Delivering business value using analytics & technology without worrying about maturity models

Delivering Value Through Analytics

Organizations across industries are in the process of increasing digital engagement, closely integrated with analytics, for their candidates, employees and customers. When we meet organisations attempting to do bigger and better things, we often turn to the maturity model concept, both as a means of diagnosing the level of the firm’s capabilities in a given area, and of explaining how that capability can be enhanced to ever greater heights.

Maturity models describe the characteristics of maturity across a multi-point scale, from zero or one (typically a chaotic state), through to say five, where the capability is at the highest level of maturity and creates a genuine point of difference for the firm. For analytics, the journey has many layers and it pushes from transactional reporting of lag metrics to proactive reporting of lead measures to prediction and prescriptive analytics/insights in various business scenarios.

{Circle denotes what % of organizations are at what stage of analytics}

Source: Bersin by Deloitte | DUPress.com             

The Myth of Maturity Models

In the domain of advanced analytics and big data, large analytics consulting providers or core analytic firms use a variety of factors to pin-point a firm on the analytics maturity scale:

Let us first break the myths of traditional maturity models and share learnings from not so successful digital transformation & analytics journeys of mid to large size organisations.

Let me share with you a couple of examples from my research, observations and interactions amongst large IT services firms in India*. 

Example 1:

A top multinational IT services firm with large offshore presence took a bold step a few years ago to automate descriptive business and HR reporting completely through Qlik, assuming it would be able to expedite decision making to positively impact business & HR metrics. In the third year of its journey, full-scale execution of all business and HR reports is still on with very little impact on decision making. Full credit to the organisation for reducing reporting TAT (Click of button vs. reactive) and reporting & analytics team optimisation saving dollars. However, this is a notional saving given the investment made into vendor evaluation time, leadership time & cost and internal team deployment time & cost which would easily take another 2 to 3 years to recover.

Challenges/learnings from the long execution cycle:

•Technology integration capabilities (Synergies of buyer & vendor systems)

•Vendor domain knowledge for faster transition/automation

•100% reliance on reporting automation can stall short term benefits of semi-automated descriptive reports

Example 2:

Another large multinational IT & consulting services firm looked to optimise talent acquisition cost & time through advanced algorithms and analytics three years back. The firm started the journey by automating candidate screening process through NLP & artificial intelligence technology platform, followed by integrating predictive analytics to score candidates on employability/fitment, forecast probability of offer accept to even candidate performance/stickiness through Big Data.

The myth with which the organisation went ahead was the fact that being a PCMM level 5 company, their hiring processes, candidate data, job descriptions, hiring manager behaviour and historical employee data for like-to-like profiles was structured, clean and fully reliable. The pilot and actual launch showcased that while candidate data was rich, the internal data to derive key insights from predictive analytics was extremely weak. As a result, benefits were reaped only on auto screening.

 Challenges and learnings from the pilot & execution experience:

•Capabilities – Running a pilot to test predictive analytics capabilities on small scale (Capabilities of not only vendor but buyer data quality, data environment & availability. Any variables with less than 30% data availability cannot be used for any predictive or prescriptive analytics)

•The vendor failed to assess descriptive reporting in buyer organisation (Organisations without matured descriptive reporting/analytics capabilities find it difficult to move to predictive analytics)

•Cutting edge AI technology with weak data yields little or no impact

It is necessary to issue a caveat here: The maturity model of your analytics practice needs to marry the organisational maturity level. Key questions to consider here are:

•Is there leadership buy-in for prescriptive actions from predictive analytics?

•Are there sufficient processes in place to capture clean data?

•Does organization have a central data warehouse?

•Do we have technology to support advanced data analytics?

•Does organization have data required to accurately predict?

Leadership buy-in is comparatively easier in financial analytics where we deal with numbers and predict numbers; whereas, it’s an uphill task when the management problem revolves around human behaviour and the attitude ranges from completely predictable to absolutely undecipherable!

Also, it is important to understand that Statistics is only a means to an end which prevents a helter-skelter approach to service delivery. Without doing predictive modelling and creating causation frameworks, there’s still much value that can be delivered to business. A leap in the analytics value chain without the same lever in the organizational maturity would render the outcome useless. 

Here are a few examples to demonstrate the value delivered at different maturity levels without the constrains of sticking to gradual movement up analytics value chain:

AirBnB and Indian bed-linen industry – Nearly a decade back, a handful of financial analysts supporting HNI’s ran simple descriptive & correlation analytics (graphs and dashboards) on growth of bed-linen industry in India and merged with causation analytics to identify possible indirect sources of demands for listed bed-linen companies. This sort of data can be a goldmine for decisions about community growth, product development, and resource prioritization. This led to a conclusion that growth in the number of rooms listed on AirBnB by home owners and the push towards cheaper good alternatives to the established hotel industry would push the demand for bed-linens from manufacturers in India. Five years down the line, both listed and unlisted players have seen a huge surge in both top line and bottom line and decade down the line few players become multibaggers.

Financial Analytics for end HNI customer – The financial services industry in developed nations are truly leveraging the power of prescriptive analytics, providing prescriptive actions to customers on banking and investment decisions, based on factors such as personal health, financial status, weather conditions in cities they live in, political or ecological changes and many more such direct derived data with financial goal set.

