The Financial Express through many of its columns and articles over the last three years, has been trying to establish the need for Indias show-piece IT industry to move away from conventional ways of doing business. The last four years have been unconventional to say the least from an economic view point, and such a period dearly required unconventional methods. While many of the IT firms have been talking about the need to move away from its ever reliable linear model of business, very few have been able to walk that talk.
So when iGate, the Nasdaq-listed IT firm led by Phaneesh Murthy, an ex-Infosys head honcho, released an advertising campaign in North America favouring a business outcome led model, it seemed yet another example of someone talking about the need to change. The important question is: Can he actually do it?
The time and material model, which runs on time spent by techies on a certain project and the materials used to deliver it, is still heavily relied upon to drive revenues. However, there is no doubt in anyones mind that this model has run its course. One can still continue to milk it, but thats not going to help us get anywhere in the future. Every top IT CEO knows this, and has been talking about it. But how many of them can come up with a winning plan? This is not easy, considering that the time and material model contributes nearly 2/3rd of the revenues of Indian software firms.
Clearly, time and material (T&M) has to go. Clients have been clamouring for it for some time now, but vendors have been trying to push it aside. In this model, the client has to pay only on the outcome and not on the time and employees required to finish the project. In this slow burn kind of environment, the customer wants to eliminate all risks possible and doing away with the time and material business model is one way of doing it. Outcome based model assumes significance when the client is not just thinking cost. This model encourages partnership and provides direction towards a common business goal. A long term relationship becomes necessary for this to succeed.
From an Indian IT view too this is required. For too long Indian IT services players have stymied innovation, barring one or two major firms. If India has to go up the value chain,