The Future of IT Services: An Overdue Kodak Moment
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Entrepreneurs often have an important question. “Service businesses can be extremely profitable, but almost no venture capitalist wants to touch it. Why?”
Services businesses have scalability issues, there are low barriers to entry, there is no reduction in fixed costs with scalability, and no hockey growth curve in their future.
There is no investment in services because investors don't see a big upside - services businesses have a traditional, uniform business model based on headcount growth. There is hardly any innovation or intellectual property being created in services.
In fact, in the last 30 years or so, there have been very few innovation waves in the IT services sector. While the IT service sector has been growing significantly on paper (from $177 bn in 1992 to $1.4 tn in 2017), it has never been given any meaningful attention. This is because of the key proposition if Indian IT has been built on one promise: “cheaper and faster”, with no scope for creativity, disruption, or innovation.
Some might argue that there have been waves of innovations in the form of the Global Delivery model, or Agile, which challenged the status quo to some extent, and defined newer ways of providing software services, but honestly, these waves are too far and few in between.
As per the World Intellectual Property Organisation (WIPO), in 2014, India filed only 1,428 international patent applications. For context, the US filed 57,385 by the US, while China filed 25,548.
Today’s business world is complex, and technology is invasive and pervasive. You live in a world where your smart mattress alerts your coffee-maker when it feels you stirring in the morning, ensuring that your cup of coffee is at the perfect temperature when you take that first sip. As you move to the kitchen, your refrigerator notifies grocery store that you’re out of eggs and auto-schedules a delivery. You look at your wearable tracker to estimate your calorie intake for the day while brushing your teeth — you decide to eat healthily, and use your phone to switch on your juicer.
All of these systems need a strong technological backend and rely heavily on emerging technologies like AI / ML, IoT, and other open source technologies.
This means that the age-old methods of writing software have to undergo a change. The services companies cannot just look at the revenue growth of today and be assured that there will be business tomorrow. The customer of tomorrow and his needs will be very different.
An overdue Kodak moment
We need an Uber of IT services, a company brave enough to disrupt and innovate across the entire business chain. IT companies of tomorrow should be able to challenge the status, question the norm, and kill existing long and error-prone processes.
This will only be possible when IT business leaders seriously attempt to think of a different, people-led culture, where teams are given extreme freedom to think and innovate.
Companies would also need to bridge the gap between the user, product owner, and the actual development team. The present approach of someone writing and understanding requirements and then acting as a bridge for the development team is massively flawed. The more the layers in the process, the more will be noise between them, and more information will be lost in traversing through that layer.
Teams should be allowed to self-organize and pick up work as per their passion and understanding - this is vital because the work of the future will be so complex that if you’re not passionate and interested in what you’re solving, you won’t see much success.
This means that recruiters would have to hire teams on the ability to learn, unlearn, adapt, and their comfort with failing and re-learning, all over again.
This is going to be a very different future - software development factories that have so far been living on the mantra of cheaper, better, faster will have to transform into innovation hubs. In this future, only an innovation-driven approach and a new innovation-as-service model will thrive, while others will struggle to survive.