Prescriptive Analytics and Consulting for Governments – Most matured countries who have connected systems, high end technology and citizen data captured over years are, in fact, in a better position to leverage prescriptive analytics in policy, political and economy related decisions. Virtual Singapore is one of the best examples where policy makers, statesmen and citizens can build or test decisions through use of IoT and prescriptive analytics. The US government has a team of data scientists testing various decisions to outcome of various policies implemented around the world to help enhance the decision making process. This is a classic example of starting with descriptive reporting to descriptive insights generation to slowly move towards predictive which is extremely mature & requires huge investments.

How to Derive Value?

Value comes from things that matter at that point in time and for the overall organisational purpose. Almost 80% of the reporting done in most organizations is transactional with metrics that are of little value —that’s where we should start.

The right metrics provide a context around which performance can be analysed. With the wrong metrics, an executive summary gets reduced to an anecdotal commentary. One of the classic examples of business metric in HR: Employee Attrition Reporting, Prediction to Prescription. Reporting employee attrition by various bands/locations/skills etc. renders little or no value unless key employee clusters/groups to be retained are identified, reported, predicted and prescriptive actions taken on this cluster to impact employee attrition as a metric.

Such outcomes presented in a compelling fashion win over the management’s trust and get them to rethink processes and workflows, invest in technology and infrastructure, and adapt to the organisational changes that arise out of your analytical frameworks. And when the organisational and business needs are in synergy, you move up the analytical value chain, leaving the management to answer just one question, Are we aware of the next big thing?

Analytics team needs to delivery descriptive & predictive models with Intelligence, Insights and Prescriptive actions to drive value and not just good looking dashboards or statistical models. This is where a combination of statisticians, data scientists and domain experts can together add value to answer the question of next big thing?

Important for Analytics teams to focus on Results but imperative for leadership to be ready to convert prescriptive insights to actions

Significant untapped value lies in data that already exists in most organizations, and analytics team needs to assess required capabilities that can effectively exploit this data. However both leadership team and analytics team needs to establish with a clear focus on tangible business value.

Based on research one of the key reasons for failure of internal analytics team in large organizations across various sectors starting from Pharma, Banking, Financial Services to IT has been lack of synergies and underlying intent of setting up analytics team between leadership & analytics team.

Analytics team needs to establishing an Agile Analytics data architecture and methodology to addresses ever-changing business requirements and opportunities in a way that can evolve along with the business to become a source of genuine strategic value (Link it back to Balance Scorecard or organization goals). Business users and leadership needs to be prepared to act on insights from descriptive to predictive analytic models to see true value of investments made.

About the Author: Gaurav Vasu

Gaurav Vasu is Global HR Market Intelligence & Analytics lead at a leading global IT services company . He has worked with CEO office, CHRO’s and senior HR leadership to shape the business strategy, identify human capital implications and design people practices to enhance performance and productivity. He is one of the top Industry experts in the Research, Consulting and Analytics domain.

He also specializes in Growth Consulting (IT/ITES), Market Entry Strategy, Industry Analysis & Assessment (India, China & Philippines), Talent Supply Mapping, Vendor Analysis, Peer Group Benchmarking, Financial Analysis (Discounted Cash Flows, Relative Valuations, Simulation, etc.) and Wargaming.

During his 12+ years of experience, Gaurav has helped delivered consulting by growing the research and analytics value chain in companies such as HCL, Accenture, Zinnov, and Knowledge Faber & Nirvana.

US Immigration Law Changes – Impact on IT Services Firms

The Immigration Reform Bill is likely to have a significant impact on the Technology sector, and especially for Indian IT Services.


The Bill is being discussed and debated in the Senate; various amendments and the bill itself would likely be voted on in the coming days. If it does go through Senate, the House will be forced to act, perhaps. The Speaker of the House has said he wants to get a bill through Congress by August. Analyst believe all the concerned stakeholders — Service Providers, Customers, and Employees — should assess the impact of the provisions contained in the 1000+ page bill (in its current form) and prepare their contingency plans.

Overall Impact to different Stakeholder groups:

While it is difficult to assess the probability of the Bill passing, it seems unlikely that the stocks of Tier 1 companies are fully factoring the likely impact.

Further, most analysts and experts are only looking at the impact of this reform on Service Providers and perhaps customers to some extent. It is important to assess the impact on another important group of stakeholders, namely employees.

Service Providers

While a number of analysts have focused on the cost aspect, it is believed the adverse impact on the Service Providers’ business model itself is more significant and has to be studied in greater detail.

Analysts have earlier alluded to some of the following strategies Service Providers will deploy with immediate effect, perhaps even proactively.

• Relocate some of these visa holders offshore

• Resort to subcontracting (which hitherto has not been a large portion of their business, and not one that is preferred by them for various operational reasons)

• Acquire U.S. companies having pre-dominantly U.S. workers (green cards and citizens)

• Aggressively hire green card holders and citizens in the U.S.

• Aggressively go after contracts requiring Rebadging.

While they can and should certainly employ/ deploy some or all of the above, most India-centric Service Providers are averse to aggressively deploying them given the perceived risks. It is inconsistent with their culture and/or business model as discussed below:

• A very high offshoring percentage will result in lower quality, lower customer intimacy, and lower revenues.

• Subcontracting has a number of operational issues.

• Acquiring U.S. companies is easier said than done due to cultural issues that need to be addressed.

• Hiring green card holders and citizens entails much higher cost, and requires investment and training in aligning them to offshore processes.

• India-centric Service Providers have not done too many contracts involving Rebadging, and in the few that they have, it has mostly been selective and somewhat reluctantly with an intent to offshore eventually. In the new scenario (if this Bill becomes law), they may not be able to move this work offshore without re-assessing impact on compliance with threshold percentages.

