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'Partnering with clients' - new mantra for Indian IT - Views on News from Equitymaster

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  • Dec 24, 2009 - 'Partnering with clients' - new mantra for Indian IT

'Partnering with clients' - new mantra for Indian IT

Dec 24, 2009

So far they have had it easy when it came to winning business. Indian IT companies have traditionally dealt only with the Chief Technology Officers of their client organisations. The IT companies usually follow a three-tiered sales structure. According to the prevalent structure for Indian IT biggies, they have a vertical head overseeing entire industry vertical. Followed by a client director who is in charge of client relationship and a number of account managers to assist him. However, this structure reached out only to the IT heads of leading customers and not to the top management. With limited access to the board room where actual decisions are made, our IT companies miss a lot of opportunities due to pure CIO-level dialogues. While this model works for low end IT application development and maintenance kind of work, it is grossly unsuitable for high-end consulting projects. So Indian IT which has been increasingly focusing on high end business transformation deals needs to figure out what is missing.

It appears that the industry has found some answers. They are beginning to recognise the lacuna in their sales and marketing efforts. This drills down to having a person designated as a client partner. Such a partner is a highly experienced individual having a wealth of domain knowledge. Someone in whom the client can seek a trusted advisor. Can this transform into bigger deals for Indian IT? We believe so.

Global consulting firms like Accenture, Deloitte, E&Y and likes follow this different sales model. And their success is there for every one to see. They hire industry experts having decades of experience in a particular industry who then have dialogues with CEOs of the client companies. In short, they have direct access to the board-room. These client partners can see before-hand and understand client's business problems. So customers can seek advice and guidance from them. This can easily translate into more business for the outsourcing vendor. They win more and more long-term IT outsourcing contracts.

Indian IT majors like TCS, Wipro and Infosys are aiming to replicate this model. They are seeking to hire highly qualified senior partners from rivals like Accenture, E&Y and others to augment their sales and marketing teams. Infact in order to drive their sales and marketing efforts, Wipro has already hired a dozen of such client partners and 30 to 40 more such hiring are on the cards over 2010. It expects these additions to grow its client relationships by as much as US$ 30 to 40 m in terms of sales. Other IT majors are also following suit. Companies eyeing long-term IT contracts cannot ignore the fact that these are annuity based projects. So a client wishes to see the same face while interacting with the vendor. In short, they need assured assistance as well as guidance from the vendor. Thus, partnering with the clients is the way to go for Indian IT companies aiming to outdo global rivals like Accenture.

This will require a change in culture as well as organisational chart for most of the IT companies. But we believe that this is worth doing as it can create formidable entry barriers for their rivals. Having said that, this ultimate level of client engagement will come at a cost. Client partners are highly expensive and scarce resources. They command a premium of as much as 30 to 40% as compared to the traditional sales model. So it can dig a hole in company's employee expense. However this tradeoff can be managed by having a performance-based compensation model for the client partners. Their salary can be linked to the success of their projects. Nevertheless, there are no gains without pains. This increase in cost can easily be balanced by the strong client relations that will help the companies in the long run.


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