Wednesday, April 05, 2006

Necessity is the Mother of Innovation?

Interesting post by Charles and Jeff on IBM's new Data Hub here in Bangalore. Makes me wonder:

- The scale in offshoring services is the one that offers competitive advantages. TCS, Infosys and Wipro give IBM, Accenture and EDS a run for their money due to having a large number of employees in low cost locations. This is like the classic Detroit scenario - the big three carmakers have a majority of the market, while the others slog it out. So if you are a small sized service company, you find it hard to compete with these Indian companies as you do not have economies of scale.

- Accenture, EDS and IBM Global Services have ramped up aggressively in India. However they are still not close to the scale of the Indian Companies. They are faced with the alternatives of scaling further (TCS has more than 45,000 employees, Wipro has more than 42000) or innovating to compete. IBM employed 38,500 in India at the end of last year while Accenture has a measly 19,000 in comparison (I wonder if this figure of 38,500 is the total IBM India employee strength or just the services division - my take is that it includes a lot of other stuff like support, OnDemand, sales etc). Faced with this dilemma, what do you do to remain competitive? Try to turn the delivery model on its head, take away the inherent advantage Indian companies have.

- Is this really Innovation? I wonder. IBM will create reusable service components and leverage the "make once, reuse many times" approach. Will this be cost effective in competing with Indian Service vendors? Will the reuse of these components be higher quality stuff than people working on creating these for their specific customers in the first place? Will it be workable and cost effective at the same time? Lets see.

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