Analysts also foresee the number of T&M contracts; especially leveraging H-1B and L-1 visas go dramatically down. If one can only execute contracts for clients if 15% or less of the U.S. workforce are visa holders, Analyst doubt those “precious few” visa holders will be deployed on hourly T&M work. They will likely be leveraged for projects and large outsourcing contracts.

Employees

Most analysts and experts have not considered the impact on this group.

Employees of Indian Service Providers are likely to be significantly impacted. While the Bill provides for increased wages for H-1Bs which is a huge positive for employees, companies may have to incur higher costs and perhaps even apply for Green cards to comply with other provisions.

Some companies may therefore seek to either replace them with US workers or ship their job overseas, so as to be in compliance and to mitigate the cost impact of having them locally.

The Bill provides for another interesting alternative by relaxing the rules for Service Providers “…that has filed immigrant status petitions for not less than 90 percent of current employees who were the beneficiaries of applications for labor certification that were approved…”, and applying for Green cards. In layman speak, it means that a possible solution is to apply for Green cards for over 90% of your visa holders. While one leading analyst dismissed this as “not feasible”, Analysts believe this may not only be feasible, but even desired. While companies may not do it if they take a short-term approach or for purely commercial reasons, Analysts believe this may be a huge positive for not only employees, but for also the other stakeholder groups. The Service providers will immediately be in compliance, clients will not be adversely impacted, and employees will be happy. Employee satisfaction and loyalty may go through the roof. Sure, the Service Provider’s costs may go up in the short term.



Customers

As Indian Service Providers themselves will be adversely impacted, the companies that have outsourced work to them, will have to likely address the consequent risks and any disruption to their operations that may likely happen. They have to start mitigating risk (discussed earlier), by doing any or all of the below:

• Review all their contracts to assess impact

• Seek answers from those impacted about actions to be taken, and risk mitigation steps, and put together a proactive action plan in conjunction with Service Provider.

In the preliminary assessment Analyst have looked at 5 Key Provisions in the Immigration Reform Bill:

1. Increase in H-1B Visa Limits

2. Higher Wages for employees on H-1B Visa

3. Outplacement Provision

4. Establishment of Threshold Percentages for Visas

5. Increase in Visa Filing Fee (for H-1B and L-1 visas)

1. Increase in H-1B Visa Limits

The annual cap on H-1B visas will be increased from 65,000 to 115,000 and can go up to 180,000.

Impact:

• This is great news for currently offshore employees who are looking for opportunities to come to the U.S. on work visas.

• The India-centric Service Providers (Cognizant, Infosys, TCS, HCL, Wipro, Igate, etc.) will not be able to benefit (in the short-term) from this increased Visa Limits provision.

• This is also great news for companies that can take advantage of the higher limits, and bring currently offshore employees onsite. Given the heavy demand for H-1B visas, the earlier limit of 65,000 was easily exhausted. Therefore, some companies Analysts precluded from getting employees on visas. Going forward, Analyst expect the heavy users of H-1B visas – the large Tier 1 India-centric Service Providers – will likely start reducing their dependency on H-1Bs (to be in compliance with more stringent provisions to be discussed below). This combination of higher limits and the lower demand from the Tier 1s will automatically make it a lot easier for those seeking to take advantage of this provision to bring more employees onsite. Several Product and non-India-centric Service Providers (Microsoft, IBM etc.) will benefit from this.

2. Establishment of Threshold Percentages for visas (Percentage of H-1B+L-1 visa holders in a company’s U.S. workforce):

• Year 1 (Oct 1, 2014-Sep 30, 2015): 75%

• Year 2 (Oct 1, 2015-Sep 30, 2016): 65%

• Year 3 (Oct 1, 2016-Sep 30, 2017) and beyond: 50%

If a company is above these thresholds, the bill (in its current form) mandates bringing down the ratio of visa holders to levels below these thresholds in the stipulated time. Until such time, companies cannot apply for new visas.

Below these thresholds, companies can apply for new visas, but will still have to pay higher visa fees, and will still have to comply with other stringent restrictions (See Outplacement provisions).

Impact:

Most of the large Tier 1 Service Providers are expected to be above these thresholds, and will therefore have to start ramping down their ratios. They may therefore attempt a combination of the following:

• Relocate some of these visa holders offshore

• Resort to subcontracting (which hitherto has not been a large portion of their business, and not one that is preferred by them for various operational reasons)

• Acquire U.S. companies having pre-dominantly U.S. workers (green cards and citizens)

• Aggressively hire green card holders and citizens in the U.S.

• Aggressively go after contracts requiring Rebadging.

3. Outplacement Provision

Companies that fall in one of the 3 below categories (“H-1B-dependent employer”) will be impacted.

1. 25 or fewer U.S. employees, and employs more than 7 H-1B nonimmigrants

2. 26-50 U.S. employees and employs more than 12 H-1B nonimmigrants

3. 51 and over U.S. employees and employs 15% H-1B nonimmigrants

Read the clause below:

An H-1B-dependent employer may not place, outsource, lease, or otherwise contract for the services or placement of an H-1B nonimmigrant employee.

Impact:

Some believe that if the Service Provider falls in any of the above 3 categories, this clause will only prohibit them from placing H-1B visa holders at clients’ sites.

Analyst hoAnalystver have a stricter interpretation, and believe that this provision will effectively prevent meaningful provision of any services at all, leveraging H-1B visa holders (by those Service Providers in any of the above 3 categories).

A similar provision pertaining to Service Providers with L-1 visas is even more stringent.

