Changing the Rules of the Game: Nonlinear Business Models for IT Services

Abstract

The rule of the game is changing with high pace in all spheres of life. In IT business where change is the only unchangeable, uncertainty and unforecastable future are quite common in this competitive arena. A business model can be defined as the mechanism by which a business intends to generate revenue and profits. It describes how a company plans to serve its customers and involves both strategy and implementation. Business model converts innovation to economic value for the business. For example, In the Aviation industry “No-frill Business model” had made huge impact around the world. In the field of Information technology there are two models widely discussed i.e. linear and Non-linear business models. Linear business options will be in operational, when the vendor delivers new service to existing clients or new clients by increasing head counts proportionately. Here, the revenue comes from new projects/service depends on the number of people involved. Non-linear business model will be developed when the vendor delivers new service to both existing customers and new customers by effective utilization of existing resources. New services/projects will be delivered even with out recruiting more headcounts. Traditionally, linear business model has been adopted by all IT majors. In a widely adopted linear business model, revenue is effort based (more the number of people working, more the revenue).Linear business model is inadequate in facing the new challenges facing the IT landscape. Rising staffing cost, Skill shortage and attrition are the major challenges which make the IT companies to think about non-linear business models. IT services companies are looking for smarter ways to boost revenue without boosting staff numbers. In this respect the Indian IT industry will continue to explore non-linear business models which will shift the terms of engagement away from headcount. This article shows light on promising non-linear business model options for Indian IT industry.