"Yes Sir" and No "No Sir"

I was having a lunch conversation with a colleague who has moved from the IT department of an enterprise to an offshore based service provider's organization. He was sharing his frustration on the lack of assertiveness on the part of most team members in the offshore service provider's team (and in that company in general). Since he had moved from an internal IT organization to a service provider, these were frustrating for him when he was in calls with the client where his colleagues mutely accepted whatever the client asked for --- be it additional scope of work, very aggressive timeline commitments or unrealistic service expectations. They just didn't push back!!!

This is in fact a recurring sentiment I have heard from many on both sides of the table -- those who offshore work to IT service providers and those who provide such services working for offshore based IT service providers. This is in fact a very rampant behavior trait which neither party wants to discuss because one is taking advantage of it and the other is being taken advantage of. Worst, most often the team members don't even realize that there is an option to push back. I am not suggesting that the trait should be a "push back all the time and every where" attitude but there are ways to respectfully and collaboratively correct a client's expectation if they are unrealistic or may have issues which they may not be aware of. Most folks in several offshore based companies just do not acknowledge this and this seems to run through the echelons of power in such companies. I have heard of some companies where the relationship manager says " How can I say NO when the customer is asking for it? He is the after all the CUSTOMER!" for situations where what the customer is asking is just not do-able or practical. What is not understood is that in the process incorrect expectations are set and face-off is deferred to a later time when anyway the expectations will not be met or lead to consequences which are not desirable.

Now, the interesting part --- though most customers who offshore take advantage of this cultural trait ( we will delve more on how much of it cultural and how much of it is anything else), in private they acknowledge that they want partners who can challenge them and say NO when the right answer is NO. They do not want to get a submissive YES for everything because then the service provider team is not bringing value in validating what they think. If, whatever the customer think prevails, there is no check or balance to bring in perspective from similar experiences with other customers. Not just that, many even say that they actually would respect an offshore provider more if they see the teams more balanced and responsive and say NO when that is the right answer.

What is the reason for this seemingly foolhardy behavior?:

1. There is a bit of a cultural aspect to this given that such conversations happen across cultures. While at one end are customers from the western world ( mostly Americas and Europe ... and I don't want to get into which ones from these two are more aggressive!) who are more aggressive in general, at the other end is a typical Indian or some times even attributed as an Asian trait of not confronting the client directly in business situations.
2. Another reason and more plausible is also that it just is not there in the DNA of such offshore based IT services companies because they essentially grew through T&M (Time & Material) contracts contributing almost 96% of all their revenues in the last 20-25 years. In a T&M contract, the resources from the service provider works as part of the staff of a manager who is from the customer's side. So, they are essentially executing tasks assigned to them. There is little chance to be asked for opinion in that sense and whatever opportunities exist are not leveraged due to the cultural trait discussed earlier. So, over the years, the organizations have grown on a staple of T&M engagements where their staff has followed what was assigned to them not having much of a chance (or inclination) to speak up to do things differently.
3. Another reason for I have seen is the "Customer is always right" syndrome which is conveniently used as it means whatever the customers asks or says is to be followed and takes away the "burden" of finding what is better or right if that is not known.
4. Another reason, which is again highly debate-able and needs to be understood in the right context has to do with the evolution of most of the offshore based IT service providers. In the early years of their formation, the staff they mostly used were from their base countries. However the IT maturity in these base countries was not to the level of what existed in most of the western world where the customers were located. Hence, while the staff started working, they were mostly on a learning curve for some of the technologies as these were new to them. Hence, in those early years, they also lacked the confidence of knowing that they could have a point to make since they knew that the client teams had worked in these systems for a longer time in the past than them and hence they found it more convenient to follow what was being told due to lack of confidence.
5. Finally, many organizations just do not understand still of what the customer is looking for. They think that by agreeing to what the customer is asking or suggesting, they are making the customer happy and ensuring continued business.
   

However this today is not limited to traditional offshore headquartered IT services companies. Since many of the employees in the offshore units of onshore headquartered IT services companies have been hired from the offshore headquartered companies, they carry these personal traits too with them in their new organization. This has further contributed to their own challenges in meeting expectations at times in their new organization or at times led to further rifting of the great divide that exists in such companies between their offshore units and their base home units set up onshore in the Americas or Europe. That rift is probably a topic for another post though!

