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BOOK REVIEW
The flawed golden goose
Blind Men and the Elephant by Was Rahman and Priya Kurien
Reviewed by Sreeram Chaulia
One must live with a golden goose to tell its faults. For the envious outsider,
the bird seems an unmitigated boon bestowing endless bounties, but the insider
knows where the chinks lie. Experienced information technology (IT)
professionals, Was Rahman and Priya Kurien are the perfect insiders to dissect
the six-decades-old IT industry, now worth more than a trillion dollars.
In a prophetic new book, they argue that the industry may have revolutionized
the global economy, but in the same breath, it has under-achieved its
potential.
The authors begin by asking why corporate customers persevere with the IT
services industry even though "40 to 55 percent of its projects fail or get
cancelled due to over-runs and quality
problems". (p18) The timeliness and budgetary discipline of the industry's
projects leave much to be desired. Conceptually, IT systems and services solve
business problems and contribute to commercial success of clients. However, it
is "increasingly difficult to quantify the economic benefits that IT delivers
to businesses". (p77)
With this paradox as backdrop, the authors proceed to examine the types of
business problems for which IT has arisen as a fix. Manufacturing firms need to
manage huge data flows from raw material ordering to final delivery. IT
companies like Oracle and SAP address such problems and oil clients' supply
chains. Prior to the invention of IT applications, absence of data streamlining
in the manufacturing sector caused long lead times for consumers.
Higher-end business problems (eg creating a new market for a product) are more
challenging because IT services firms might be acting as "downstream"
implementers of software as well as strategic advisers in an uncertain
corporate environment. Given what Rahman and Kurien call the "simultaneously
fascinating and frustrating IT services industry" (p44), corporate clients
could pay a high price for such problems if they choose the wrong tech firms as
consultants and application developers.
What makes matters worse for problems higher up in the value chain is that
"knowledge workers" of the IT industry have a poor understanding of the
business world. They are burdened with fanciful jargon and specialized
terminology that distances customers. Unlike other services industries such as
hospitality or retail, IT is "immature at communicating with customers in their
own language". (p73)
Large IT firms offer all three types of services, viz consultancy, application
development and support. Whether a firm bags a deal depends on its capabilities
along the types of services it can bring to the table as well as on inter-firm
competition. Good proposal writing and selling oneself in meetings and
presentations are key skills to persuade prospective clients to award
contracts. To generate demand, IT firms resort to tactics ranging from cold
calls for getting a foot in the door to networking with corporate stakeholders
who authorize buying. Innovative marketing campaigns build brand value and
"recall factor" in the minds of prospective customers.
On the supply side, the main task for IT firms operating in a highly
competitive labor market is to find skilled professionals, (re)train and retain
them. Optimal utilization of human capital and maximization of revenue
productivity (revenue earned per employee) are important in this
people-intensive industry teeming with inter-firm "wars of talent".
In the second section of the book, Rahman and Kurien change track to
investigate the factors that shaped the historical development of the IT
services industry. The earliest computing devices in the 19th century benefited
the US railroad and insurance industries by reducing time and cost of handling
large volumes of transactions. The US military's demands to improve artillery
accuracy in the world wars propelled computing in the first half of the 20th
century.
Usage of computer applications for business spread in the US and Europe from
the 1950s. IBM was training more than 14,000 programmers in 1957.
Interestingly, as is the case today, "it was very difficult to teach business
to a programmer" and IT departments within corporations ominously "abdicated
accountability from the business side". (p121)
Software services firms grew rapidly in the 1960s under the leadership of the
American company, Electronic Data Systems (EDS). IT applications were applied
to modernize traffic management, road building, airline ticketing and so forth.
From this decade itself, large projects were significantly behind schedule and
exceeded budgets by three times the original estimate. The North Atlantic
Treaty Organization even held a conference in 1968 on the difficulties of
meeting deadlines and specifications in software projects. A "mindset that
nothing could be done about this" set in, "leading to an acceptance of the
unsatisfactory state of the industry both by users and creators". (p132)
The US economy's recession in the 1970s threw half of the 3,000 IT services
firms out of business, a pattern that would recur subsequently. It revealed the
industry's vulnerability to external winds of world economic slumps, which
bring severe pressure on businesses to justify IT spending levels.
By 1980, thanks to Oracle's relational databases that refined payroll
operations of businesses, the IT industry's revenues shot up. The advent of
enterprise resource planning (ERP) software and attendant consultancies took IT
services to new heights. New easy-to-use languages geared towards commercial
applications and independent advisory firms such as Gartner Inc and Forrester
Research became popular.
