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BITS PilaniPilani | Dubai | Goa | Hyderabad
Authors:Neetu Yadav, Anil K Bhat, Sushil*
Birla Institute of Technology and Science, Pilani, Rajasthan-India*Indian Institute of Technology Delhi, New Delhi-India
Sustaining competitive Edge of Indian Outsourcing IT-ITes Industry:
A Systems Approach
2nd Asia-Pacific Region system Dynamics Conference of the system dynamics societyUTown, National University of Singapore 19-22 Feb, 2017
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Flow of Presentation
• Introduction
• Indian Outsourcing IT-ITes industry
• Systems Approach
• Dynamic Hypotheses
– Capability building & eroding loops
– Infrastructure competitiveness loop
– Moving up value chain loop
– Non-linear growth loop
Evidences
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
India as Outsourcing Destination for IT-ITes
• IT-BPM sector currently valued at: $143 billion
• Contribution 9.5 % of Indian GDP
• 45 % in total service exports (2015-16)
• India holds 55 % market share of global sourcing
• Industry exports of $98 billion
• What is competitive edge of this industry?
• How this competitive edge could be sustained?
• How to combat Global challenges to sustain competitiveness?
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Indian IT-ITes Revenues
(Source: NASSCOM Strategic Review, 2015)
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
A.T. Kearney Global Services Location Index
Rank Country Overall outsourcing
index
Financial
attractiveness
index
People skills and
availability index
Business
environment
index
1 India 6.96 3.22 2.55 1.19
2 China 6.49 2.28 2.71 1.51
3 Malaysia 6.05 2.75 1.42 1.89
4 Brazil 6.00 2.34 2.07 1.50
5 Indonesia 5.99 3.23 1.54 1.22
6 Thailand 5.92 3.04 1.44 1.44
7 Philippines 5.88 3.17 1.43 1.29
8 Mexico 5.87 2.71 1.56 1.61
9 Chile 5.72 2.58 1.26 1.88
10 Poland 5.68 2.41 1.37 1.90
(Adopted from: https://www.atkearney.com/strategic-it/global-services-location-index)
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Global Growth Forecasts
2013 2014 2015 2016 (F) 2017 (F)
World 2.4 2.60 2.40 2.90 3.10
High Income 1.2 1.70 1.60 2.10 2.10
U.S. 1.5 2.40 2.50 2.70 2.40
E.U. -0.2 0.90 1.50 1.70 1.70
Japan 1.6 -0.10 0.80 1.30 0.90
Russia 1.3 0.60 -3.80 -0.70 1.30
Developing countries 5.3 4.90 4.30 4.80 5.30
China 7.7 7.30 6.90 6.70 6.50
India 6.9 7.30 7.30 7.80 7.90
(Source: World Bank, 2016)
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Porter’s Diamond Model (Indian IT-ITes)
• Porter (1990)- Competitive advantage of nations
• Nation’s competitiveness- Industry competitiveness
• Potent determinants of competitiveness-prevailing thinking, labor cost, interest rates, exchange rates, economies of scale
• Porter’s diamond model-Indian IT-ITes Industry
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Factor Conditions
• Availability of young workforce
• Large English speaking population
• Large number of Engineering graduates
• Availability of workforce at competitive prices
• Presence of Indian diaspora
• Lower infrastructure cost
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Demand Conditions
• Growth Patterns
• Start-up ecosystem
• Automation
• Currency fluctuations
• Visa fees hike
• Global economy slowdown
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Firm Strategy, Structure and Rivalry
• Margin pressure
• Non-linear growth strategies
• Differentiation strategies
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Related and Supporting Industries
• Education institutions
• Analytics industry
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Government
• Digital India campaign
• Make-in India campaign
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Systems Approach
• Porter signifies-Points of diamond are self-reinforcing
• Diamond creates SYSTEM
• Jim Hines (2004) ‘model development & analysis’
• Limited to developing dynamic hypotheses
• Causal loop diagram
– Input conditions: Resources capability, infrastructure
– Firm’s strategies: Non-linear growth, Moving up value chain
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Capability Building & Eroding Loops
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Infrastructure Competitiveness Loop
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Moving up Value Chain Loop
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Non-linear Growth Loop
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Evidences
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Evidences
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Reflections
• Sustaining competitive edge in global turmoil- from outsourcing to complete IT solution provider
• Home grown software products-BaNCS (TCS), iON, Finacle
• Domestic demands- Digital India campaign enabler
• R&D in product development
• Growing digital workforce
• Reorienting business models away from labor arbitrage
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Conclusions
NEETU YADAV, [email protected]
http://www.linkedin.com/pub/neetu-yadav/26/383/576
https://www.researchgate.net/profile/Dr_Neetu_Yadav
