#NASSCOM_ILF 2018: An industry stuck in #fakenews limbo, desperately needing to change the channel

February 22, 2018 | Phil Fersht

Stability and modest growth should be the best thing that has happened to this industry:  companies can plan for the future with greater predictability and make smarter investment decisions.  Instead, we’re suffering from a culture of endless hype, copycat marketing and an addiction to hypergrowth. 

NASSCOM’s annual India Leadership Forum is always a good bellwether for testing the temperature of the global services industry – and the 2018 rendition this week in Hyderabad served up some real pearls of wisdom (yes, Hyderabad is the world’s leading refiner of pearls).

Getting to the point, the services industry has never found itself in a worse state of bewilderment and confusion.  After last year’s sense of looming disaster with President Trump’s proposed Visa reforms, at least the industry has something collective to hang onto – a common fear of being politicked out of business.  However, with that panic pretty much diluted, what has been left is a conflicting range of moods, ranging from confusion to depression to uncomfortable modest growth, alarmingly untrue #fakenews, and a never-ending plethora of meaningless buzz words, which have become so deepset in the fabric of our industry, most of us are resigned to using them, as it’s the only language left to communicate basic sentences to each other.

So let’s try and shed some light on the confusion, based on some of the terrific conversations we had this week:

The Indian IT industry is struggling to cope with “modest growth”.  With NASSCOM bravely predicting something in the 7-9% range, most credible analysts are predicting 4-5% for the short, medium and long-term.  The reality is, the whole DNA of Indian IT has been borne out of hyper-growth, offering genuine riches to ambitious executives who could project-manage their way to a very nice condo in Bangalore or Gurgaon.  The gravy train has now firmly ground to a halt, and most of the lovely folks remaining are still coming to terms with their salary increases slowing down, or disappearing altogether.  And many are just pleased to cling to their jobs. The level-headed executives have accepted they are now looking at a more modest outlook for their firms and their own futures, and are making some adjustments, while others are still clambering around trying to find the next hype bandwagon to hitch to their next career move (and payrise).  Did I hear the words AI, Blockchain, or RPA anyone?

“Digital” provides a sugar frosting for restating revenues as something that is not traditional IT.  While we managed to have about 30 structured meetings with service providers, GICs and tech firms, the term “digital” has become so meaningless, it now ceases to be used in any coherent sentence. It seems to be purely a term now for convincing investors and Wall St analysts that, somehow, traditional services revenues have become something mysterious and new that will set services firms on a new pathway to returning to hypergrowth… and very soon. In reality, "digital" is all about designing new revenue channels for customers using emerging interactive technologies.  It’s all about collapsing internal silos within business operations to service customers’ emerging digital needs.  If you’re telling me that 50-75% of IT services revenues are now “digital”, then please tell me where all the billions of dollars of app testing, app management and IT infra revenues mysteriously disappeared? 

Services has fallen hook, line and sinker for its own #fakenews.  Suddenly, every services provider has developed the industry’s leading competency for delivering automation, artificial intelligence and blockchain… overnight.  While, barely a year ago, exactly the same firms were the industry’s leading maestros at serving up “digital transformation”.  Amazing how they could source thousands of experts, and convince so many clients to make this all possible in barely a few months.  Until recently, most providers declared they were adopting a “wait and see” attitude to approaching some of these areas, but now are in there fully-fledged and firing on all their lovely blockchain cylinders.  Puhlease ladies and gents!  At least, in days gone by, most providers would be relatively honest about their core areas of focus and expertise.  Now it seems perfectly acceptable for many just to stare you in the eyes and just lie… what on earth has driven us to this place?

DXC continues to baffle everyone.  Can someone please explain what DXC is supposed to be doing?  I love the Accenture-esque TV ads, but I am still clueless as to what this firm is actually doing to be the next big thing in the industry.  While I was very happy with the DXC branded gifts for writing notes and charging my phones, I would rather just get a little postcard explaining what on earth this new-fangled services business is supposed to be doing that is so special…

Sourcing advisors have just fallen off a cliff.  Yeah – they just weren’t present.  Barely a couple of years ago they still trawled these halls with their promises of big deals (or would try and sell you some “research” to make a few bucks).  Now they have all but disappeared from the equation.  Maybe their absence is the most notable sign that the good ol’ days are firmly gone forever, and it’s high-time to wake up to something approaching a normal, stable industry?

The Bottom-line: There are some seriously cool things going in in the world of technology services; we just need to unearth them and change the narrative

There is a lot of goodness this industry is capable of achieving if we can just get out of our own way.

