Diversity of service not volume the way forward for IT services in new world

I recently met up with Indian supplier NIIT and found it interesting to see how diverse its business strategy is, for a relatively small firm.

It is always interesting to hear that some small firms have very big customers and diverse and interesting business models. The second tier of Indian suppliers is a particularly interesting one.

IT suppliers these days always talk-up the business enablement credentials they offer, rather than just being seen as cutting costs for their customers. NIIT is no exception with a “focus on customer revenue not costs.”

The digitisation of business is changing things. Service providers are attempting to move towards non-linear revenue generation and move away from business models based on time and materials.

For Indian suppliers this is particularly important. They have grown on the back of the relatively low cost of skilled people in India. A confluence of trends means this cannot go on forever. Low cost regions are emerging, Indian wages are increasing and Western governments are trying to reduce offshoring.

The big Indian players are changing their business models, which is a challenge given their massive reliance on labour arbitrage and the pressure on them to deliver good financial results.

The smaller Indian players are an interesting bunch. They are more nimble and seem able to try new models out quickly. I have written quite a bit about these Indian Tier two players.
For example I blogged about NIIT in 2011 and then head if Europe Sunil Surya, told me about the businesses focus on certain verticals as well as IP. 

Earlier this month I got an update from the supplier’s COO Sudhir Chaturvedi.

The company has 8,500 staff, half of which are based in three Indian cities: Delhi, Bangalore and Chennai. All of the company’s R&D is done in the UK.

Its biggest sector is travel and transport which accounts for 37% of global revenues. Banking and financial services is next up with 35% and it has a separate focus on insurance. Other sectors include media and the government sector in its native India.

In terms of geographies the US accounts for 42% of its revenues which were about $381m, Europe generated 37% and Apac 21%.

NIIT for example is strong in travel and transport and has relationships with BA and Eurostar and is currently transforming the digital services at Irish airline Aer Lingus.

In terms of IP the company has software aimed at the insurance sector. These include catastrophe modeling software to work out the costs and risks of disasters. NIIT has about 14 customers in insurance market Lloyds of London.

The company values vertical expertise. Chaturvedi says that local knowledge is vital to the company. “In every geography 50% of are employs are local because we want local expertise.”

It will also put its hand in its pocket and buy resources to impriove services to big customers. When BA acquired Iberia one of its IT suppliers, NIIT, acquired the IT service provider that supplied Iberia. NIIT took over Projecta IT Services in Spain following the acquisition by BA. The British airline has been a customer of NIIT for 10 years.

It also acquired a captive in Manila belonging to another customer Sabre, which operates in the airline industry, to improve its service to the company.

Both these acquisitions are now being used to provide services to other customers.

The company has also devised its own way of classifying service levels and trained 4500 staff in understanding it.

Chaturvedi says the IT service industry is too happy to just do enough. “The industry believes if it meets the SLA it has done its job. We expect to get paid for just doing a basic service.”
To this end the company has devised 7 levels of service that its staff have to aim for.

The lowest level, if the service level is not even reached is known as Criminal. The next level is basic. There are five more levels with the top level known as Unbelievable.

NIIT is also focused on infrastructure services and helping businesses ensure that they are always on.