost-effective Base Terminal Station designed for GSM networks in underserved markets, a mobile switching router for emerging markets, connected home concept and Wipro Energy Manager that uses M2M communication are some of the products of the Wipro innovation culture. Wipro as part of ODC concept legacy has also developed application-based innovations like Flex and Cigma delivery models which are service-based as opposed to resource-based. Source: Wipro website

Discussion points:

1. Is the Innovation strategy adopted by Wipro since 2000 is successful?
2. Wipro has created a culture of Innovation in the organization. Did this culture generate revenues for Wipro?
3. What is the client’s view of Wipro Innovation culture and how did it work for them?
4. Will Wipro strategy of collaborating with other IT Vendors like Hardware vendors and Research Organizations help it in innovation?

Wipro Innovation Clock 

Global Cloud Computing Industry – 2011 & Forecast till 2020

Cloud computing is rapidly making inroads into most organizations but with concerns about security, identity, SLAs, outages, etc. Reasons for adoption of cloud services are that it frees companies from having to spend big on technology support and nullifies geography as a barrier to in-house information. Data from various sources suggests that businesses globally are either evaluating, planning, implementing, or have already adopted a cloud strategy. According to Gartner's 'Executive Program Agenda Survey”, Cloud computing has emerged as the top technological focus for CIOs. CIOs expect adoption of cloud technologies will free up to 50 percent of infrastructure and operational resources, which can be utilized for other strategic priorities. BFSI and manufacturing are the early adopters of cloud services. Communications, high-tech industries and public sector are interested in the potential of cloud services. North American and European markets are the largest markets and other geographies Asia Pacific and Latin America will experience growth.

There is a major difference in the estimates give by the three technology research firms. All the three firms have different perspectives in terms of nomenclature like Gartner calls it as Cloud Services Market and IDC talks in terms of Public and Private Clouds. Forrester view of BPaas is different from Business Process Services that are included in Gartner’s cloud services market. Forrester Research expects the global cloud computing market to reach $241 billion in 2020 compared to $40.7 in 2011. Gartner expects the global cloud computing market to reach $176.8 billion in 2015 from current $89.4 billion in 2011. IDC expects the global cloud computing market to reach $79.5 billion in 2014 form $21.5 billion in 2010. Cloud computing includes Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Business Process as a Service (BPaaS). 

Please click here for -  Global SaaS, PaaS, IaaS, BPaaS Market estimates

Natural Disasters affect on Business - Impact of Thailand Flooding on HDD, PC and Storage Supply

Natural disasters are flood, hurricane, volcanic eruption, earthquake, etc and they lead to financial, environmental or human losses. Governments, International Relief Organizations and Businesses across the globe develop and implement Disaster Management and Response plans to minimize losses in terms of human, financial and environmental. Natural disasters cannot be controlled and the only way is to try and predict and prepare for the disaster. Businesses and Governments before setting up factories and plants take into account the natural disaster vulnerability of the areas. There is no escape from the natural disasters and most of the times the losses are so huge it takes years to recover from them.

Natural calamity risks are assessed based on the historical data available about a particular geographical area. Natural disasters have caused major losses and recovery from such a disaster requires huge resources in terms of human, financial and infrastructure. Natural disaster cause lot of emotional damage to the people affected. There has been some major disaster in the recent times like Earthquakes in Japan, Haiti, Turkey, hurricane Katrina in US, Indian Ocean Tsunami etc. These disasters have caused significant losses and people, businesses and governments are still struggling to overcome.

Thailand Flooding Case

Thailand’s worst flood in 50 years has swamped more than two-thirds of the country, shutting down many factories, businesses have been impacted and hundreds of lives have been tragically lost. Thailand is the world's second-largest producer of HDDs and accounts for 45 % of worldwide hard-drive production, after China and is a major supplier of hard drive parts too. The major hit has been to 2.5in drives produced in Thailand and typically targeted at the notebook, rather than the larger 3.5in drives more commonly produced in Malaysia or mainland China facilities. Seagate, Western Digital and Toshiba have extensive production facilities in Thailand that are affected. . Nidec supplies more than 70 percent of all global HDD motors, to major manufacturers.