For starters, we're seeing the fastest revenue growth from several middle-tier providers who are big enough to go after some large complex deals, small enough to work on new concepts with clients and lack the legacy business to focus on going after greenfield disruptive opportunities that the big guys cannot consider.  We are seeing some of the major providers unearth new gold by taking ambitious clients to new places of business value, with a high-risk / high value mindset, using technology that is here today and working with them as a trusted long-term partner.  We’re seeing real advances in automation, machine learning and digital enablement that are here today – they are now a reality, not some future innovation that is still some years away.  We are also seeing a feverish desire from many clients to experiment with blockchain, despite the fact it’s still a long way from providing many meaningful business applications today. 

The present is now the future and this should be the most exciting time ever to be innovative, courageous and entrepreneurial.  So let’s stop trying to pretend to be something we’re not and focus on the real potential that is staring us in the face.  Everyone’s tired of the #fakenews… it’s time to change the channel!

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT Services

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  1. Manish Pandey
    Posted Feb 22, 2018 10:00 AM | Permalink Reply

    Sharp observations, Phil. We needed somebody from west to call spade a spade, unfortunately. We've always been better of serving old wines in new bottles. Having said that, we do see some eagerness among mass to learn new technology. Just check with Andrew NG, how he felt after his first visit in India. We may not invent something novel however we'll always remain the first to "democratize" that novelty to rest of the world.. as a true soldier of "world's largest democracy". Hope you had a fun stay! Cheers!!

  2. James
    Posted Feb 22, 2018 10:16 AM | Permalink Reply

    Brilliant piece. Tackles the issues head on

  3. Jim Butterworth
    Posted Feb 22, 2018 10:24 AM | Permalink Reply

    Loved this Phil. Thanks for calling out the fakenews in this business. Need to change asap


  4. Deepak
    Posted Feb 22, 2018 12:31 PM | Permalink Reply

    IT services model has depended on other people’s IP. Either moving vendor IP into the customer’s landscape or creating customer IP under close supervision. The only IP they ever built was transition, knowledge transfer methodologies and scaling up processs for hiring, training, visa and travel. The smallest startup develops its innovation capability, risk appetite and marketing savvy faster in several pivots in 12 months of its life than the industry has collectively done in decades. Surprising - because the financial flexibility and access to decision makers that the industry enjoys is something startup’s kill for. Why ? The leadership profile which had it too easy growing up in mediocrity explains it all .

  5. Gaurav
    Posted Feb 22, 2018 03:05 PM | Permalink Reply

    Superb piece Phil! You lay out what is wrong and what is right is your own brilliant style. 100% agree this industry needs to work with stabilty and longer term planning - less of the hyper hyper :)

  6. sridhar
    Posted Feb 23, 2018 01:08 AM | Permalink Reply

    Loved your candid and well-meaning piece! So these 30 folks you met in Hyderabad were unwittingly staring at a gift horse (for sources) in the mouth, and you can see these fogeys are long in the tooth, eh! The green shoots are fake just in case they think are straws to clutch at. Meanwhile, reconciliation will happen, just as 2007 reminded several smart bankers that banking is better boring! And I too echo you "Did I hear the words AI, Blockchain, or RPA anyone?"

  7. Phil Fersht
    Posted Feb 23, 2018 02:56 AM | Permalink Reply

    @Sridhar - fortunately I pick my meetings carefully and most were sharing a common frustration, but also a common optimism that a longer term opportunity is unraveling...


  8. Chris Lord
    Posted Feb 23, 2018 09:09 AM | Permalink Reply

    Always great insight and frankness from Phil Fersht

  9. Jon Clark
    Posted Feb 23, 2018 11:09 AM | Permalink Reply

    Will be uncomfortable reading for some but the signs have been there for a while. Some service providers would love boring levels of revenue growth.

    On the blockchain note, take a look at cygnetise (https://www.cygnetise.com/) - not the sexiest use case but hugely practical one.

  10. Rajesh Ganji
    Posted Feb 22, 2018 10:07 PM | Permalink Reply

    Loved it Phil . Nice call out.

  11. JN
    Posted Feb 23, 2018 10:05 AM | Permalink Reply

    Must commend your courage; the choice of picture notwithstanding

  12. Phil Fersht
    Posted Feb 24, 2018 06:20 AM | Permalink Reply

    @JN: This is Modi addressing the conference (via a video link). PF

  13. Jerry Durant
    Posted Feb 22, 2018 06:47 PM | Permalink Reply

    Reminds me of the quote by Jack Nicholson in "A Few Good Men". There has always been a pervasive tendency to push the element of truth (fondly referred to half truths) and this isn't limited just to providers and even 'some' analyst companies (who are paid for hire) but also the denial of truth by customers as well. Probing deep it all relates to fear and uncertainty relating to desired outcomes. How can it be overcome is best to remain silence until you can abate the fear, deal with the elements you need to added to and boldly push forward. Sounds easy but it is just as difficult as for those who view your truthful work as being as such.

