TRENDS IN SOLUTION PROVIDING: Jack Of All, Master Of Some

Solution providers have a different way of functioning in India than the ones

based in developed countries. While the latter are more focused on a niche area,

desi solution providers provide end-to-end comprehensive solutions. It is

difficult to say which one of the two - niche or specialized solution providing

- is more fruitful, as they both have advantages and flip-sides attached to

them.

One would think that the trends in the Indian SI segment follow those of the

US. However, a cursory glance through the list of DQ Channels Silver Club list

of the top solution providers and SIs in the country throws up an interesting

aspect. More than 80% of the players listed are generic SIs and solution

partners, while specialist or niche SIs make up for a minuscule minority.

This is in sharp contrast to the US and other Western countries where

specialist or niche players typically dominate the mid-tier SI landscape. They

include SIs with a regional or state focus; those that restrict themselves to

domain—level expertise in specific areas such as media and entertainment

center; and those who follow the product route by developing their own solution

sets.

Further, there is a clear demarcation between tier-one and tier-two players.

Said Nitin Shah, MD, Allied Digital Services, "Fortune 500 companies abroad

are served only by the top rung SIs, while mid-tier enterprises are served by

the second rung."

The Indian scenario is a vast departure from this model in that even a huge

tier-one player like Wipro spans the gamut of projects from SMB to a large

Fortune 500 customer side deployment. So why do most Indian SIs risk spreading

themselves thin, rather than settle for a comfortably lucrative niche?

Evolving market



One would find some answers by looking at the way enterprises view IT today.

In the past, deploying IT meant implementing IT infrastructure (read hardware).

Today, IT is important for them in order to ensure business continuity and

productivity. Small and medium companies prefer to have flexible but limited IT

services, while large enterprises need to ensure that they have specialists to

take care of their critical needs since it is a strategic business requirement.

Another

reason why SMBs prefer to go with one partner is because it becomes cumbersome

to manage multiple Service Level Agreements (SLA). Some of the mid-sized IT

companies that are trying to scale up in the industry are beginning to go with

niche SIs for domain expertise since they need to follow international standards

like Sarbannes-Oaxley.

KN Prasad, who heads the Marketing and Alliances at Apara Enterprise

Solutions, which deals in storage, networking and security solutions, draws the

analogy of medical specialists. "Today even in medicine, you have

specialists. You don't go to a general physician if you have an ailment."

He observed that large enterprises are more inclined towards specialist SIs

especially in mission critical areas. "Today if there's a slight hitch

anywhere in the system, the data center catches a cold. Companies cannot afford

to lose even one minute. Specialization is just catching up here."

'Pizza versus multi-cuisine'



This is how Nitin Shah summed up the specialist —generic SI scenario. Both
type of players have their share of pluses and downsides. We asked a few of the

major players for their take on the business.

Network Solutions (Netsol), which won the DQ Channels Excellence award for

2004 for 'Most Successful Solution Provider' focuses on Infrastructure

management. Netsol's MD, Sudhir Sarma opined, "Being a niche player is

advantageous as you are looked upon as the expert in that space. We can provide

significant value add and expertise in a chosen area. But the disadvantage is

you could miss out opportunities where customers insist on you providing a

comprehensive end to end IT solution."

Sanjiv Bhavnani, CEO and MD of Visesh Infotecnics, felt that niche players

who know their domain better have better chances of success in their defined

market and may also command a premium for their services. "However, the

choice of the niche needs to be balanced in order to achieve sustained growth

and profitability, as most industries are cyclical in their nature. Hence a

well-balanced portfolio of industry verticals and services needs to be

maintained in order to build a good and sustainable SI." 

 While specialist players have to invest in building capabilities, the

payoffs are in terms of high profitability. Added Mukund Ramarathnam, Marketing

and Business Development director, AMD Far East, "For specialists, it is

not a volumes game and since they are domain experts, profitability is

high."

Mukund believes that the market is in a growth phase and is only warming up

now to the value that specialists provide. Pointing out that customers have to

realize the premium that specialists bring to the field, Prasad thinks that in a

mature market, people would pay for skills.

Rather than remaining complacent in their respective niches, players must

make sure they have a good set of industry verticals that they can tap. Industry

verticals like BFSI, service providers, telecom, energy, manufacturing and BPOs

are the segments, which would go partner with specialist SIs.

Apara's Prasad also contends that sometimes, a specific area ceases being

niche. "Currently, storage and security is no longer a niche, because the

space is getting complex and crowded with many players. The industry itself has

evolved."

'If you can't beat them, join them' goes a saying. Apara follows this

strategy by partnering with generic SIs. "If generic SIs want our

specialist skills, we work with them on the backend while they are on front-end

customer projects. This could be on project basis or at the strategic

level," stated Prasad.

Going global



With the winds of globalization blowing into India, the world is an

universal playground for SIs. Both generic and niche SIs are exploring markets

abroad, which could boost not just their bank accounts, but also their stature

back home. Most SIs who want to venture abroad prefer to begin by looking at

uncharted territories like the Benelux region in Europe, Thailand, Yemen and Sri

Lanka to name a few.

Going to underdeveloped markets translates into easier access to markets, not

much competition to contend with and opportunities for providing end-to-end

solutions. On the other hand, it is difficult to gain a foothold in developed

countries like the US or UK where local providers are well established in the

market.

Nitin remarked, "People want a partner who is agile, responds to change

in needs, are flexible and has proven management skills. SIs need to go out of

their way to take care of customers. This is where outsiders fail."

Niche players like Netsol have also announced plans to raise money to acquire

companies with matching capabilities abroad. This could be a trend that could

get widespread.

Getting competitive



With SIs competing on both volume and price, it is a tough game to win.

Companies can differentiate by developing their own unique set of service

capabilities. Instead of looking at easy opportunities, SIs and solution

partners could raise the bar by identifying their strengths and strengthening

them by investing in skills.

Nitin said that his market strategy is to look for high-hanging fruits, which

all cannot reach. "The niche players can't reach there. We are able to

serve large customers who require our presence everywhere. We have 62 locations

in India alone." He warns that following the franchisee route could

jeopardize customer relationships.

And how does one become a specialist player? "Solution providers have to

identify an area and develop special capabilities, build strengths and become

central to customer needs. This could be a gateway to other niches,"

suggested Mukund.

However diverse the SI trends may be in the US and India, there are some

unalterable aspects to the business that hold good to any SI. These include

adding value to customers, improving efficiencies and differentiating oneself in

the market.  

PRIYA PADMANABHAN

CyberMedia News (With inputs from New Delhi & Amishi Shah in Mumbai)