Technology Research Firm’s View:

According to research firm IHS iSuppli, HDD shipments in the fourth quarter will decline to 125 million units, down 27.7% from 173 million in the third quarter, resulting in an increase in price of about 10 percent compared to third quarter prices. Disruption to shipments is not expected in 2011 as there are sufficient stockpiles to last through the fourth quarter but the shortage could impact notebook PC production in the first quarter of 2012. Digitimes Research reported that the flood will create a 12% HDD supply gap in the 4^th quarter of 2011 and the gap may increase into 2012 and estimates the 4Q11 hard disk drive shortage to reach 19 million units. For detailed charts please click here: Digitimes Research Charts 

Gartner currently estimates that 50 million HDDs will be taken out of the planned 180 million-unit 4Q11 production runs, and there may be an additional 50 million HDDs taken out of the projected 175 million-unit build plans in 1Q12. According to IDC, major part of PC production for the fourth quarter had already been shipped and it expects the negative effect of the flood on PC shipments to be limited to 10% lower than earlier expectations. For the first quarter of 2012, the firm expects total PC shipments to be slashed by more than 20% from previous forecasts.

Manufacturer’s view:

Seagate's hard drive and component assembly factories in Thailand were not submerged, but manufacturing has been curtailed due to external component supply constraints. It now expects to report a total production of 41-45 million hard drives for its December 2011 quarter, compared to the 48.9 million in the fourth quarter of 2010. Samsung, Hitachi Global Storage Technologies and Toshiba are also affected by Thai floods.

All Western Digital's hard drive and component manufacturing facilities in Thailand have been shut down since the week of October 10. Company expects its hard drive shipments during the December quarter will be 22-26 million units in contrast to the 58 million units shipped in the September quarter. Company expects the suspension of its operations in Thailand and that of some of its suppliers will continue into the March quarter and possibly beyond and is exploring alternatives to maximize existing capacity in other locations, including its Malaysian hard drive assembly facility and a third-party slider fabrication facility in the Philippines.

Original Equipment Manufacturer’s View:

Drive prices have increased 20% since the flooding started .Dell has warned its revenues could be hit by a worldwide shortage of hard drives and warned that the company may have to raise computer prices as HDD prices rose. Lenovo believes it can source enough hard drives to meet customer demand and try to manage the cost situation with minimal impact on profitability. Samsung and Acer have said that PC supplies will be lowered due to shortage of HDDs and subsequently prices will rise. For NetAPP, low hard-disk drive production, and revenue growth is slowing and difficulty in forecasting revenues and big impact will be felt in second half of 2012. Goldman Sachs lowered its expectations of Microsoft Windows revenue for both 2011 and 2012.

Viable Options for Industry

Current scenario is not expected to improve till March 2012 and supply constraints of HDDs will lead to rise in prices. To improve supply to certain extent HDD manufacturers are trying to move production capacity to their plants in other countries and Taiwan, Malaysia and China manufacturers can increase production. Increase prices of the products and pass on the increased cost of HDDs onto the consumers. Another suggestion is adoption of Solid State Drives in place of HDD. But SSD are very costly right now and there is still couple of year’s time further for its adoption. These are the viable options for the manufacturers and OEMs until the scenario improves in second half of 2012. Manufacturers and OEMs are not scared and are confident enough to tackle the situation which highlights the preparation that businesses have to tackle such disasters.

Discussion Points:

1. How to improve Natural Disaster Risk Assessment and predict their affect on production facilities?
2. How to prepare for and tackle the production shortages due to Natural Disasters?
3. How to prepare for the business losses that arise and how to tackle and survive?
4. What lessons are to be learnt from Thai Flooding?