Interpretation is that T&M or Staff Augmentation work cannot be provided by L-1 visa holders even below the 15% threshold (as L-1 visa holders are not allowed to provide “Labor for hire”)

This Outplacement Provision will perhaps have the biggest impact of all on the Indian IT Services industry.

4. Increase in Visa Filing Fee

Starting October 1, 2014 (Oct 1, 2013 for L-1), the application fee will substantially rise. The fees will be as follows:

• $5,000 for applicants that employ 50 or more employees in the United States if more than 30 percent and less than 50 percent of the applicant’s employees are H-1B or L-1 visas.

• $10,000 for applicants that employ 50 or more employees in the United States if more than 50 percent and less than 75 percent of the applicant’s employees are H-1B or L-1 visas.

This is up from approx. 4,325 per visa application earlier.

Impact:

While some have argued that this will drastically increase the expenses for Tier-1 India-centric providers, paradoxically, this may not have a material impact as the Service Providers will be applying for far fewer visas than in the past (if they apply at all), as they will be required to cut down the total number of visa holders, per the other provisions in the Bill. (Analysts have looked at the scenario where all the provisions survive. If however some of the other provisions do not survive and this provision survives, it may lead to higher costs).

Some employers require employees to bear all or some of the costs pertaining to filing of visas. To that extent, some employees may be impacted.

In some T&M contracts, customers pay for the costs of bringing someone onsite (usually clubbed under Travel & Visa fees or structured into the hourly rate). In such cases, Service Providers may re-negotiate, and try to pass on the costs to customers.

5. Higher Wages. The bill stipulates higher wages for H-1B visa holders to the extent of roughly 20-25% over current rates.

As per interpretation, this will apply to new and existing H-1B visa holders (some believe this will only apply to new visas).

Language in the specific provision

“…if the employer is an H-1B-dependent employer, is offering and will offer to H-1B nonimmigrants, during the period of authorized employment for each H-1B nonimmigrant, wages that are not less than the level 2 wages set out in subsection (p);…”

Impact:

• Employees ought to be very happy, with this provision. It has always been their biggest grouse that they are paid significantly lower than citizens and green card holders with comparable skills and experience. With the new provisions, companies may have to pay higher wages to its employees with visa, and perhaps even apply for Green cards to comply with other provisions. This provision may help bring better overall parity, and lower the dissatisfaction levels amongst employees with visas.

• However, this provision (in conjunction with other provisions) may cause India-centric Service Providers to perhaps restructure their contracts from T&M contracts to Managed Services/ Outcomes contracts, and to optimize onsite-offshore ratios. This would result in some employees with visas being sent back offshore.

• If this restructuring and optimization is purely motivated by financial/ commercial considerations, it may have the effect of lower customer satisfaction and lower customer intimacy, hurting them in the long-term.

• Overall, customers may get impacted as follows:

o Some Service Providers may invoke clauses where a regulatory change could trigger a commercial re-consideration/ negotiation (depends on how many contracts included this provision), or suggest reconsideration if the contract did not specifically disallow commercial re-consideration for regulatory/ legal changes. (Some Managed Services contracts may explicitly disallow any commercial negotiations, and require compliance with existing and new laws at Providers’ own cost. In such cases, customers may not be financially impacted.)

o Replacing H-1B visa holders with citizens/ green card holders may impact continuity and client satisfaction, and even require re-training etc.

o Relocating onsite workers offshore will also likely lower customer satisfaction and customer intimacy in most cases.

o Customers may get cautious especially with respect to new Outsourcing contracts as:

 They will have to assess disruption to their operations over the course of the contract.

 They may have additional questions with respect to the Service Providers’ compliance with respect to visa holders on U.S. payroll

• Service Providers may have to resort to increased subcontracting (which hitherto has not been a big component of their operations). Customers usually have a say with respect to Subcontracting, and they may assess the consequence of such subcontracting to the quality of work.

• If compliance to laws requires Service Provider to relocate personnel offshore, there may be an implicit conflict of interest (which Client gets priority). Using a bad analogy, a squeaky wheel gets the grease. Clients should therefore be proactive, and request commitments with respect to personnel.

• Clients can invoke Key Service Provider Personnel clause to ensure continuity, and non-relocation of their staff offshore.

• Some companies may choose to bring back the outsourced work in-house through their Captive centers in India, or even re-bid the work in the context of new provisions.

• The MNC Service Providers (Accenture, IBM etc.) are sure to use this impending law to their advantage and to the detriment of the Indian Service providers.

• No matter what, this will require a careful review of the contract, and understanding all of the options available, and knowledge of Service Provider’s operations, current standing with respect to percentage of employees with visas etc. This will likely not be a pleasant discussion for either the Customer or Service Provider.

Genpact India

Today Genpact is much more than just finance and accounting (F&A) BPO service provider. It has grown from providing support back office services to General Electric to being a diversified and much broader BPO service provider. Currently only one third of its revenues come from and accounting outsourcing (FAO) it has forayed into IT services (16% of revenues), procurement outsourcing, voice based customer services and knowledge process outsourcing (KPO)/analytics offerings (10% of revenues). Today Genpact works for clients from various industry verticals like BFSI (mortgage, commercial and consumer banking, investment and wealth management, insurance), automotive, healthcare and pharmaceutical.
Genpact has recognized various important aspects like standardized offering through alliances, organic growth by focusing on emerging markets like India & China and Inorganic growth (In talks to acquire Intelenet Global Services). Genpact’s India arm employs around 2000 professionals servicing around 10 – 12 customers (Domestic clients). As a part of its strategy to provide cost competitive services Genpact has hired 90-95% of fresh graduates to provide services to its Indian clients and rest 5% are hired from competitors, internal teams and top executives. India domestic business arm is expanding with addition of another 1500 employees by year end to tap domestic market opportunity.
Genpact also realized the importance of alliances with ERP software providers to standardize its service offerings across clients for optimizing process effectiveness and efficiency. Genpact has partnered with leading insurance asset provider MajescoMastek and ERP vendor NetSuite deliver more replicable processes to its expanding client base.