In the 1990s, IT firms made a killing from the panic surrounding the Year 2000
(Y2K) problem and the rise of Internet-based sales concepts (e-commerce). The
sudden prospect of reaching out to a large target audience across the world at
very low costs attracted hordes of venture capitalists into the industry. Once
the dot-com bubble burst in 2000, many IT firms lost their clients and bit the
dust. The 1990s also witnessed India record a dramatic spurt in its IT services
sector by riding the new wonder horse of "globally distributed work" (or
outsourcing).
Rahman and Kurien point to widespread hype as a constant spur of the IT
services industry. The industry's hyperbole about "the next great answer" to
business problems creates a mystique around a particular technology. Demand
outpaces supply in the ensuing rush and IT firms hire unspecialized programmers
to catch up, thereby hurting the maintainability and long-term viability of
applications. At the end of each such promise cycle, the market realizes the
real worth of the exaggerated claims.
The other key feature of the IT services industry's rise is the mushrooming of
intermediaries or generalists who advise enterprises on how to become more
efficient by implementing computer systems. The authors refer to "power shifts"
towards consultants that occur whenever corporate customers adopt attitudes of
negligence and dependence on techies.
Section three of the book profiles leading IT services firms and their recipes
for success. IBM comes in for special mention because its research and
development division pioneered creation of technology when its counterparts in
other firms were interested only in finding usage for new technologies. Years
before IBM's peers realized the value of brand management, it made the computer
a prestigious machine by showcasing in glass cabins for window gazing. EDS
piloted the outsourcing model by becoming the virtual IT department for client
businesses and governments. Accenture, a truly global firm with representation
from different countries, is the other big influencer of the industry whose
consultancy model set off achievers like Deloitte and Capgemini.
In the new millennium, evidence appeared of the arrival of Indian challengers
to the industry heavyweights. With world class engineering and management
graduates, India emerged as the biggest offshore talent pool for IT services.
Predictability, timely delivery, and quality at lower cost were the triple
pillars on which Indian IT firms such as Tata Consultancy Services, Infosys
Technologies, and Wipro Technologies became market favorites. The authors
credit Indian companies for raising the industry's slack standards but say that
possible new entrants like China and Eastern European countries could threaten
Indian firms by being lower-cost substitutes. China is unlikely to upstage
India, though, since the former's IT services are still bundled with hardware.
In the final section of the book, Rahman and Kurien consider future scenarios
for an industry where change is permanent. The most optimistic picture is of
accelerating growth by leaps and bounds fueled by ever-greater need among
businesses for personalized IT services. To "keep customers delighted", IT
firms would have to effect a "shift of work culture" by better deciphering the
business dimension of their services.
A second speculated fate of the industry could be an end to the current growth
and entry into a maturity phase. Here, the market stops looking infinite and IT
firms will have to devise a way to steal away business from their competitors.
Medium-sized firms may disappear due to the recourse of mergers and
acquisitions available to large firms.
A third plausible script for the industry is of a rules change that would
reorganize the fundamentals. For instance, the present labor-based,
programmer-intensive model of application development and maintenance might be
replaced by automation. Rahman and Kurien are sanguine about "commoditization"
of more and more applications that would have a drastic impact on labor market
demand for software programmers.
The most pessimistic projection for the industry is that chip-embedded humans
or drastic alterations in banking and finance (the two biggest clients of IT
services) could render IT redundant. The industry’s horizon watching is so
negligible that it would be unable to survive such a deluge. Shortening
boardroom careers of chief executive officers and tunnel visions of
quarter-to-quarter earnings have made long-term strategic visions a casualty in
the industry. Rahman and Kurien end on a sombre note that "there may be some
shocks ahead" for which the IT services industry would be caught unawares if it
clings to complacent habits.
The merit of this highly reflective book lies in its focus on the weaknesses of
a phenomenon that has rewritten the modern way of life. The authors' insistence
that the IT industry should waste less and think more debunks the myth of its
unstoppable "rise and rise".
Blind Men and the Elephant. Demystifying the Global IT Services Industry
by Was Rahman and Priya Kurien. Sage Publications, New Delhi, 2007. ISBN:
978-0-7619-3620-6. Price: US$29.95, 317 pages.
(Copyright 2008 Asia Times Online Ltd. All rights reserved. Please contact us
about
sales, syndication and
republishing.)
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