Legal Process Outsourcing in India –Knowledge Intensive work driving growth

Initially LPO in India was transcription but now Indian LPO vendors offer end to end solutions in legal domain. India is commonly preferred destination for LPO and hold around 85 percent of the market share, with advantages like cost savings, similarity in legal systems of both the US and UK legal system, availability of 1.8 million lawyers as skilled manpower with English proficiency and ‘time factor’ which is time zone advantage.  LPO services go beyond simple cost-cutting and focus more on the quality of services like Litigation and business document review, contract management, electronic discovery, legal analytics and document preparation etc. LPO industry is expected to grow in the next five years with revenue growth of 26% annually. For charts please click here - ValueNotes and Evalueserveestimates charts.

According to The LPO Program, the Global LPO market is expected to grow 34% ($217m) in 2011, from a base of $640m in 2010, to $857m. The Forrester report estimates the global market for legal services to be $250 billion with the US accounting for more than two-thirds of the market, the vast majority of which comes from U.S. companies and law firms ($170 billion). According to NASSCOM-CRISIL study, LPO in India was USD 356.5 million in FY2010 and is expected to record robust growth to a USD 1.3 billion market by 2015. For more estimates please click here – LPO IndustryEstimates.

Indian LPO space is controlled by exclusive LPO service providers such as Pangea3, CPA Global, Unitedlex, Integreon and Evalueserve which are large players with 500 lawyers. Infosys LPO engagements account for 60 per cent of the total KPO business, with over 500 professionals and Rs. 70 crore ($15 million) in annual revenue. Wipro Technologies provide legal process outsourcing (LPO) to Microsoft’s intellectual property (IP) and licensing group worldwide. HCL Technologies is another major player and it has been doing well in LPO since last 4 years. TCS does not have a major presence in the LPO segment but is planning to explore the Legal Process Outsourcing (LPO) market. Cognizant debuted in the LPO space just two years ago initially by reviewing contracts for our financial services clients.

With demand for LPO on rise, bigger players will enter into market and the outsourcing of specialized high-end legal outsourcing and variety of legal work outsourced in large amounts will definitely attract new players into the market.

For detailed article please click here -  India Legal Process Outsourcing 2011 Key playersand growth forecast

India KPO Industry 2011 - Slow Growth and Future Concerns

India KPO industry had seen significant affect of the Global Financial Crisis in 2008 and the Industry have slowed down but currently recovering. India still is the dominant player in the Global KPO market with 70% market share. Evalueserve estimates Global KPO industry to grow to $ 17 billion by 2014, from current $9 billion in 2011 and is expected to grow at an annual rate of approximately 24% for the next four years (2010-14). But the fact is that Evalueserve predicted Global KPO market will reach $17 billion revenue by 2011 in 2005 and this did not happen due to the financial crisis and clients cutting the KPO spend drastically. KPO firms in India would employ approximately 205,000 professionals generating revenue of $ 10 billion by 2014 from current $ 5.95 billion and 135,000 professionals in 2011. For detailed charts please click here - Evalueserve KPO Estimates.

According to Nasscom-Crisil study, knowledge services outsourcing industry in India is expected to grow at a CAGR of 22.2% over 2015 from $2 billion in 2010 and touch $5.6 billion. Globally, knowledge services landscape is expected to grow from $2.9 billion in 2010 to $7.9 billion by fiscal 2015. Business research represent a $2.2 billion opportunity. Data analytics is $1.15 billion opportunity. Legal Process Outsourcing is also expected to record robust growth of $1.3 billion by FY15. The Associated Chambers of Commerce and Industry of India has projected KPO industry’s size growing to US$ 8 billion in 2011 and 10 billion mark by 2012 with a growth rate between 25-27%. Currently, the KPO size is estimated to be around US$ 5.7 billion and the sector has grown at around 15-17% in last few years. Please click here for charts- India KPO Estimates

Significant competitive advantages in terms of low-cost offerings, skilled manpower with sales and marketing capabilities, domain expertise and knowledge of regulatory compliance attract clients.The Indian KPO providers offer a range of solutions to various industry segments such as FMCG, engineering, automobile, telecom, R&D, BFSI, etc. The range of services has expanded from initial research and analytics. And as the market has developed, variety of offerings such as legal process outsourcing and clinical trial management are included.

