“At times, Indian IT service providers fall behind expectations in new and exciting technology areas that extend beyond the traditional outsourcing paradigm.” – A large MNC buyer of IT outsourcing services
With traditional models of IT outsourcing facing increasing competitive pressures, Indian service providers are looking at a multitude of solutions to drive success and retain competitive advantage. Chief among these are emerging technology solutions from start-up firms. Service providers have realized that to compete and stay relevant in the changing paradigm they have to focus on developing niche and specialized products, boost efficiency, and develop IP. Primary traction themes include data analytics, big data, cloud computing, and enterprise mobility. Niche start-ups with innovative technology solutions help providers augment their existing service offerings.
Increasing Traction
This echoes the strategy often adopted by multinational technology firms including Cisco, Microsoft, Yahoo!, Intel, and SAP, which back a plethora of emerging firms. Indian providers are now looking to invest and form alliances with ventures in niche domain areas. This is a dramatic shift in the status quo, as Indian IT providers have historically paid minimal attention to start-ups due to their own lack of a proper ecosystem to facilitate such transactions and a fairly low-risk appetite. Yet, of late, they have increasingly set up funds and accelerators dedicated to tech start-up initiatives.
|
Company |
Mandate |
Notable Involvement in Start-ups |
|
Infosys |
Has set up a US$100 million fund to invest in start-ups, besides spotting and funding internal innovation |
OnMobile, Yantra Corp |
|
Tech Mahindra |
Has established a US$50 million fund exclusively for investments in global technology start-ups |
Launched an initiative – i5 Startnet – to scout for firms in cloud, mobility, networking, and vertical-specific technologies |
|
MindTree |
Created a team led by the Chief Strategy Officer to look for start-ups and next generation solutions |
7Srata |
|
Wipro |
Actively picking up stakes in cloud and big data firms |
Opera Solutions, Axeda |
|
TCS |
Formed its Innovation Labs and Co-Innovation Network (COIN) to bring together academic institutions, start-ups, venture funds, strategic alliance partners, multilateral organizations, and clients |
iKen Solutions, Perfecto Mobile, Computational Research Laboratories |
|
Cognizant |
Set up an emerging business accelerator |
Incubated 20 ideas over the past 18 months |
Changing Ecosystem
Slowly, but steadily, the ecosystem is developing to encourage such start-ups. For instance, in June 2013, NASSCOM announced a program to fund and incubate 25 start-ups to be established by young Indian entrepreneurs. Additionally, it held an event that brought together promising technology start-ups and IT service providers including Infosys, TCS, Cognizant, Wipro, and MindTree. The gathering was an effort to provide young start-ups a platform to showcase their capabilities, connect with leading service providers, and generate investor interest.
Quid Pro Quo
Increasing competitive pressures and changing market dynamics have made Indian service providers truly value innovation, viewing it not just as a buzzword but rather a core operating lever to drive growth. Partnering with start-ups is an effective method of achieving innovative solutions without the allocation of time and resources they can ill-afford. And the mutually beneficial relationship between the two segments can lead to sustainable ecosystem in the long haul.
