While in the past, cost may have been the most important consideration, these days competing in the IT industry locally and globally is becoming more complex
Indian IT companies have done exceedingly well, despite the global recession. They have been a part of aggressive expansion across global markets, where they have significantly increased their investments and operations as part of M&A deals and setting up of service delivery centers. Notwithstanding this strong performance, the economic downturn has placed an even greater premium for more effective cost-cutting practices. This has driven IT companies to render critical attention to their costs and pricing as a response to the demand of buyers for cheaper and often times, smaller and more manageable IT deals.
Cost advantages in India have somewhat been diffused due to the increased number of domestic competitors as well as the multinational firms that have been gaining traction through expanded operations in low cost locations such as India. In an expansive IT market such that of India’s, pricing can be lowered but only to a point that the market’s saturation can handle – companies will eventually settle on almost equal pricing, leaving each with the challenge of offering more than just cheap costs to differentiate themselves from their competitors. The current industry landscape therefore is one wherein cost arbitrage is not anymore the most convincing brand or product/service differentiator.
An increasingly relevant strategy and trend being adopted by IT companies is forging better business relationships with their clients. The global recession has indiscriminately affected all sectors, albeit some industries suffering more devastation than others. In this business climate, buyers have become even more meticulous in selecting their IT partners. This elevates the competition between IT companies from which firm offers the cheapest deal to which actually guarantees the best demand-fit package. IT companies must be able to deliver their products and services regardless of the client’s preference for multi-sourcing or bundled services. In the Services space for example, openness for renegotiation of multi-year contracts have become the norm in recent years. This has been brought about, not only by the current global economic scenario, but also by the increased competitiveness in the provider landscape.
Indian IT companies have done exceedingly well, despite the global recession. They have been a part of aggressive expansion across global markets, where they have significantly increased their investments and operations as part of M&A deals and setting up of service delivery centers. Notwithstanding this strong performance, the economic downturn has placed an even greater premium for more effective cost-cutting practices. This has driven IT companies to render critical attention to their costs and pricing as a response to the demand of buyers for cheaper and often times, smaller and more manageable IT deals.
Cost advantages in India have somewhat been diffused due to the increased number of domestic competitors as well as the multinational firms that have been gaining traction through expanded operations in low cost locations such as India. In an expansive IT market such that of India’s, pricing can be lowered but only to a point that the market’s saturation can handle – companies will eventually settle on almost equal pricing, leaving each with the challenge of offering more than just cheap costs to differentiate themselves from their competitors. The current industry landscape therefore is one wherein cost arbitrage is not anymore the most convincing brand or product/service differentiator.
An increasingly relevant strategy and trend being adopted by IT companies is forging better business relationships with their clients. The global recession has indiscriminately affected all sectors, albeit some industries suffering more devastation than others. In this business climate, buyers have become even more meticulous in selecting their IT partners. This elevates the competition between IT companies from which firm offers the cheapest deal to which actually guarantees the best demand-fit package. IT companies must be able to deliver their products and services regardless of the client’s preference for multi-sourcing or bundled services. In the Services space for example, openness for renegotiation of multi-year contracts have become the norm in recent years. This has been brought about, not only by the current global economic scenario, but also by the increased competitiveness in the provider landscape.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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