Operational and Tactical Challenges Faced by Indian Software Firms

Abstract

The Indian software services industry has been spectacularly successful, growing at over 50% annually for several years. However, the nature of markets and technology is changing. Other changes include rising salaries in India, fast growing higher end markets, talent shortage worldwide, and need for fester implementation of projects. However, for Indian companies a key change could be the growth of market segments that are not so price sensitive, and price based competition from China, Mexico, Philippines and other countries. In this paper, we have described important unique challenges faced by Indian service companies. These include challenges arising from sustained high growth, operating as a low cost service provider, challenge of overseas development, managing multiple agencies in a single project, cultural challenges of operating in overseas markets, and entry barriers to higher end value added work. Strategic responses include building brands, re-positioning, changing client and market perceptions, and deciding whether to move up the value chain. However, Indian firms also need to make operational and tactical responses. We describe and assess current responses made by Indian firms. In general they are inadequate, largely because of recent success and high growth. Thus Indian firms feel there is no need to worry. This might include a different sales and marketing approach, and training sales people for negotiating and getting better prices and rates. It might also include re-training software professionals to manage clients and communications better and to handle client requests for changes in specifications. It is important for the firm to identify talent and put it in the right projects. It requires tracking of individual employees, and their current skills and experience. It also means keeping track of upcoming projects and their requirements so that the right people can be put on the right job. Few Indian companies use systematic processes while executing projects. Putting the right processes in place helps to cut down re-work, improve quality and reduce project execution time. Finally, firms might also have to change some of the beliefs that employees hold about themselves, markets, clients, and the company they work for. These responses would help firms to improve operational efficiency. However, in the long run, it will also help to improve brand image and sustain marketing efforts to reposition the company higher in the value chain.