Why do Indian System Integrators(SIs) fail in Japan?? Failure in terms of growth as well as in profitability despite being present in one of the biggest IT market. And the most astonishing fact is most of the SIs are present in this market for more than decade, however still struggling to find Golden key to success. And somehow Japanese IT companies and major Global IT players profitable !!
Recently I had been intrigued by this question again and again. Therefore out of my curosity I did some research, deeper thinking to recall my experiences and spoke to variety of people involved in this industry. Then according to my understanding,I came up with five most important failure reasons which are very important for any Vendor to understand and work upon in order to survive in this geography..
1) Operating Model
US being the major source of revenue for almost all the major Indian SIs therefore the operation models of these SIs are usually drafted based on lesson learnts in US geography. If we see, practically all the vendors have one uniform model (i.e. how Marketing, Sales, Delivery are going to operate etc) which is inherited from bigger US based model and enforced on all geography. This works in some geography like Europe, ANZ where the working culture as well as the process maturity is more or less same as US. However when it comes to geography like North Asia, ASEAN , this model start falling like deck of cards.In another words Indian SIs are trying hard to prove the impossible " one shoe fits all ". As usual , exceptions /miracles do happen so in these geography too there are some. This is very tricky as it creates a delusion that success is possible and on other side doesn't give exact exit point.
Lets try to see Japanese IT prospective market . There would be following categories a) MNCs operating in Western style b) MNC operating in Japanese style c) Local Large Enterprises operating in Orthodox way d) SMBs operating mostly in orthodox way and e) Govt sector working in orthodox way.
By looking at above , we can easily find out that out of six categories, the Indian SI vendors are successful primarily in first category , others are more or less hit and trial. Why hit and trails, failures, simple reason is uniform operation policy doesn't fit other 5 categories. So there has to be lots of thinking done to come up with operating model suiting this geography.
2) Resources
Once we have operating model in place we need to think about the people who are associated to make this successful. Its a common belief that company can survive in this market only if it has adequate natives onboard as well as EXPATS with bilingual skills. I would say this may not be true for all the aspects of Operating Model. In my experience , it sometimes , creates huge Abyss between different bodies of organization, which instead of working together in synchronization, work differently , causing waste of energies and finally changing the course of direction or progress is stalled. Some examples may be gaps between delivery and sales, sales and marketing , country manager and Sr. management etc.
Most of the organization think that the resources are like Lego blocks and these can be put in any condition with any other blocks and they will absolutely fit in, however little do they realize that there are dealing with human beings who hail from different cultures, have different though process and different behaviour.Therefore its not easy , rather impossible to gel these pieces together. Usually the most common debate is: Native feels Expat don't understand the culture and Expats feel that Native don't understand the soul of organization. So you can very well make out where the things are heading...
This is the second most point to fix. For being successful , one needs to achieve Synergy where all small forces work in one direction towards the growth. So the key is to put the right skilled people at right place at right time. This is easily said than done. This requires lot of maturity and for sure some calculated hit and trails.
3) Project execution Model
After laying down the correct processes and identifying right set of people, Vendors need to take a deeper look on how the projects are executed. The projects are usually having two types of models ( T&M and FB) . Its been seen that almost all of the FB projects tend to end up in Red. Really Interesting !!
To start with all the project start as if Vendor - client match was made in heaven , every thing looks perfect and harmonious however things start turning sour soon when the milestones dates draw nearer. Why, is so? Don't we have good plan ? No that is one of the factor , however, there are lots of cultural and process related reasons or catalysts which changes the color of relationships.These are as follows :
a)requirements are not frozen b) Escalation doesn't work at all .Because there is usually a team who makes decision so that no single person is made accountable. c) Projects are executed in T&M way d) Vendor doesn't allocate the right team to project etc etc.
Interestingly , most of the Japanese IT vendors realize this fact and execute the project in T&M or T&M with cap model and in worst case if they execute FB with economic adjustment. That is why they are very successful .However Indian Vendors are under so much pressure to follow uniform operating model and to provide non existent value, fail to understand a simple fact. This sometimes is little difficult to achieve while working with MNCs client because they are better manager of risks and usually are driven by HQ policies. But still the decision to take it or leave is with the Vendor and must be taken based on operational strategy.
4) Costing Model
Now we understand the eco system to some extent, however without having good costing model, its not possible to get more business. Now If we have a close look, the costing model too is driven from uniform operating model. This usually is impractical as I have never seen any regular wins in line with the prescribed rates. In another words the rates being maintained by Indian IT vendors are too high. Since these are high and the market expectations are less , this create a gap. And here it introduces unnecessary communication overhead to take approvals for closing the deals. Also in many instance client doesn't feel having any advantage if compared with Top 5 Global SIs . For sure if the services provided are same and the there is no marginal difference in cost then why Japanese companies will opt for Indian Vendors?
Now if we look at the reasons, why this cost is higher, there can be many reasons. First its defined based on some other geography and second is because of the higher resource cost due to insistence of Bilingual skills. Most of bilingual resources are paid as good as expats , in many cases much more than bilingual. This makes the profit margin less and leaves a very less space for adjustment.
For first one, probably the IT companies need to have a close look of the market. One can easily get onsite Chinese resource with Japanese skills at around offshore rate quoted by Indian vendors. For second one , I believe its not at all required to have bilingual skills at all the level. Just composing a team with strong bilingual leader/s who know the IT vendor working philosophies and cheaper resources at lower level will do the trick. This can reduce the the over all cost providing desired operating margins and enhancing the winning chances.
5) Mis reading Culture and Lack of Persistence
Japanese companies operating in orthodox way are usually too closed , not open to any change and like to work prevailing situations with proven networks. This makes the ice breaking very tough at first instance and even once its done the results received are usually very very small to start with, this is where the Indian Vendors loose patience.
I have seen the usual selling cycle of 1-2 years for just couple of resource augmentation. This surely requires lots of follow ups, relationship nurturing in order to reach that state. However sometimes when this state is reached the Vendor is not having the right set of resources and rather just pushes whosoever is free. This makes the situation worse and creates the direct impression of Vendor Capabilities. 80/100 of these cases are closed and never open. The remaining cases where the right resources were allocated , make the account asset for any Vendor.
Being a closed knit small community , world of mouth travels faster than any thing else. So , Networking/relationships, good work ( world of mouth) , patience is very very important. So the Key is to have lots of these opportunity ongoing and keep on following up and definitely be ready with right Resources.
To Summarize, we can see that there is a lot of work needs to be done in order to be successful in this geography, this usually will start from changing the perception altogether and aligning operating model in line with Japanese Business culture.Indian IT vendors are just part of service based industry so this simple fact needs to be realized. One needs to work on right resources, right costing model and choose the right execution model in order to be successful in this geography.
Hope the above given some hooks to catch. The above is purely my thought process . For sure there would be some other ways too...
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