Telepresence – Can It Transform Offshore Delivery Model?

We have been hearing about Telepresence for some time now.   Its primitive form, video-conferencing, has been around for a while.   Now I think we are at an inflection point in the technology maturity level.   Admittedly, Telepresence technology has a better use in other industries than in IT Services/BPO.

New Opportunities
Indian IT companies have hit a slow growth path due to a variety of factors such as rupee appreciation, slow economy, and increased competition in outsourcing.   It is true that Indian IT companies arguably pioneered the offshore model.   However, US-based IT services companies have quickly learned to play the same game.   The current traditional Global Delivery Model has matured and is no more a key differentiator.   Onshore, Offshore, Nearshore, Right Shore, Anyshore are passé.   It is time to have a “shore-proof” delivery model.

I personally feel that the Telepresence technology is one that has the potential to trigger some innovation in the offshore service delivery models.   Of course, technology alone can’t provide a competitive advantage if commoditized – an exception being early adoption.   It is how one uses the technology that brings out the differentiation.

Current Offshore Delivery Model and Challenges
By its nature, global delivery model involves people from different geographies, cultures and social backgrounds.   Most of the communication in the current model happens over e-mails, long early-morning or late-evening telecons, web conferences, instant messages etc.   Videoconference is very rarely used in most offshore companies.   Talk to anybody that works in a global delivery model, and they are sure to blame the “other-shore” team for any problems in the projects/programs/products.

Can Telepresence Improve It?
Most of the current challenges are related to communicating with e-mail or phones.   Teams miss precious non-verbal clues such as body language, moods, and cultural nuances when communicating over these traditional channels.

Some of the immediate effects with the adoption of telepresence technology could be:

• More effective communication between the teams leading to better execution and improved team dynamics
• Reduced travel costs – Initial knowledge transition or requirements gathering phase can happen without the teams traveling; Project/Program/Customer Reviews; Sales presentations; Conceivable elimination or reduction of the role of a pure onsite “coordinator”
• Team meetings – Brain-storming with customer, onsite, offshore teams

Prohibitive Cost
No doubt that these systems are expensive at $200K-400K and upwards, not to mention the maintenance costs.   Connecting key development centers in different geographies may be the first step.   These can act as hubs servicing multiple customers, projects and teams.   An account review where 2-3 executives from an offshoring company travel across the globe for a day or two, will cost about $20,000.   I think a basic telepresence pays for itself after 15-20 such virtual meetings.

Indian IT industry uses a convenient the excuse that they have competitive edge over China and other alternative offshoring destinations because of its large pool of English-speaking engineers.   While it is true to some extent, that gap is narrowing very quickly.   If you add technologies like this to the mix, communication becomes less of a hassle.   China or Vietnam or Malaysia could see this as a disruptive technology to challenge Indian IT companies.

Should Indian IT companies such as TCS or Wipro or Infosys seriously consider it or is it too soon to think about it?

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HP-EDS Merger – Effect on Indian IT Companies

HP’s plan to buy EDS for $13.9B is one of the bigger news of last day or so and it obviously has everybody’s attention.   Analysts, bloggers and just about anyone in IT has already commented on this development with much more insight than I would have.   A lot of strong theories are floating around as to why this deal happened (cloud computing, scale in services, profitability etc).   While its hard not to connect EDS’ strength in data centers with HP’s core hardware skills and chalk it up as a huge investment in infrastructure/cloud computing space, I want to quickly focus my comment on a few things concerning Indian IT industry.

Indian IT providers (SWITCH companies) will definitely be viewing this development with a hint of worry.   These companies are investing a lot in their infrastructure offerings now that the bread-and-butter IT services such as ADM, BPO have hit a maturity level.   They have just started winning big in this space and are now able put up a fight against an IBM or Accenture.   They also have their sights on Indian domestic market where IBM has done well.   Now they will have another titan to compete with.   Both IBM & HP can provide a more integrated service offering – hardware, software and services – than these companies.   Added to that, HP will now have a strong positioning in government-related deals which typically are more stable and run longer.   Thus, HP will have its hand on the handle of the entrance door in such deals.

While HP covers some ground (infrastructure that is), it remains to be seen if it can effectively compete with IBM at all levels.   If only HP can pick up a strong business consulting organization.   Game on, then.

Coming to SWITCH companies – unless they evolve from a single-dimensional (Services) to multi-dimensional (H/W, S/W, Services) model, they will have tough times ahead.   I think the easy ride of offshoring is over. Execution and process excellence which these companies pride in are as important as strategy but it alone can’t provide competitive advantage.   Time to plan for future is now since HP will saddled with integration issues with EDS deal.

A final thought.   Some have said that HP wants to get on to outsourcing/offshoring bandwagon.   If HP was looking purely at that, it would have considered buying an Indian IT company with better margins.   Obviously, Mark Hurd has a bigger plan.   Does he have one more integration/turn-around in him?   It will be interesting to watch how this plays out.

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