KPO industry is also facing the challenge of adequate talent availability and high attrition rate among young professionals. Skills shortages particularly relating to pharma clinical trials etc are major concern in India KPO. Wage inflation is another cause as India is loosing out on the lower cost advantage. Current European debt crisis and US Economic slowdown are causing concern for India KPO industry. India is also facing tough competition from China, Philippines, Sri Lanka, Poland etc, but India is expected to hold its domination of the market.

Please click here for further analysis- India KPO Industry2011 - Growth Forecast till 2015

Blue Ocean Strategy – Wii Game Consoles Struggling

When talking about Blue Ocean Strategy one of the companies that comes first in mind is Nintendo. Nintendo adopted this strategy successfully and launched some of the most innovative products in the Gaming industry that totally redefined the gaming experience. Nintendo’s success with Blue Ocean Strategy was evident with company’s strong financial performance since 2005. In 2007, Nintendo sales sky rocketed with strong sales of new Wii console and DS handheld gaming device. The momentum continued into 2008 and the company has seen significant growth in revenues in 2007 & 2008. But revenues have fallen in 2010 due to price cuts in Wii, lack of strong game titles and fall in volumes. Same story continued in 2011. Stronger yen against dollar and euro were other causes of revenue fall.

Nintendo applied the Blue Ocean Strategy to create the seventh generation of consoles Wii, which redefined who video games are played by in 2006. Wii was expected to attract core gamers, casual gamers, lapsed gamers and non-gamers through new game play experiences, wireless controller, the Wii Remote, which can be used as a handheld pointing device and detects movement in three dimensions and new forms of interaction with games rather than cutting edge graphics and expensive technology. Nintendo focus was on non gamers and how to bring them into gaming world and they were also focusing on the core and casual gamers and Wii was a product for all of them. Wii has surpassed its competition both Sony Play station and Microsoft Xbox and as of September 30, 2011, Nintendo has sold 89.36 million Wii consoles.

Wii was not designed to be the best game console but focus was on attracting the non gamers. Non gamers and casual gamers were the uncontested market space in the gaming industry that Nintendo targeted. With that focus Nintendo was less focused on the product as the graphics, chip were average and no disk drive, no High definition, and hardware features  when compared with the main competitor at that time Sony Play station. It was a far cheaper device and customers were not only attracted by price but also by the remote and motion sensor technology that brought a new gaming experience. Access to internet through WiConnect24 is another feature that attracted gamers through which they can receive updates and chat with other gamers.

Wii games came uniquely with proprietary, DVD-like Wii Optical Discs packaged in a keep case along with instruction information. Nintendo tied up with third party companies like Ubisoft, Sega, Square Enix, Activision Blizzard, Electronic Arts, and Capcom who developed games exclusively for Wii through the game development suite Unity. Nintendo authorizes the developers and only those games will be sold that are submitted to them and approved by them. Total Wii games sold as of September30, 2011: 752.54.09 million. Donkey Kong, Super Mario, Call of Duty etc some of the popular games. Since 2010 Nintendo has seen stagnation in Wii hardware sales and competition has significantly caught up with them by offering superior and technologically advanced products.

Nintendo in June 2011 announced the Wii U, sixth home console, with 1080p high-definition graphics, and features a new controller with an embedded touch screen. The player can continue a gaming session with touch screen controller (tablet) displaying the game even when the television is off. Nintendo designed the Wii U console with an objective to enhance and refresh the Wii experience and consumers who did not even have an opportunity to interact with the Wii system. Gamers who desire high-quality HD visuals in their game play and spend a greater amount of time with game play are key focus of this device. The device plans to remove the barrier between the core and casual gamers and provide, on a single console, an experience that will satisfy both types of users. The company is still continuing with a plan to attract non gamers with this console.

Wii U is expected to be released in 2012 and Nintendo is planning to regain its market share with this console. It is working on the launch of new game titles, and compatibility of multiple controllers. The device received initial positive feedback but the success of the device can only be estimated upon release. Wii hardware sales are stagnating and many publishers are dropping SKUs for the platform as they are focusing on mobile games. The reduced focus of the game publishers have led to shortage of new games for Wii. Lack of strong titles, price drops on hardware systems, and a weakening U.S. dollar are the major reasons for drop in the Wii volumes and revenue losses. Nintendo believes the drop in sales of Wii is a natural cycle as for four years the sales has been very high and gamers eagerly waiting for the launch of Wii U will boost sales in 2012. Wii is the best selling console till date and Nintendo expects to keep this position in future too.