    In so far as promoting the industry there are limits of capability and duty. For many such groups, such as NASSCOM, it becomes a bit confusing at times. Are they to promote, enable, develop, facilitate and to create visibility (as is much the confusion with many industry sector organizations) or is it more? This provokes the question as to 'what is more'? This means that there is a part of the mission that is a gap, whether by design or by omission. Elements of forward visioning, transformation and adaption, and purpose are only given circumstantial consideration.

  14. Phil Fersht
    Posted Feb 24, 2018 06:26 AM | Permalink Reply

    @Jerry: You describe it all pretty well! My fear is we end up like the telecom biz of 20 years ago - losing a grip on reality while the real value is generated elsewhere... PF

  15. Dinesh Goel
    Posted Feb 25, 2018 12:11 AM | Permalink Reply

    Another great hard hitting candid post from Phil. Can't agree more to the points raised. It's time to brace up for action in a tech world that's undergoing seismic shift. Anyway, the old model would not have lasted for ever by filling seats with humans after training them to the requirement of the job, whether the industry saw it coming or not. Upside is that last 3 decades (more like 2 for BPM) have created a large industry in India which counts world class F500 companies as clients, understood their challenges and requirements, figured out how to do business across the planet and more importantly, has enough cash on the Balance Sheet to fund the future. Time for action to compete with the best in the world rather than be consumed with bean counting and re-classifying the proportion of digital revenue.

  16. Sudhanshu
    Posted Feb 27, 2018 02:28 AM | Permalink Reply

    The problem with some of the leading organisations in this industry is that the top leaders grew quickly to the top riding on the (past) fast growth phase. The IT industry is broadly made up of two parts: Infrastructure and Software. However the current "Leaders" of the industry lost touch with ground realities long agoi, they neither understand software development nor Infrastructure management.

    Therefore they find comfort in irrelevant buzz words. Since nobody really understand what they mean, these "leaders" have an equal understanding (misunderstanding) as anyone else.

    I doubt the "Leadership" of many a company peddling "cutting edge" solutions could write 10 lines of coherent code, which is the bread and butter of the business regardless of the buzz words adding additional flavour.

  17. Richard
    Posted Feb 28, 2018 07:18 AM | Permalink Reply

    So Phil I think in summary you are saying that the "Emperor has no clothes" but are some very good fashionable and not so fashionable items out there within easy reach.

  18. Manish Mehta
    Posted Feb 28, 2018 12:41 PM | Permalink Reply

    Apropos comments from Sudhanshu on the lack of depth/vision in industry leadership, due to no real technology/engineering experiences and hence the easier path of mouthing fake news and buzz words and so on, it is useful to understand that Nasscom is just a representation of the collective will of a few large firms. Many of which are single owner driven or majority owned by a few (private?) entities despite the veneer of a corporate, of a diverse stockholder business structure.

    Remember, what first gets scaled to be produced across boundaries then gets further squeezed by automation. That happened to Chinese manufacturing (now heavily uses robotics) and will eventually happen to Indian services, whether it be due to the RPAs hype or something far simpler we will know later. So, in a progressive manner it will be obviously a very different industry over the coming years and will stagnate further. These "owners" hence have two choices, either seek to take risk to buck the trend - to expand the pie to grow wealth for themselves AND all of their constituents OR to extract/build more and more financial returns for themselves out of a stagnating, then shrinking pie.

    There was a time in the 1800s and early 1900s when the capitalists realized in their own interest that, given the small base of consumers for many of the new products/services, it makes sense to pay workers better (including benefits, perks etc.) and to help create a more broader economic system because this in turn fuelled a self sustaining economy, more credit potential and hence more consumers for their products. However this is unlikely in times today, as we are in a cycle of wealth concentration now (even in Indian IT) wherein it is no longer desirable to expand the pie for all. So, while the real power lies with the employees (who to put it starkly know to write code and the management does not), the reality is that these very employees are now stuck between a rock and a hard place.

    So, while a Gurgaon and Bangalore and NOIDA and Mumbai and other hubs were driving a more wider economic cycle that rippled through real estate, education, services, goods sectors too, sadly now these hubs are shrinking with many of those condos and swanky places you refer to no longer having any takers and lie empty! This direction will only increase even as more and more gets sucked up and wealth continues to be concentrated while the staff nos. reduce even more.

    Don't count on the next Nasscom event to be any different an experience!

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