The WSJ profiles Dave Smoley, CIO of AstraZeneca in a story about how cloud computing is pressuring Indian outsourcing. Dave is one of my favorite CIOs and he had allowed me to showcase in SAP Nation his remarkably brave initative to invert the 70% outsourced model he inherited and about the cloud investments he has been making.
But the WSJ could have gone further back. In The New Technology Elite, Dave had described an even braver decision to go with Workday and its implementation consultants for a global HCM project when he was CIO at Flextronics. In 2008, the much safer decision would have been to stick with SAP and a global SI. But Dave did not.
Actually the WSJ could have gone even further back. In 2006, I had blogged about a contract format I had started negotiating for other similarly brave CIOs which blended application management and hosting, on a per user basis. I called it Software as a Customized Service (SaCS) and for years I have implored Indian vendors to move to this model.
Three challenges have kept most of them from getting there, even a decade later. First, they have shied from CapEx needed to offer infrastructure services, so invariably have to partner with a hosting or cloud provider. Investments in Indian world are measured in recruiting and training days, not in data centers and servers. They have also shied away from automation investments to cannibalize some of their labor. Second, (as a corollary to their labor intensity), they are still stuck with headcount/FTE pricing models and reluctant to offer as-a-service pricing. Finally, and probably, much more alarmingly, a continuous improvement culture (which was proudly developed when their commitment to CMM and Six Sigma was intense in the 90s) has vanished. That had helped offset some of India’s wage inflation.
It is gradually changing. Vishal Sikka, formerly of SAP, now CEO of Infosys is pushing for more automation. "The company has set a long-term internal target of up to 70% automation in its infrastructure management business, and up to 55% automation in its business process outsourcing business. Currently, 35-40% of its BPO processes are automated.”
But that automation should have started years prior at Infosys and other Indian vendors. As should a change in business models. Now brave CIOs like Dave are much more mainstream, so the urgency has only increased significantly.