Discussion Points:

1. How to boost sales of Nintendo Wii hardware sales?
2. Will price cut or Game title launch boost sales?
3. How to survive the current debt crisis and US economic slowdown?

Blue Ocean Strategy – Nintendo DS & 3DS Portable Game Consoles Struggling

When talking about Blue Ocean Strategy one of the companies that comes first in mind is Nintendo. Nintendo adopted this strategy successfully and launched some of the most innovative products in the Gaming industry that totally redefined the gaming experience. Nintendo’s success with Blue Ocean Strategy was evident with company’s strong financial performance since 2005. In 2007, Nintendo sales sky rocketed with strong sales of new Wii console and DS handheld gaming device. The momentum continued into 2008 and the company has seen significant growth in revenues in 2007 & 2008. But revenues have fallen in 2010 due to price cuts in Wii, lack of strong game titles and fall in volumes. Same story continued in 2011. Stronger yen against dollar and euro were other causes of revenue fall.

Nintendo applied the Blue Ocean Strategy to create the Nintendo DS handheld game system launched in November 2004, that was the first portable gaming system to offer dual screen gaming and a touch screen. Nintendo DS is the successor to the Game Boy Advance series of portable consoles. It also featured Wi-Fi connection that allowed players not only to download games but also play multi player games and chat with other players. As of September 30, 2011, all Nintendo DS models combined have sold 149 million units. Nintendo DS changed the way people play video games and game play experience. It caters to needs of all gamers core gamers as well as casual gamers. The DS models till today generate significant amount of revenues for the company. Nintendo DS launched further models like DS Lite (slimmer, smaller, and lighter version) in 2006, DSi (faster CPU and RAM) in 2008 and DSiXL (bigger screen and size) in 2009.

Nintendo has invested significantly on the handheld gaming devices and have released versions of this model with latest features and number of new game tittles. According to Nintendo of America, there are over 1150 titles available for the Nintendo DS, Nintendo DS Lite, and Nintendo DSi as of February 12, 2011. Brain Age, Nintendogs, Mario Kart DS, New Super Mario Bros are some of the popular games on this device. The DS model is compared with Sony PSP but the company disputes this saying DS model targets different set of audience i.e. casual gamers. Nintendo DS are easy to play, quick pick and portable to carry on person and easily attract the casual gamers to try and start playing and become core gamers. Nintendo DS is presently struggling to keep up as the market is being encroached by the smart phones with bigger display screens and more games available at cheaper rates form the mobile companies’ online stores.  

Nintendo 3DS is third endeavor as part of the Nintendo’s blue ocean strategy. It is an autostereoscopic device is able to project stereoscopic 3D effects without the use of 3D glasses or any additional accessories. The device was announced in March 2010, but officially unveiled it at E3 June 2010, was released in Japan in February 2011 and in March it was released in Europe and North America. The device received positive reviews and gamers started queuing up for the device eagerly. Sales picked up in the release weeks but As of March 31, 2011 the 3DS has sold 3.61 million units, short of the 4 million Nintendo was expecting. Sales slowdown drastically and only 710,000 units sold in the next three months.

Despite being a good and innovative device, Nintendo 3DS hardware sales fell mainly due to the encroachment of smart phones and tablets and gamers were eager to play on smart phones and tablets as the games were very cheaply available on the Mobile Company’s app stores. Smart phone and tablets games can be downloaded for as cheap as a dollar and compared with costly $40-$50 games made for especially for consoles like the 3DS. Another reason for the fall in sales is non availability of 3D game tittles in the market and 3D versions of the existing popular game tittles. Nintendo has realized this fact and have announced to launch more game tittles including the 3D versions of the most popular games in coming months. It is also planning to upgrade its software to add more functionality to the device like 3D video recording.

