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IT services firms bank on innovation to woo clients

Livemint:  December 23, 2016

Bengaluru/Pune: One of the defining trends in 2016 played out at India’s $150 billion technology outsourcing industry is the way Indian companies chased clients for business. Clients going through a guided tour of the large, manicured facilities of the largest companies is passé; rather in the spotlight are visits to the research and development hubs or innovation labs, have a first look at solutions in the areas of blockchain and artificial intelligence platforms, and even engage with start-ups focused on newer technologies.

Sample this.

Don Callahan, head of operations and technology at Citigroup Inc., paid a visit in October to Wipro Ltd’s innovation lab in Bengaluru and was showcased the company’s artificial intelligence (AI)-powered platform Holmes. The stakes are high: The last time the contract was awarded, in 2008, it was worth $2.5 billion for a 10-year period, and this will be the largest outsourcing contract up for grabs in close to a decade.

“When a client visits us here (in Bengaluru), they usually spend a full day. Now we have our clients visit out our innovation lab and we have dedicated sessions, usually running for about one-and-a-half hour, for our clients,” said K.R. Sanjiv, chief technology officer at Wipro Ltd, country’s third largest software firm. “We curate the list of start-ups. We tell the customer where start-ups can value-add. Basically to make them know the art of possible.”

Earlier this year, Tata Consultancy Services Ltd (TCS), India’s largest software services company, unveiled a new building at its Mumbai office. Since the start of the financial year, the building has hosted and showcased company’s solution offerings in the areas of natural language processing, machine learning and 3-D printing.

At India’s fifth largest outsourcing firm, Tech Mahindra Ltd, teams from the company’s 40-odd research and development unit and some start-ups, showcased 45 solutions in areas such as drones, connected cars, and blockchain technology at its once-a-year, flagship innovation event held at Pune last week.

Executives from AT&T Inc., Barclays and Vodafone Group Plc were among the 110 clients who visited the annual two-day event, as against 20 client visits at last year’s annual event.

“Clients these days want to see what investments we are making. What better way to showcase before them the solutions we have to offer,” said Jagdish Mitra, chief strategy and marketing officer at Tech Mahindra.

Customer visits at Infosys Ltd, India’s second largest software company, these days include a tour of the design thinking labs, where the benefits brought in by the engineers using user-centric approach of design thinking are shared with clients.

Over the past few years, Indian software services have struggled for growth as their traditional business model of deploying armies of engineers to write software codes and maintain data centres and manage technology infrastructure for Fortune 1000 companies has started getting commoditized. This is essentially because of the twin challenges posed by the cloud computing service providers (Amazon Web Services) and AI-powered platforms offered by companies like IPSoft which means mundane repeatable tasks of providing customer support no longer need engineers and can be replaced by bots. For this reason, over the last 18 months, most technology companies have launched their own AI-powered platforms and some stitched partnerships with cloud computing firms.At the same time, technology vendors have also set up teams to write applications on technologies like blockchain or work on cloud computing platforms such as General Electric’s Predix, as these newer technologies become the first-choice of companies across the globe.

“We’ve seen the impact that Accenture, Capgemini, and IBM have by helping clients imagine the art of the possible,” said Ray Wang, founder of Constellation Research, a technology research and advisory firm. “Wipro, Infosys, and Tech Mahindra are diversifying their offerings and moving more into design and consulting. For this reason, we expect 2017 to be a year where every IT services firm broadens their offering and bundle more services into larger mega contracts”

Indian technology firms believe that by offering solutions in some of these technologies, they can manage to open not just new revenue streams but also create a differentiated offering to wrest back outsourcing contracts which is seeing intense competition and pricing pressure. “IT firms hoping to wrest business away from incumbents will look to offer solutions based on newer technologies,” said Siddharth Pai, who has personally led over $20 billion in complex, first-of-a-kind outsourcing deals. “I believe technologies like blockchain will essentially become mainstream, and so it is logical companies have started working on these technologies and importantly showcasing them to clients”

Is this move to make clients visit innovation labs and connecting them with start-ups helping the companies?

“This was the third year we held our annual event, and over the last three years, we have seen such solutions, many of them going beyond paid pilot projects, impact our business by $500 million,” said Mitra of Tech Mahindra. “This does not mean we got $500 million in direct revenue but Tech Mahindra has seen win deals which until a few years back we were not even called for.”

Analysts certainly believe this is a good start.

“The reason these innovation labs and design centres drive business stems from the fact that if you are co-innovating and co-creating with a client, you are helping them solve a real business problem,” said Wang of Constellation Research.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.