Genpact has over 40,365 employees across the globe providing BPO, IT and KPO services. About 73% i.e., 29466 employees are located in delivery centers in India. It’s NCR (Delhi and Gurgaon) delivery center alone employs around 18,000 professionals for providing BPO and KPO services.

Cognizant’s Success Demystified

Back in 2006/2007 Cognizant was just an emerging company and not a close competitor for IT giants like Infosys, Wipro, TCS, or MNC giants like IBM or Accenture both in terms of revenues & talent. But all that has changed in the last three years. Quarter after quarter Cognizant has outpaced the Indian giants i.e., TCS, Infosys, Wipro posting double digit growth numbers. Infact Cognizant was one of the only IT services firms in India to hire aggressively during recession. Cognizant recruited nearly 20,000 professionals to prepare for the renewed demand after recession.

So what is it about Cognizant that makes them different? Well everything. We have heard stories that Mr. Lakshmi Narayanan, Cognizant’s vice chairman does not believe in consultants. He would throw a highly cited survey into the dust bin and listen to real people. Current CEO Francisco D’Souza is a good mix of numbers, people’s person and absolute empathy to client needs.

• Company has taken some bold steps and adopted some path breaking strategies to grow much faster than many of the leading IT services firms around the globe. In the year 1998 Cognizant decided to plough back any profit earned in excess of 20% back into the business.
• During the same time frame Cognizant adopted “Two in a Box” Relationship Model as large percent of its workforce was located offshore (India & China). For every client it decided to have a manager on the ground in India and one on the ground at the client site. Currently Cognizant has around has 500-600 accounts, served by 750 client managers. (These accounts have been built by a team of about 70 sales professionals around the world) Company added one layer of senior management to be able to follow the big shifts in the BFSI sector and catch opportunities early. It has always remained client centric organization spending about 23% of its revenues on sales and general administration expenses as against an Infosys which spends about 12%.
• It follows a factory like delivery model or “run-of-the-mill application maintenance work” with two shifts for commoditized projects like payroll applications in its Coimbatore center saving infrastructure costs like office space, computers and software licenses while delivering twice the work.
• Cognizant attributes its increasing revenues to its strategy of investing even during the recession and being able to sustain high customer service levels. In a recently concluded customer satisfaction study, the company was ranked the leader among twenty-five India-based and global service providers and was the only firm with no dissatisfied clients.
• Cognizant continued to expand its global footprint through acquisitions and recently acquired Galileo, a boutique firm focused on testing services in the French market. Galileo’s services help French customers to optimize and extend business performance through IT system measurement, management, and testing. Outsourced testing services have great potential in the coming years, the industry is expected to grow 19% annually over the next five years to reach $17.7 billion by 2013. With over 12,000 professionals, Cognizant can accurately claim to be the world’s biggest testing service provider.
• Even without a home grown product in the BFSI segment (Unlike TCS or Infosys) it has been very successful with 42% of its revenues coming in from BFSI clients. It tied up with Temenos to go to market jointly especially in the Asian and Middle East market.

However biggest worry for Cognizant today is the its inability to grow its BPO practice. BPO is a major differentiator and an entry point to cross-selling other IT services. Today BPO constitutes about 5% of Cognizant’s revenues and the firm is aggressively planning to plug the gap in its services portfolio. The only way to plug this gap is through acquiring mid to large size BPO firms.
Another big worry for Cognizant is the lack of second layer of leadership who can step into D’Souza’s shoes when it is in sniffing distance of TCS, Infosys and Wipro in terms of revenues from BFSI segment. During its growth phase it had four strong pillars (Kumar, Lakshmi, D’Souza and Chandra) who could lead the company through tough period.

Current Status of Indian IT-ITES Industry

Indian IT-ITES Review 2010 (July 2010 - Gaurav Vasu)

Indian IT-ITES sector generated revenues of about USD 73.1 billion in FY2010, a growth of 5.4 per cent over FY2009. Sector provides direct employment to 2.3 million people and contributes to about 6.1 per cent of India's GDP. Indian IT-ITES sector continues to be export oriented with about 69 per cent ($50.1 billion) of India's total IT-ITES sector (US still being a major contributer). Indian IT-ITES sector created 90,000 addition jobs for FY2010 and as per Nasscom estimates next year Indian IT-ITES sector would add another 1,50,000 (Net hiring) professionals for FY2011.

Top 20 IT Exporters from India (Includes services and product firms)

1. Tata Consultancy Services


2. Infosys Technologies


3. Wipro


4. Cognizant Technology Solutions


5. HCL Technologies


6. IBM India


7. Accenture India


8. Tech Mahindra


9. MphasiS


10. Oracle India


11. Patni Computer Systems


12. Hewlett-Packard India


13. Capgemini


14. CSC India


15. L&T Infotech


16. Syntel


17. Aricent


18. Prithvi Solutions


19. Polaris Software Lab


20. Mindtree Consulting

Top IT-ITES firms are optimistic about the global demand in the next two qaurters and hence all the top players are hiring aggresively.