To further improve sales Nintendo lowered the price of 3DS hardware by 32-40% depending on the market. This has initially spurred the sales but sales slowdown and the company are expecting to miss the goal of shipping 16m units in the fiscal year to March. But the fact remains that sales growth of Nintendo 3DS model lies not in the price reduction but the availability of the 3D game tittles. This fact is being supported by the raise in sales after the recent launch of the popular game Super Mario 3D. Nintendo is expecting the price reduction and the launch of more 3D game tittles will boost the sales in the coming holiday season. Nintendo 3DS is a good case to realize how the alternate devices like smart phones and tablets with games available in the Application Stores at a cheap price of a dollar affect the innovative and disruptive Portable device like 3DS. Nintendo is still sticking to its Blue Ocean Strategy to grow in the Red Ocean market of Gaming Industry.

Discussion Points:

1. How to boost sales of Nintendo DS & 3DS hardware sales?
2. Will price cut or Game title launch boost sales?
3. How to survive the current debt crisis and US economic slowdown?

Healthcare Vertical – Growth Driver for Indian Outsourcing Industry in Future

Healthcare has become focus vertical for majority of the Indian IT Vendors. Most of the IT/BPO companies like Cognizant Technology, WNS, TCS, Firstsource Solutions, Genpact, Mahindra Satyam, Pacific BPO, CBay Systems, etc already cater to global healthcare industry. Infosys is looking at Healthcare vertical as one of the critical vertical for future revenue growth. Indian IT vendors have been slow in tapping this vertical as major focus earlier was on BFSI and Manufacturing. Indian IT vendors are making use of technology as a platform and offer their service offerings. US healthcare reform announced by President Obama provides a huge opportunity for Indian IT vendors and the policy focuses on controlling healthcare costs and provides universal coverage. The US healthcare bill, valued at US$ 940 billion, will provide healthcare coverage to 32 million Americans over the next 10 years.

Major opportunity for Indian Outsourcing vendors lies in revenue cycle management, electronic medical/health records (EMR/EHR), billing & coding and medical transcription. According to ValueNotes, EMR/EHR is a $20 billion IT outsourcing opportunity. Revenue cycle management (RCM) is a $50 billion market in the US. Medical transcription business is estimated to be worth $25 billion annually and growing at around 15%. According to CBay Systems the size of the US medical transcription (MT) industry is estimated to be approx. US$17 billion for the year 2011 and is expected to reach US$21.2 billion by 2014.

Cognizant is the undisputable leader in healthcare market with more than US$ 1.17 billion in revenues. TCS has started looking at the healthcare vertical since 2009 and has seen good revenue growth in last two years. Wipro healthcare vertical revenues for 2010 were US$429 million and a momentum vertical. HCL technologies annual revenues from healthcare vertical in 2010 were US$252 million. Infosys does not report the healthcare revenues separately which highlights the fact that the company does not have much exposure in this vertical. Smaller players in the market like Firstsource, Genpact etc and pure play MT players like CBay, Pacific BPO also are focusing on Healthcare BPO market.

Indian IT vendors have to look for growth opportunities in healthcare as the US and European Markets are struggling to overcome the economic slowdown and European Debt crisis and the growth drivers till now BFSI & manufacturing verticals are slowing down due to the slowdown and debt crisis. Apart from the US healthcare policy, healthcare spend is also expected to increase in UK and India which also presents a growth opportunity. Mergers & Acquisitions are expected in this vertical as many big players in the Indian IT industry like Infosys are looking to acquire for jumpstarting revenues in this vertical.

For full article please click here:

http://itbizcharts.blogspot.com/2011/10/india-outsourcing-industry-2011-focus.html

India Outsourcing Industry - View on IT Budgets/IT Spending in 2012

Causes for IT spending decline

European debt crisis which intensified in early 2010 is still continuing to affect the Global economy in 2011 and is expected to continue into 2012. Euro zone countries and IMF agreed on a €110 billion loan for Greece in May 2010, with a condition of implementing strong austerity measures by the Greek government. After Greece, a €85 billion rescue package for Ireland in November and a €78 billion bail-out for Portugal in May 2011 were announced, as an effort to tackle the crisis. Recently in October, Euro zone leaders agreed on a package that included a proposal to write off 50% of Greek debt owed to private creditors, increasing the EFSF to about €1 trillion and requiring European banks to achieve 9% capitalization.

