Eleventh AIMS International Conference on Management

December 21-24, 2013

Flexible Strategic Framework for Managing Forces of Continuity and Change in Service Operations: A Study of IT-ITES Sector in India
V.K. Gupta Abhinav Gupta vkgupta@imt.edu abhinavgupta24@gmail.com IMT Ghaziabad
IT-ITES sector, contributing 60% of GDP, posesunique challenges as services are intangible, cannot be inventoried and involves customers in delivery process. Flexibility, continuity and change have become areasof interest for researcheron how to manage high uncertainty in the service sector. Managing IT-ITES service operations pose great challenges. This paper focuses on study of serviceoperations of IT-ITES industry in India and understanding how they are coping up with the forces of continuity and change. The aim is to develop a strategic framework for managing forces of continuity and change in IT-ITES industryand validate through primary research. Keywords: Flexibility, Continuity and Change, Strategic Framework, IT-ITES Industry, Service Sector

1. Introduction
Information revolution enabled by availability and penetration of cheaper computing power and Internet has fuelled the growth of service sector and it has emerged as the biggest contributor to the economics of each nation overtaking the manufacturing sector by a wide margin. India has a unique advantage of a large pool of young English speaking net savy working population with high aspiration level. IT-ITES sector has grown at a fast pace in India, making it a preferred destination for all the leading IT-ITES companies in the world. Indian IT cities, Bangalore followed by Hyderabad and Gurgaon have become as well-known as Silicon Valley in United States and sometime have become a case of hot political discussion in US due to their fast growth and high level of competitiveness. India has been following this trend and service sector including IT-ITES contributes to over 60 percept of GDP (IBEF 2013). Designing and managing IT-ITES services pose challenges as services are different from manufacturing in a number of ways. Few factors that differentiate the IT-ITES services from manufacturing are - services are intangible in natureand involvement of customer in service delivery process. In case of IT and ITES industry,production and delivery of services has to happen simultaneously. Due to the fact that customer in involved in service delivery process, the output of IT-ITES services is highly variable and outcome in terms of quality and consistency may be difficult to standardise. ITITES sector however has evolved over time to address all these issues and developed mechanisms to address some of these concerns. Early adoption of ISO standards, BPM and CMM methodologies have helped few Indian companies to be amongst most successful companies in the world. There are highly successful companys operating at International levels and many unsuccessful companies as well which has not been able to withstand tough competition. In present highly dynamic global economic scenario, it is therefore necessary to understand the underlying factors for successfully managing IT-ITES service operations. The aim of this paper is to identity the factors affecting forces of continuity and change for innovation and risk management for sustained growth of IT-ITES Industry. Objectives 1. The main objective of the study was to understand innovation and risk management in IT-ITES industry in developing economy like India. 2. Understanding on how the different companies are actually managing their respective IT-ITES service operations to provide the competitive quality, cost and delivery to the customers 3. Identify and study the factors affecting forces of continuity and change influencing management and growth of IT-ITES Industry.

2. Literature Review
Zhao (2008) states that India and China share certain similarities that enable them to develop advanced software that attracts leading countries, the outsourcing partners of the two countries China with Japan, and India with the USare related to disparities in their institutional systems that have an impact on their software development. Gupta (2009) explores four interrelated strategic concepts for innovating pharmaceutical companies - core competencies, economies of scale and scope, knowledge sharing, and learning. He states that outsourcing knowledge intensive activities to knowledge process organizations (KPOs) serves to reduce 1039