However companies across the globe are focusing on reducing capital expenditure hence concepts like "Cloud Computing and SaaS" have taken a center stage. Global economies especially US and Europe are still battling with lower private consumption and high unemployment. Slight recovery in the US is largely due to government spending & stimulus.

While MNC's and top five Indian IT-ITES players are doing well most mid to small size companies are still struggling to stay afloat. Mid and small IT-ITES players have failed to close deals in the domestic market.

Knowledgefaber article on status of IPTV in India

Indian operators providing IPTV services have not aggressively pushed and promoted IPTV the way they have promoted DTH. Why?

Globally, IPTV market has successfully reached an advanced stage where it has been growing rapidly since the last three to four years. IPTV has grown from strength to strength from its first deployment in 1999 to 2009 in terms of number of subscribers and revenue. At the end of 2008, global IPTV subscriber base was 23 mn that grew to 26.7 mn in 2009, and is expected to grow at a CAGR of 32% to 81 mn by the end of 2013. In terms of service revenue, global IPTV market is $6.7 bn in 2009 and is expected to grow to $19.9 bn by 2013 as per industry estimates. Globally, there are around 120 IPTV service providers in over sixty countries, with Europe and the far eastern markets taking the top spots. Currently, Hong Kong, France, Taiwan, and Belgium are leading the pack in terms of IPTV penetration. By 2013, Europe and North America will generate a larger share of global revenue, due to low ARPUs in China and India, the fastest growing markets (and the biggest) in Asia.

In the last few years major developments have taken place in the global IPTV market. One of the major developments that should interest companies who are planning to foray into IPTV deployment in India, China, and other emerging markets is the deployment of IPTV services over ADSL access on telephone wire or without interest connection. Operators like Deutsche Telekom (German telecom operator) and Akash Optifibres in India are providing IPTV without Internet/broadband connection. Other major milestone for IPTV was approval of a new ITU standard that supports global rollout of IPTV services. This should definitely encourage many global IPTV service providers to look at the Indian market either to provide services directly or the cable operator route. This is another major development in the global IPTV space, wherein cable operators are providing IPTV services through their existing network. Butler-Bremmer is one such recent example of a leading cable operator providing IPTV services. Though examples like these are still few and far between, but cable operators abroad are starting to deliver IPTV services over Docsis 3.0, a CableLabs platform that bursts data in excess of 100 Mbit/s.

Indian Scenario

As stated in our earlier report that Indian IPTV market is at a nascent stage where it is being deployed over DSL, ADSL and ADSL2+ network infrastructure owned by operators like BSNL, MTNL, and Airtel. Indian market has witnessed an interesting battle where for the first time state owned companies are aggressively promoting IPTV when private players have kept a low profile. Till now state-owned telecom companies-BSNL and MTNL-were not considered formidable competitors to private telecom companies. But interestingly these two are aggressively marketing IPTV in India. Recently BSNL and MTNL along with Smart Digivision (official franchisee for IPTV) announced 'MyWay' that will be launched in over fifty-four cities, the largest IPTV launch in the country. Smart Digivision plans to offer IPTV services to 1.6-1.7 mn broadband subscribers of BSNL and MTNL in these selected cities which comprise 80% of the country's broadband subscriber base. Private players like Airtel and Reliance have not aggressively promoted their IPTV services. In fact, Reliance has quietly launched their services in some areas in Mumbai without much fuss. While on the other hand, Airtel has been going slow on IPTV, they are still in the process of evaluating more cities (Bengaluru, Mumbai, and Chennai) before launching the services aggressively. Private players believe DTH is for masses and IPTV is for the classes. However private players do realize that IPTV in the long run can become an ARPU driver. Some of the other interesting developments that took place in the Indian IPTV market in the last few months was the roll out of wireless STBs (hardware essential for accessing IPTV, digital cable or DTH services) for its IPTV services by Aksh Optifibre. Aksh has plans of commercially rolling out its wireless STBs for IPTV services. This will enable consumers to access IPTV services in any part of their home without having to physically make wire connections from the STB to the TV sets. Though this is very expensive right now (three times costlier than the a normal box for accessing digital cable or a DTH, IPTV service) but we believe if this is commoditized just like mobile handsets it can penetrate in India creating a mass consumption drive eventually resulting in price reduction.

India is not only a potential market for IPTV, but can also become a hub for innovation and the next technological breakthrough in global IPTV market. Indian IPTV market has the potential to bring new innovative technology, breakthrough business models and world class content just like the Indian wireless telecom. This is clearly evident from the amount of interest shown by biggies like Cisco, UTStarcom, CopperGate, etc. UTStarcom opened its IPTV technology center and center of excellence in India to develop and enhance standards for IPTV deployments in the country and support global development. CopperGate is also keenly looking at India as a huge market in the near future. CopperGate sets up one IPTV connection every 7 seconds somewhere in the world.

The Value Chain

India's first IPTV deployment was in 2006, when MTNL rolled out its IPTV service in Mumbai followed by BSNL. Other major players like Bharti Airtel and Reliance Communications were given the go ahead to launch their IPTV services in the Indian market in February 2008 by Trai. Airtel has launched its service in January 2009, while Reliance has launched their services in Mumbai. The scenario for IPTV market in India is driven by certain factors like interactivity, value added services, customer end benefits, and fueling broadband demand.

However, India still has a long way to go before IPTV can pick up momentum like wireless communication or DTH services. India has a lot of problems that exists as a barrier for growth of IPTV in India.

