Value versus volume
Often, when I look at the Indian IT industry, I am forcibly reminded of a similar industrial situation a couple of centuries ago. It is one that every Indian school going kid of a certain age is familiar with: India, which had been famed for its high-count, fine-quality cotton since the centuries before the Common Era, was reduced to supplying raw material to the powers-that-were. We lost out on our markets by bring forced to provide low-value raw material and products. Sure, it was probably easier to do, for the producer, at an individual level but the opportunity costs were tremendous. India as a brand, became associated with low-value, low-grade products and was seen as a source of basic raw materials rather than high-end finished products. We had the capability but we were not being able to utilize it.
Today, hundreds of years later, the IT industry is in a somewhat similar position due to a combination of several factors. We have the talent and capability to do far much more than we are doing now. The country still churns out the largest number of engineers in the world. Unfortunately, most of them are unemployable when they graduate due to a massive disconnect between the education system which focuses on certification rather than imparting usable knowledge, and industry requirements. Also, a lot of youngsters today, who opted for employment in BPOs are joining these operations either as a stop gap or for easy money that they offer. This unfortunately soon palls if the employee is not focused and equipped and does not enjoy what he or she is doing. The resultant attrition again hinders growth and development at all levels - that of the individual, the organization and the industry. Quite evidently, if the talent pool that we are drawing on is barely equipped to handle a basic BPO job profile, there is no question of them being able to handle a profile that requires advanced skill sets and training. Again, it is simpler to set up widespread basic operations rather than build expertise in specialized fields, since that requires an investment of time, money and talent and offers visibly quicker returns. But in the long-term perspective, this is not a sustainable model. While the traditional pyramid structure can still work (see dig.), what we need to do is concentrate on growing the top of the pyramid - the high-value zone, rather than further widening the low-value base. 
Where is the point to producing wheat when you can bake breads or even cakes and earn much more in terms of reputation, skills and yes, money… Horizontal expansion is palling and it is time to climb the ladder.
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As we could see in the diagram, the High value is at top, but, very less in volume. For the country like ours, where volume is also more, the top alone may not be sufficient. May be we need to have a way in which we have them all integrated together. We need to have the control on complete triangle, rather than any part of it. We have people who can deliver all the layers, so making use of that will be better than trying to convert everyone into that smaller triangle.
Comment by Lakshminarasimhan R — February 27, 2008 @ 12:10 pm
This needs to be addressed in the context of how each and every employee is different from one another and what is the common thread that makes the firm look different from another firm. This differentiation outside the firm’s boundaries and commonality within the boundaries must be linked between the various layers of the firm’s operational framework.
Value and uniqueness are great friends which help each other. Customers must be willing to pay for that uniqueness. So, obviously that uniqueness must add value to the customer’s bottom line. What adds value to the customer’s bottom line will add value to a seller’s bottom line. We need to promote uniqueness consistently and continuously enhance the value of that uniqueness. This uniqueness cannot be promoted without extreme motivation. Value addition can come from unlikely places under careful observation of the most mundane processes. The key element is the presence of the most motivated employee who notices value lurking in the most mundane areas. Identification of value in these areas often results in great volume improvement. So, when you increase value, volume comes as an add-on result. You end up with great value and good volume. They don’t necessarily be adversaries. A sustainable business proposition focuses on value first which begets volume. Best Regards Sreedhar Nair - a Project Management Professional with 21 years of technology and management experience - 14 years in North America, 5 years in Asia and 2 years in Europe. He can be reached at smnair@att.net
Comment by Sreedhar Nair — March 4, 2008 @ 5:49 am
The key question is how to create value. Value = services + brand equity. Higher the equity (like the P/E Ration in the stock market) - higher is the value. What Indian companies need to do is build their brand equities - however big or small a company is - it can build a strong brand image. One key aspect of building brand equity is focus.
Most companies try to put their hands into multiple things - the key to success is - if you can do even one thing very well and you are No.1 or No.2 in that you are home!
Customers Value you and then rest will be history.
Digressing from a company perspective - the fundamental challenge with Indians is that right from childhood they are taught by parents, teachers and all around them to mitigate risks. What is risk - the risk of not being a jack of all trades. Thats why we do not produce as many sportsmen or extreme talent in any field of education or sports.
Maybe that was also because we were a developing country and were always insecure venturing into a field outside the traditional where there is a job secure after you pass out. But now is the time that Indians should change - we need experts in the areas of arts, science, sports. We need to be known not just as a country that produces technical brains but the best sportsmen, the best artists and the best of many things.
Comment by Neel — March 6, 2008 @ 12:24 pm