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innovation process obstacles. Chadchan (2012) addresses various complex urban issues associated with the present pattern of urban development through review of urban development of selected metropolitan cities of India which have experienced the impacts of Liberalization, Privatization and Globalization process. Nicholson (2006) examine the practices and controls available to vendors to limit the transaction costs due to high uncertainty and potential opportunism, and facilitate the offshore outsourcing of a wide range of accounting activities.Javalgi (2009) concludes that as firms in developed countries (e.g., the US) continue to face enormous challenges to sustain competitive advantage; outsourcing to emerging markets is becoming an increasingly important source of business renewal and corporate transformation.Palvia (2011) discusses the most critical concerns for Global outsourcing of IT and IT-enabled services (ITES) such as issues dealing with work arrangements and relationships with the client, and issues related to the clients organizational readiness for offshoring. Moorti (2011) discusses Cognizants key operating principles e which include customer -centricity, their unique Two-in-a-Box operating model and their emphasis on working together with clients to make their businesses stronger and how they have contributed to the companys spectacular growth story. Shaw (2007) taking the case of Bangalore (Karnataka) and Kolkata (West Bengal), examine state government agencies and their impacts on the cities growth policies.Biswas (2004) outlines factors that are required for sustained growth of IT regions and evaluates the Hyderabad IT industry and the state governme nts IT policy against them. Jensen (2013) states that service provider firms from emerging markets, India in particular, are now offering BOT outsourcing contracts in which the client firms are allotted call options, i.e. the right, but not the obligation, to transfer pre-specified assets from the service provider.Demirbag (2012) examines the demographic antecedents of job abandonment among call centre employees in India using a large firm level data. Swami (2011) states that the promoters of the company has one of the highest percentages of employee ownership in any BPO company in the world, and has helped Motif build long term relationships with its employees, who in turn have cherished this gesture and built long term client relationships. Vathsala (2009) concludes that there are differences in competency requirements for KPO and BPO services. Further, demographic variables, namely, age, the level of education, and total years of industry experience shape competency requirements. Kanwar (2009) examines the impact of work life balance and burnout on job satisfaction in the context of the Information Technology (IT) and IT Enabled Services (ITES) industries. Raina (2012) concludes that close interaction with geographically spread audience and the periodic interventions could be the factors impacting the Communication Competency of the managers. Lampel (2008) states that successful offshoring must begin with an understanding of the market and competitive pressures that encourage offshoring, and then build on recognition of how these pressures can be addressed using or modifying the offshoring options currently practiced. Hung ( 2009) discusses the extensive diffusion of new technologies in the IT industry, including technical knowledge and human resource development, industrial cluster, market information and management skills, research and development, financial resources, domestic and international markets, and the interaction between these factors and the government. Agarwal (2012) throws light on the strategies and initiatives being taken in the industry to meet the challenges and opportunities going forward.Lahiri (2009) shows that resources and capabilities of BPO companies relate to performance in varying measures and partnership quality has partial-mediating and moderating effects on these relationships.Ravi (2011) studies the outsourcing practices in the banking sector in India. According to him, the impacts of perceived benefits, perceived roadblocks, and perceived criticality on the attitudes towards outsourcing were found to be strong and statistically significant. Henley (2007) argues that successful Indian IT and ITES companies will pursue higher value-added activities through acquisition of related European- and North American-based companies in order to achieve greater credibility with major customers. Report (2011) states that the availability of employable talent is the single most important determinant for the growth of the IT services and ITES industries in the long term. According to Lahri (2011) analysis of qualitative and quantitative data collected from the top executives of Indian ITES industry suggest that perceptual evaluation of (i) three intangible firm assets (employee, organization, and management-related), and (ii) recent firm performance positively impact relationship quality. Narayanan (2011) analyze the antecedents of process integration and its impact on BPO performance. The antecedents we examine are task complexity, task security, end customer orientation of the client and IT capability of the BPO. Jensen (2009) concludes that both Danish and Indian firms use the input from their offshoring partnership to upgrade their organizations and business processes. Currie (2008) finds that KPOs working in Financial Services face many challenges including gaining the confidence of potential clients about outsourcing knowledge-intensive work, and finding effective solutions to mitigate outsourcing risk. Kohli (2013) seeks to assess the likelihood and impact of earn out offers on the acquiring company wealth gains in cross border acquisitions in India.Atesci (2010) describe a significant failure through chronological description of scandals that took place at one of Indias largest outsourcing vendors, Satyam Computer Services. Lahiri (2011) proposes an integrated framework where various institutional and organizational factors that coevolve to enable engagement of clients and providers in offshore outsourcing. This 1040

