Some large corporates haven’t used traditional western IT service providers for years.
I wrote an article last week about how the offshore IT service providers that are based mainly in India are reshaping their business models. Traditional time and materials models are not offering what they used to and traditional markets in the US and UK are becoming saturated.
While I was writing the article I had a conversation with Peter Schumacher, CEO at management consultancy Value Leadership Group. He had some interesting research that he had carried out alongside Deutsche Bank.
He shared some of it with me. Below are some of the comments from senior IT services buyers within large corporates.
They make interesting reading. Many corporates are committing heavily to the Indian service providers. And it is not just about cost because most the traditional western suppliers have large delivery operations in India.
1 – Global manufacturing business in continental Europe with $2bn annual revenue
Q: Are you working with traditional vendors?
A: We haven’t considered traditional players in years.
2 – Large transport group, continental Europe:
Q: Costs are rising in India – do you think the traditional firms will eventually match the Indian firms on cost?
A: No. We don’t think traditional providers will ever be able to match the Indian firms on cost – rather we believe that the cost pressure on the traditional firms will increase as the offshore firms gain more market share in our country.
Q: How are you allocating projects between traditional firms and offshore firms?
A: Our procurement approach is not to give work to a European firm, if an offshore alternative exists.
3 – A large global financial services business with major operations in Europe:
Q: What strategic advantages do the traditional firms have in your view? A: Domain knowledge is the last thing the traditional firms have – once they lose this, they are gone. Q: Who do you see winning in the long run?
A: The Indians win.
4- Member of the board of a major captive Banking, Financial Services and Insurance company in continental Europe:
Q: In your view, how would you assess the capability of offshore-based firms to adopt European business practices, as opposed to the capability of European IT services firms to become more competitive in terms of pricing and efficient global delivery?
A: I think it will be easier for the Indian companies to adapt to the European way, than for the European companies to make efficient offshoring. I have trust more in Indian companies.
Q: So, you are saying that the legacy companies have a material disadvantage as in fact they have legacy structures?
5 – A large global manufacturing business with major operations in continental Europe;
Q: Would it be fair to say that the offshore companies have a global capability that is at least equivalent to, or would you say that is possibly even better than, that offered by the conventional companies
A: At this moment, I would say it is better.
6 – A large global bank with major operations in continental Europe:
Q: How would you assess the global delivery capabilities of traditional firms?
A: The traditional firms just pretend to provide offshore services.