In 30 years, the tech industry underwent five rounds of transformation. From Convergence, Cloud, and SaaS to Artificial Intelligence and Machine Learning, each round of transformation hit enterprises with greater effect in markedly shorter intervals. The upshot of such successive transformation phases includes newer revenue models and value additions that relied on infrastructure, deployment and on-demand system services. This reliance on system services created newer problems: businesses became dependent on using established platforms rather than building native solutions.
As the service-oriented architecture (SoA) platform evolved, businesses with similar process requirements benefited from using the platform. There was absolutely no need for developing native solutions or reinventing the wheel. Seven years back, these businesses would have been ideal targets for a development company, but SaaS/PaaS/IaaS has changed it all. The result: the enterprise market is expected to register 7% CAGR compared to IT services (5% CAGR) over the next three years. On the other hand, 28% of all IT expenditure will be towards cloud-based solutions by 2021, with IaaS growing at a 23% CAGR by 2010.
For tech companies, smaller development projects have dried up; instead, they are taking up requests for customization of existing SaaS platform solutions. This has forced the tech companies to work with advisory firms for developing agile processes and systems for their clients. We have worked with some of these companies to help achieve the transformation that today’s businesses demand.
Let us take the case of a company, Company A, providing development services to the media industry. While analysing their dismal performance over the past two years, they concluded based on CRM reports that they were losing clients due the pricing factor. The management took initiatives to reduce the cost of operations, but to no avail. Smaller outfits with lower infrastructure spends could afford to undercut on contracts—worse, they shared the same platform with Company A. In any case, under-pricing was out of question. When we delved deeper into the problem, we found that Company A had built a silo of expertise in a soon to be crowded segment and that their solutions easily succumbed to price elasticity. In other words, Company A’s strategy to specialise in certain technologies was at the cost of business viability.
Getting out of this situation required a concerted rethinking of what the company stood for. We helped them into reimagine how the business should be viewed and perceived with concerted strategic steps:
Step 1. Understand why we were working on a vertical. Disengage the “Business as Usual” mentality, question everything, and do not consider profitability as the only reason to exist.
Step 2. Identify and evaluate those segments and technologies that are worth spending time in and grow competencies over the next three years.
Step 3. Understand how the buying process works, the expectations from each vertical, and the ability of growth in each vertical (cross-sell/ up-sell opportunities).
Step 4. Do a thorough analysis on market attractiveness frameworks to identify verticals and develop a strategic roadmap for the organization as a whole.
Step 5. Run simulation on multiple scenarios of strategic choices and evaluate the impact on cash flow, ability to sustain growth, talent pool, longevity of relationship, difficulties of sourcing, fitment to plans, and potential.
Step 6. Nib what does not fit, and do more of what does fit.
Step 7. New mantra: Experiment. Simplify. Concentrate.
In a year’s time, the company added over 12% to the bottom-line while becoming leaner by 20% and reducing unutilised time by 15%.
Organizations can ride the transformation wave by learning new skills (technologies), learning to sell better (solution selling than price warring), learning to price better (equity + revenue rather than just sales), and removing internal redundancies (performance rather than cost cutting). Instituting a “Business-as-Usual” routine meant that the management at Company A was so busy with operational activities that they had forgotten to look inward. It meant taking some hard calls for the management. Having a flexible, dedicated, and concerted effort on finding research-backed outcomes is what we brought to the table in this situation.