On his visit to SPJIMR, he delivered a talk on the same. The following is the summary of his talk to the students.
Mr. Nemeth started the lecture by sharing his perspectives on IT revolution over the years. He said that the first phase marked a missionary zeal among the IT services organizations to convince clients about the proofs of concepts. They were getting the work that used to be done by independent vendors. They were typically harvesting the low hanging fruits in their domain of work. This first phase of IT revolution is over. Currently we are at the start of the second phase of IT revolution. The question in the minds of the clients these days is how to get strategic leverage out of the offerings from companies like CTS.
Second revolution is going to be counterintuitive, said Mr. Nemeth. Over the last 10 years the objective of outsourcing has been to save money. This is akin to dieting for the sake of reducing one’s grocery bill. A good outsourcing program achieves strategic objectives. Labor cost arbitrage is only a minor part of the contribution. Today the big ticket deals are in the area of rationalizing application portfolio for the client. We need to tell the client what applications can be pruned, upgraded and also advice them regarding the inclusion of strategic applications. Clients need partners to transform the business by applying technical and business skills. Billing rates only reflect our unit costs but the customer cost is known only after the project is completed. So billing rates are not costs, Performance is. No Cost Benefit Analysis can be done if the business value of the IT solutions is not known upfront. We need to increase the performance and there need not be a decrease in billing rates.
We are moving from what are currently pure services offering to a mixed services offering. The services are offered as a continuum. CRISP is an initiative where multiple companies come together to solve major problems in the Insurance industry. As regards the regulatory barriers, IT services firms face licensing requirements problems in only couple of states in the US. It is not a good idea to outsource your core competency. There is a gap between the strategy space and the implementation phase. CTS offers to bridge that gap. Speaking about the value of a deliverable, Mr. Nemeth observed an objective solution is of a lesser value if it is eventually not implementable. Corporate memory is preserved in the minds of the employees. Mr. Nemeth recounted Mr. Narayan Murthy’s words “My company’s equity becomes zero when my employees go back to their homes in the evening”. He added that this illustrates the criticality of human resource capital for a company. Having said this, he pointed out that professionals with business skills are the ones who are going to herald this second phase of IT revolution. Currently in CTS, 1000 out of 40000 employees are MBAs. This number, he said, will be going northward in the years to come.