Some of the key issues are listed below:

Physical infrastructure: One of the biggest challenges India faces is the required infrastructure for growth of IPTV. India lacks the required high-speed wiring and copper cables and is still dependent on copper or coaxial cables for deployment of IPTV network. Some parts of the world have successfully shifted to optic fiber for deploying high quality IPTV services.

Broadband penetration and n/w capability: One of the biggest and most important factor for success of IPTV in any country is its infrastructure for broadband services and broadband penetration. India's broadband penetration is one of the lowest in the world and the success of IPTV is directly dependant on broadband penetration. India's broadband penetration rate is 2% (rate of Internet penetration of the total households). Although, it is expected to pick up pace in the coming years, advanced technologies like VDSL, WiMax or LTE can save the day for IPTV in India.

Network capability: IPTV requires at least 1.5 Mbps line (with MPEG-4) for basic services at a good QoS and 8 Mbps line (with MPEG-4) for HDTV services. Some part of the broadband networks, especially MTNL and BSNL networks are not ready yet. Most of the major cities like Delhi, Mumbai, Pune, Bengaluru, Chennai, etc, are SDTV compatible this is largely due BSNL and MNTL network and these are the cities where BSNL and MTNL first launched its IPTV in India. Quality of service: India lacks the required infrastructure to support IPTV. Current subscribers have criticized the QoS offered by these companies.

Content readiness and cost: Content is critical for success of IPTV and to compete with DTH and cable operators IPTV service providers will have to provide high quality innovative content. With respect to content there are various costs which are involved and it totally depends on what route does the player take. It can be either fixed fee deal with broadcaster or Ala carte price per channel. Operators will have to offer services that are not being already provided by their competitor including live TV, video on demand (VOD) and digital video recorders (DVRs).

Cost of service for user: The cost of IPTV services offered are quite competitive but the cost of IPTV STBS is still very high. Cost of IPTV STBS will have to fall further, as they are more expensive than traditional DTH or Cable set top boxes

Regulatory framework: Some of the potential regulatory issues identified includes advertising: targeted advertising and advertisement less content delivery to allow next generation business models; time shifted TV: legal framework to support content storage, redistribution and super-distribution (for example, access from multiple devices); privacy: protect privacy of user content (with consideration for lawful intercept); piracy: provide a framework for detection and prosecution. Alternate models: watermarking, crawling, etc ; multimedia communications: triple play, voice, video and data regulations; and content classification: larger scale production.

IPTV ecosystem: When we dig deeper into specific infrastructure and ecosystem required for IPTV we find the following trend in India.

IPTV infrastructure is not at par or as required for areas like broadband/transport infrastructure and technology, favorable regulations, customer understanding of product proposition, content readiness and cost, unified standards development and pricing and promotions

SDTV and HDTV

Not all the available set-top boxes in India are scalable from standard definition to high definition technology. Most of the IPTV or DTH set-top boxes are just meant for SDTV. Customer has the choice to choose HD compatible set-top box and pay much more for it. In addition he needs to have high definition LCD, plasma TV, etc.

Also one of the reasons why not many players are aggressively looking to promote IPTV services is because currently in India, TV program producers are not making programs in HD TV format.

The price drop in HDTV in India expected, as DishTV, Reliance BIG TV and Tata Sky satellite TV channel providers are having plan to start HDTV channels.

Experts say the push to HD TV has been prompted by the government's decision that the 2010 Commonwealth Games will be broadcast only in high-definition. As a result, Doordarshan is also expected to launch HDTV on an experimental basis, has stated it will produce content for the Commonwealth in this format.

Sun Direct (DTH) is the only player either in DTH or IPTV or digital cable areas who is providing 'Sun Direct HD' which provides high definition broadcast service on the DTH platform in India. It provides two HD channel in India, both are movie channel and regional languages (Tamil and Telugu).

Challenges

Challenges like robustness and scalability of IPTV technology. Choice of middleware platforms and video server architectures, changes in bandwidth requirements and availability and interoperability among enabling technology products are the key challenges to effectively delivering high-quality video services. The market is in its infancy and the more established commercial rollouts attracting limited take up. Growth of over-the-top (OTT) video consumption poses a particular challenge to the growth of IPTV, which shares many functional attributes with Internet video-such as time shifting, interactivity and on-demand program scheduling-but which currently still relies primarily on a subscription based revenue model.

Basic deployment challenges are classified as network issues like bandwidth drop offs that have a direct effect on video quality due to copper usage , operational issues like frequently updating routing tables, bandwidth issues and network management concerns and in home issues like wiring, interference, additional CPE requirements ,post installation requirement and multi-room DVR and HDTV requirement.

Cost Optimization

The cost metrics for IPTV provisioning vary significantly by provider and are based on in-home topology, the complexity of the installation and the cost of the technical workforce. The average calculated installation cost comes around Rs 287. An exception to our model is the Asia-Pacific market, where several factors lower installation costs. There are fewer wiring issues in homes because they are significantly smaller than those in North America and Europe. Also on support side we estimate that the average technical support call lasts 17 minutes further adding to the cost.

For cost optimization DDR2 DRAM controller specification was enhanced to support transparent auto entry into an auto-precharge power-down mode (APPD) when the memory is infrequently used. This can save up to 90% of the power consumed by the memory devices in an idle system, with no impact to the software running on the device.

In addition to cost and size emphasis is given to reduction of capacity, power and noise. Installation of 2.5” drives serves the purpose which is one-fifth the total size, with a volume of about 67,000 mm3 and weighs just 100 grams, compared to 3.5" drives at nearly 400,000 mm3 and 710 grams. Second, 2.5" HDDs fit naturally within Green initiatives, which are now an important aspect of every technology sector using a 5V power supply, the latest 2.5" HDD consumes just .5 Watts while idle, nearly 10 times fewer Watts than a 3.5" HDD. The 2.5" HDD also operates at only 20 decibels while the typical 3.5" HDD is three times louder. Finally, 2.5" HDDs have three times the shock tolerance of their bigger counterparts.