US economy is slowing down with rising unemployment levels, shrinking corporate profits and widening trade deficit. President Obama announced US$447 billion jobs package that's intended to spur business hiring and consumer spending in an economy that has sputtered almost to a halt. The package includes spending US$140 billion to save the jobs of state and local teachers and first responders, repair deteriorating schools and rebuild roads, railways and airports. Also includes 50% reduction in the payroll tax which will cost US$240 billion. Critics question whether the package will stop slowdown and kick start growth. These two factors have a significant impact on the overall IT spending/IT Budgets by the businesses on which the IT/BPO Industry depends for the revenues. 70% of the revenues for Indian Outsourcing vendors come from US and Europe.

IT spending view by IT India Outsourcing Industry  

TCS CEO said there was a lot of “negativism” among clients amid economic uncertainty. The macroeconomic situation in Europe is “worrisome,” but they are getting positive vibes from customers in terms of their IT spends going forward. Clients are investing significantly to drive efficiencies and also making commitments for discretionary spending.

Infosys said clients are becoming cautious about investments. There are delays in decision-making. At the same time, they are not seeing project cancellations. Clients continue to look for cost-cutting steps even as decision cycles were getting delayed by a few weeks. When it comes to discretionary spends, clients had become “extremely tight”.

Greece defaulting on its debt is inevitable; the impact of this on the European banks in terms of IT budgets would be low as European banks will put in a strategy to tackle the crisis.

Wipro said macroeconomic sentiments continue to remain uncertain but they have seen growth momentum build up in IT business with healthy volume growth. Exposure to Southern Europe is minimal, they have not seen the impact of the so-called recession, but as far as the rest of Continental Europe is concerned and the UK is concerned, given the portfolio that they are in, they don’t see any secular decline or any cause for concern. Asia-Pac and Latin America continue to remain a growth market, because they still seem to be going through the investment cycle, so a lot of opportunity out there, but in a different kind of business.

Cognizant says that clients’ IT budgets are likely to be flat or marginally up next year, and that the shift towards increased outsourcing will continue. Cognizant continue to see a robust pipeline. Clients are not slowing down their decision-making processes. Clients are clearly indicating that they will continue to ship work to global delivery models. Clients are working hard to protect investments that are directed towards building agility into their businesses.

The macroeconomic indicators were “troublesome” and there are concerns over the euro zone debt situation said HCL Tech CEO. Overall, IT budgets have been down for some time and the economic environment looks bleak. The activity is now around churn. Clients were unhappy and they are looking to change their vendors, which throws up more opportunities for companies like HCL. HCL expects flat or negative budgets next year.

Genpact said it's an uncertain and volatile economic environment. The difference from 2008 is that the leadership in most companies continues to be stable. They expect quick decision-making in 2012 around IT budgets, compared to 2008-2009 when decisions almost froze.

Slowdown in IT spend

Overall IT spending will slow down in 2012. With no end to be seen for European Debt crisis and question being raised on President Obama stimulus package’s effectiveness in kick starting US economic growth from current slow down levels. Business and governments are skeptical about the IT spends as of now but there is a positive upward bias in terms of IT spending growth all but at a slow pace compared to 2011. With overall revenue growth slowing business may not spend much on IT but will be looking at IT as a way of improving the efficiency and reducing costs. IT spend will definitely help the businesses and governments to overcome the slowing the revenue growth and increase profits through cutting costs using IT. Emerging economies particularly BRIC countries will be driving the overall IT spend growth compared to US and European countries. European countries are definitely going to see reduced IT spend due to the debt crisis.

Discussion Points:

1. What will be the affect of the European Debt crisis & US Economic slowdown on the Indian Outsourcing industry?
2. What strategy should be adopted to overcome the reduction in IT Budgets/Spending?