Trust is the foundation of any relationship. Whether personal or business, without trust a relationship can’t flourish.
This is particularly true of an outsourced business relationship where parties are separated by thousands of miles. Trust is essential, if sometimes hard won.
The digital transformation trend sweeping across the world has increased demand for outsourced IT services, and, it would seem, Nearshore providers are poised for an influx of extra business from US companies eager to accelerate their digitization efforts. Though India may be the planet’s IT services hub, there are enough opportunities to go around. Right?
“Indian companies have an advantage; they’ve been deeply embedded within large corporations for decades,” — Hansa Iyengar
Well, maybe not. In a recent chat with Nearshore Americas, Hansa Iyengar, Principal Analyst for IT Strategy at technology advisor company, Omdia, said that the quickening pace of digital transformation may in fact push large companies to bet more heavily on providers they already know and, vitally, trust.
“The acceleration of plans means that there is little option for the enterprise but to go with vendors that it trusts. This is where many Indian companies have an advantage; they’ve been deeply embedded within large corporations for decades … You cannot build 30 years’ of expertise overnight,” said Iyengar.
Hundreds of large technology organizations already have a presence in the Nearshore, and many more thousands rely on the region’s service vendors. But the Nearshore does not yet have the reputation of India nor perhaps Eastern Europe for specific tech skill sets. How then, does the region go about building trust with clients to cement its place as a go-to region for high-end IT service provision?
India’s IT Services Rise
According to Kiran Karnik, the former president of Nasscom, India’s powerful IT trade association, outsourcing’s big bang moment in India was in 1989, when General Electric agreed to outsource US$10 million of IT software contracts to India. What the country had at that time was the power of its labor pool.
“India has dominated the marketplace for considerable time, but it had to start somewhere,” Jagdish Dalal, president of JDalal Associates and former chief advisor to the International Association of Outsourcing Professionals (IAOP).
“I think of India’s process as three steps, or triangle, by which the bottom of the triangle is access to skilled labor. The middle of the triangle is process knowledge and technology expertise, and the top of the triangle – the point – is domain expertise; by this I mean specialized expertise directed towards specific industries, types of businesses, and transformation ability,” he explained.
The adoption of India as an outsourcing hub in Y2K and the post-9/11 economic slowdown in the US began a process whereby the country “moved up to the middle of the triangle, becoming experts in technologies and applications like SAP and Oracle, which became the basis for winning contracts,” said Dalal.
Once this point had been reached, companies like IBM and Accenture arrived to provide the domain expertise.
This, says Dalal, is where some Nearshore markets struggle.
“The Nearshore has already demonstrated that it has the skilled labor available. There is some strong expertise in technology and applications. But, in my opinion, what it lacks is domain expertise.”
The Nearshore: How to Win Contracts and Influence People
Build an Industry Association to Rival Nasscom
Nasscom’s global renown and influence within the IT outsourcing world has produced an image of India’s talent that is difficult to beat, argues Dalal. While associations exist in most Nearshore markets, none have the power nor allure of Nasscom.
“Nasscom was started by industry players and once the Indian government saw its job-creating potential they publicly supported it. But it is fully funded, governed and supported by the country’s entrepreneurs. But it’s reason for success was that financial backing from large companies,” said Dalal.
“Nasscom used its public relations skills to create the myth of Indian software genius and influenced government policy and journalism to favor the Indian software industry” — New York Times
Associations already exist within Latin America, and individual markets. The Association of Latin American Service Exporters (ALES), is one example. But none have built the aura that Nasscom has been able to build. The closure of ProMexico, for example, and the complete lack of investment promotion agencies in some markets, means that there is little formal promotion activity in parts of the Nearshore.
Indeed, according to the New York Times, Karnik’s book, ‘The Coalition of Competitors’, “is largely about how Nasscom used its public relations skills to create the myth of Indian software genius and influenced government policy and journalism to favor the Indian software industry.”
Build a Niche
Companies transitioning from internal market players to Nearshore entrants should aim to make a niche of their own, argues Dalal. Larger global organizations who can “do it all” cannot provide – or do not consider it worth their time – to provide narrow specialized technological expertise. The digital transformation is a chance for companies to build strong verticalizations. Supporting this deep knowledge with sound customer care makes for a muscular value proposition.
“Indian companies tend to invest heavily into promotion and development of skills, but there isn’t a Latin American company the size of TCS, Infosys or Wipro able to make the level of investments these companies have done,” — Jagdish Dalal
“The digital transformation is opening the space for a lot of niches, from automation to robotics to data analytics,” Dalal argued. “I would suggest Nearshore companies take a look at their expertise and build around that to provide a solution – rather than a service, especially for those small niches that big players are not present in.”
Companies that have not yet offered their specialized knowledge to foreign clients can first build a reputation within their internal markets by providing services to local powerhouses. “There are hundreds of major regional organizations in Mexico and Colombia, for example. By going after a local, a company can support and prove its concept before entering the Nearshore market.”
Crank Up Investment
“Indian companies tend to invest heavily into promotion and development of skills, but there isn’t a Latin American company the size of TCS, Infosys or Wipro able to make the level of investments these companies have done,” Dalal suggested.
Though the Nearshore industry is clearly very active in upskilling and training employers, could more be done to build a stronger matrix between the private companies, public policies and education strategies within the region?
More recently, global companies like Japanese investment management company, Softbank, has bet heavily on Latin America and invested a total of US$8 billion in a regional innovation fund. To build expertise that will last for the future, more investment is needed as Nearshore’s natural advantages of a shared timezone will be slowly diminished.
“In this 24/7 economy, I don’t see shared timezones as being as big an advantage as it once was. That is, except if outsourced services are customer facing. But many of them will be eliminated through digital transformation,” he said.