Biggest threats to IT services offshoring are internal, not external

“You can’t do today’s job with yesterday’s methods and be in business tomorrow.”

– Author Unknown

I recently came across a few articles by some leading lights in the IT industry, talking about how automation, AI, and other emerging technologies are going to disrupt the sector. While I don’t disagree with their predictions, I would like to go out on a limb and suggest that the basic operating model and standard business practices of the industry pose a much more serious, and existential threat.

Transient resources, and narrow skill-set: The overwhelming trend in the industry is to recruit engineers by the thousands, and majority of them come with a very narrow skill-set. The usual practice is to push them into a client team, with little or no regard to their role fitness, or specific customer needs. What is even more alarming is, very often the customer has no control or say on the movement of people, and is at the mercy of the service provider. When a team member is unavailable for whatever reason, a substitute is pushed without any thought to their suitability. And the transient nature of people ensures that there is no scope for retention of domain expertise, which could be extremely important in the long-term from a customer perspective.

Lack of transparency: The customary practice of sales and operations personnel in the industry is to restrict the visibility and interaction of the customer to only the top-tier of the team. This lack of transparency means that the customer has little or no interaction with the rest of the team, lacks insight into the internal team dynamics, and severely limits the scope for integration with their native teams.

Top heavy management: One of the most unseemly practices prevalent in the industry is a mindless push towards a top-heavy management structure. This may safeguard the service provider and decision makers from unforeseen risks, but adds little value to the customer. And very often, the management itself becomes one of the biggest problems to the customer.

Upsell rather than right sell: Many of the service providers have a relentless focus towards growing the topline, which in turn means that the focus is on always selling more, and deriving more revenue from the customer. There is an absolute disregard to whether there is any value addition or the real customer needs.

Code quality: As I stated earlier, the focus on meeting Q-on-Q numbers in terms of headcount ramp up resulted in enormous dilution in the quality of people. They either come with a very narrow skill-set or are poorly equipped and lack the training and exposure in terms of best practices and processes. The end result is a perception that majority of these engineers have zero focus on code quality. There could be islands of excellence in an ocean of mediocrity, but this is also the bitter truth that the industry must own and acknowledge.

Vendors not partners: This overall body of business practices has created an indelible impression that the bulk of the service providers are only focused towards selling more and are looking for a transactional relationship. This might work well if the focus is only on handling low-level tasks or cost optimization. The perception of the customers is that we are merely vendors and not partners.

Over the past few decades, the IT industry has evolved and grew manifold. It has completely changed the nature of service industry, fundamentally transformed many major economies, and has made enormous contributions to economic growth. It has also forced many businesses to transform and focus more on their core competencies, market needs, and customer relevance.

The same transformational forces are knocking on the doors of the IT service providers. As the industry evolves and matures, and is increasingly moving up the value chain in terms of the kind of services delivered, we must ensure that our practices are commensurate with the customer needs. We must shape up to become strategic partners to the customers and help them overcome technology and business challenges. If we want to be mere vendors, the winds of change will ensure our demise in no time. Time to wake up and smell the coffee.

In a subsequent blog, I will share some best practices that we have adopted and which helped us overcome these challenges.