Pricing in India

Indian market is extremely sensitive to price and to succeed stakeholders will have to carefully price their services to win in a competitive environment. Currently, IPTV packages are aggressively priced. In fact some of the packages are at par with prices of DTH packages. However, cost of set top boxes are extremely high and needs to come down drastically to attract more subscribers. This can be the potential make or break for success of IPTV in the Indian market. The Indian market offers a great opportunity for set top box manufacturers for a long term growth. These manufacturers can look at innovative design models with low cost manufacturing capabilities to support mass demand from the Indian market. Companies would have to draw inspiration from mobile/handset manufacturers like Nokia, LG, Samsung, etc, who churned out low cost customized devices targeted at the Indian market. Globally companies are trying to integrate HDTV with a built-in set top box which acts as a multi compatible device that can support cable, DTH, and IPTV. One such initiative in India is taken by Aksh Optifibre which is currently testing an integrated television set in which IPTV has been integrated so that consumers do not need any extra box. This is just a beginning of various innovative business models to push IPTV into the of consumers. The next wave of development in highly competitive markets like India and China might bring global innovation for IPTV. Below is a snapshot of some of the available packages and pricing models for IPTV in India

Outlook

Wireless IPTV: Wireless IPTV also called 'Quadruple Play' is going to be a revolution in India. Launch of 3G and WiMax technology will bring about a huge change in the Indian market.

User generated content: IPTV is much beyond DTH when it comes to user generated content. Exclusivity of content and differentiation will be key requirements for IPTV to be successful has gone beyond DTH potential to go beyond DTH when it comes to brining user interactivity believes that wireless IPTV is going to be a revolution in India. Launch of 3G and WiMax technology will bring about a huge change in the Indian market.

Interactivity: IPTV is all about interactivity, services from a cable or satellite operator are 'pushed' into your home. The user has limited choice and has to keep on surfing channels for variety.Cable TV is a one-way communication where as IPTV provides for a two-way communication. Users have complete control over the content they wishes to view. Content providers and operators will have to come up with more innovative interactive services to capture the imagination of Indian consumers.

Windows embedded based solutions will enable more flexibility and versatility in offering services ranging from IP based broadcasting to video-on-demand, IP telephony, gaming, and vertical markets such as media (internal content distribution within news broadcasting, movie and video production services); hospitality (hotels, resorts, cruises, and luxury apartments such as Leopalace21); interactive point-of-sale advertising ; education; corporate; and government.

Competitive environment: IPTV is not just restricted to telecom operators, globally leading cable operators have also aggressively marketed IPTV services to reach out to new customers. Cable operators can leverage their existing cable network infrastructure, existing customer base and customer reach to offer comprehensive and high quality services at affordable prices. One of the recent example of IPTV deployment by cable operator is by Butler-Bremer Communications, which launched cable IPTV services with Harmonic (on-demand video's Direct-2 Edge solution) and Falcon IP/Complete Solutions (For “bird to box” video solution)

Recommendations

Indian operators providing IPTV services have not aggressively pushed and promoted IPTV like the way they have promoted DTH. The marketing efforts have been lacking to a great extent. Though BSNL has tried to some extent, for example, with live demonstration at its Kerala circle to promote IPTV in smaller cities but it has become more of an evaluation strategy rather than a marketing strategy. We believe a more focused marketing strategy would yield better results for these companies. Also we think to be successful in the long run operators will have to collaborate with content developers, content providers and VAS providers to offer unique customized customer centric content. Exclusive content, such as any sporting event exclusive rights, is another area where global operators have not been able to push IPTV.

IPTV operators should leverage flexibility of IP platform to extend services to mobile platforms and develop effective approach for content acquisition. They should build advanced services and offer more options for bundling with other services to improve value proposition, embrace the ascent of web based and mobile video delivery by working on IPTV into a cross platform strategy, use remote management to significantly reduce support costs, take advantage of CPE visibility in consumers' homes. Operators should devise appropriate business models to harness the latent demand for premium home networking management and support services.

Operators should work together with both carrier grade CPE and high-street CE vendors to promote adoption of digital home equipment and services.

The Indian market could be the next billion dollar opportunity for the equipment providers. Global and Indian IPTV equipment providers need to understand that the Indian market offers them a huge untapped potential. They will have to come up with cutting-edge customized STB technology to produce low cost customized set top boxes that can cater to Indian masses. Equipment makers will have to draw inspiration from mobile devices manufacturers like Nokia and to some extent healthcare device makers like GE who have learned the art of building low cost and quality products targeted at Indian consumers. A few companies like Aksh Optifibre are currently testing an integrated television set with build in IPTV compatible set top box so that consumers do not pay anything extra. These television sets can support cable, DTH, and IPTV.

Telco equipment manufacturers and CE vendors must work closely with BSPs and network operators to bring devices to market that serve the digital home needs of today and tomorrow. They should collaborate to ensure that telcos and BSP partners, as owners of the ongoing customer relationship, are able to manage and support the use of your digital home equipment. Vendors and operators should work with the standards bodies to overcome the barriers to wider digital home implementation.

Article Written by Amit Goel and Gaurav Vasu

The authors are managing partner and senior consultant at Knowledgefaber respectively