But before I conclude this post, I should say that these are typical traits heard from many people on both sides of the story. This however does not mean that all offshore based IT service providers or all the team members of a particular service provider demonstrate this trait. There are many who are highly appreciated and their clients will tell you how they brought value by brining in perspective that were really brilliant. However, for those who found these traits, the above is an analysis on why it possibly happens given that such a behavior does not help either party in the long run.

Tiered Infrastructure Architecture

Thanks to the recession, CIOs are busy but not to support the growing demands of business, but instead identifying how and where to save costs and bring sustained value. When the going is good, it seems to pay better to throw more hardware, software and labor at any business requirement because business is growing and someone will pay for it. Studying delta savings and incremental benefits are more of overheads, where the cost of managing them seems to outweigh the benefits accrued. Not any more in these times!

One of the things I have consistently observed is the lack of a consistent approach to a tiered infrastructure architecture. IT infrastructure is mostly set up as chunks of monolithic or patchy systems with no stratification or gradation of the infrastructure or the service quality provided on top of it. While many banking and other enterprises do have "A Class" infrastructure or service for "A Class" business applications, the rest of the applications and their underlying infrastructure is most often a mix of systems acquired over time. It is often not possible to say that we have three kinds of storage infrastructure --- A, B and C which caters to different kinds of storage requirements in terms of these metrics 1. ..... 2. .... and .. 10. ...

An efficient environment should have an enterprise divide its IT infrastructure into two or three grades. Each component (hardware, software, labor) should fall into one of these buckets. It may not be possible to have an air tight environment with no overlap but having at least 80% discipline from the current 10% (or none) will result in cost efficiencies and better manageability. It will also ensure IT is more responsive and participative in growth --- next time a project estimate is made for (say..) setting up a new back office, the project cost would be more reflective of how critical that operation is to business. IT team would first ask how critical that environment is, operational requirements, redundancy requirements etc. for all aspects of IT environment to plan for an optimal set-up instead of an one-quality-fits-all approach where that "one quality" is often an expensive service requirement.

Emerging New Players in Outsourcing Space

In the last two weeks two major acquisitions were announced in the Outsourcing services space --- Dell acquired Perot systems for $3.9b and Xerox then acquired ACS for $6.4b. These come within a year or so of HP's acquisition of EDS for $13.9b in May 2008.

While each company has its reasons to buy the acquired companies, these deals have few things in common:

• The acquiring companies are primarily hardware manufacturers and the companies acquired were services companies. Xerox or Dell did not have any services business contributing any significant amount to the revenue pie
• Both these recent deals came during the time of recession (or at least the fag end of it if we believe that is the beginning of the end of the recession). In these times if Dell and Xerox spent time, energy and money to acquire these companies, it must surely be a major event in their history. This is surely not one of those Cisco acquiring yet another technology company ( by the way they acquired Tandberg yesterday for $2.96b) where the fitment is obvious. The acquisitions by Dell and Xerox are much more aspirational than others as they aim to start a whole new service line of revenue for their companies. In fact Xerox's acquisition of ACS is even more aspirational than Dell's where the latter at least was in a related business.

Talking of aspirational acquisitions, Oracle's acquisition of Sun for $7.4b which was sure stunner for most industry pundits.

And not so back in the past, IBM had sold its hardware business (ThinkPad) to Lenovo, exiting from a product manufacturing revenue stream -- which helped it focus on services business and improve profitability in a significant way.

These deals are surely going to have some bearing in the future outsourcing services market. Dell is keen to shake off its PC-business image, whereas Xerox realizes that somewhere the printing and copying industry would head to be a sunset industry as over time people have been printing less, copying less on the whole. This will help each company jumpstart into the services space and meet the kind of companies they aspire to compete with.

Interestingly both Perot and ACS have a fair offshore presence in India. With the acquisition, both Dell and Xerox would also get access to these facilities and delivery models. It would be challenging to integrate these acquired companies and find the right kind of management team which can oversee a different business from their traditional manufacturing business.