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study is based on information obtained by interviewing 46 executives of 31 firms of the Indian business process outsourcing industry. Luo (2011) brings out a sustained and systematic pattern of strategic management issues at the national-level. He explicate that a unique bundle of national-level institutional, competitive and sociocultural conditions function together with a repertoire of distinctive capabilities or weaknesses for most firms, incubating certain national-level patterns of corporate-, business-, and international-level strategies adopted by most firms within the nation. Lahiri (2012) concluded that the analysis of data collected from a sample of 105 Indian service providers suggest that rent generation from firm-specific, idiosyncratic resources is positively moderated by the level of management capability possessed by such firms. Ramachandran (2004) concludes that the Indian BPO firms have to consistently prove their capabilities to deliver and create near indispensable situation for the parent to survive without them. Ashish (2012) analyses the impact of Lean Six Sigma and a firms quality management capabilities in developing its organisational learning capability (OLC), especially in the business process outsourcing (BPO) environment of a developing country. Kevan (2009) finds that success in offshore BPO is based on a combination of cost savings, technical service quality and strategic issues in India and is specific to business context and will change over time. Gunta (2007) catalogues the types of outsourcing decision possibilities and the way they would be impacted, thus providing a useful conceptual handle to practitioners. Singh (2009) suggests that companies doing business in India should capture all the issues in a detailed risk matrix and find solutions to all eventualities that can be envisaged today and going forward. Mittal (2009) states that Government, Industry and Nasscom have to work together as India has the opportunity to emerge as one of the top three global IT Innovation hubs driven by opportunities arising in new areas of climate change, clinical research and mobile applications. The above literature is based on strategies for IT-ITES sector on either continuity or change basis and therefore addresses options on either or basis. A detailed study is needed to develop strategies for managing forces of continuity and change in a more comprehensive manner.

3. Continuity and Change Forces

Sushil (2005), Garg and Sushil (2010), Gupta (2007, 2009, 2010a, 2010b, 2011) have identified the following factors for forces of continuity and change that need to be studied in greater details to develop a flexible strategic framework for managing an organisation. Sushil (2012) discuses typology of strategies is provided for different combinations of continuity and change forces acting on an enterprise; out of which the flowing stream strategy is further developed and presented in terms of its principles and key strategic channels. The detailed methodology for arriving at the factors indicated below has been discussed at length in the earlier work of the author referred to above. Factor for continuity forces 1. customer base 2. infrastructure 3. technology 4. core competence 5. supply chain and distribution network 6. culture 7. performance. Factors for change force 1 Globalisation 2 New opportunities 3 Competition 4 Customer needs 5 Technology 6 Mergers and acquisitions 7 Government policy. There is a need to study factors affecting forces of continuity and change in IT and ITES industry and study impact of underlying factors with perspective of continuity forces and change forces on strategic management decisions and come out with a flexible strategic framework for their survival and growth in this period of highly competitive fast evolving customer preferences and needs.

4. Research Design
Research Methodology This is an exploratory research which is based on primary and secondary data. In-depth interviews of the experts from IT-ITES industry have been taken using a structured questionnaire. We have further tried to understand the IT-ITES business processes in leading IT-ITES companies in India. We have tried to identify 1041

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the forces of continuity and forces of change which would affect service operations in India through the research questions which were given to senior executives of these companies. A flexible strategic framework has been conceptualized and developed to manage these forces. Scope of the Study The scope of the research is the study of IT-ITES business processes in India. For the study, a secondary research of IT-ITES industry in India was done. The research questions to be investigated were: to identify the factors contributing to the forces of continuity and forces of change and developing a strategic framework for managing these forces in IT-ITES service operation, validating the research propositions stated above and applicability of the framework to service sector as a whole. Method of Data Collection The data was collected from published secondary data and internet: industry databases, IT ministry and Industry association studies and annual reports, balance sheets and published articles and interviews of CEOs, internal newsletter of companies. Based on initial secondary study and interviews with industry experts a list of leading IT-ITES companies was drawn. A questionnaire was designed and validated with help of the experts. Focused discussions and in-depth interviews of executives of the selected IT-ITES companies were conducted. A structured questionnaire, using a valid scale (Sushil et al., 2010), was used to collect primary data. A number of telephone interviews were also conducted to obtain additional information wherever needed during the study. Findings And Results Of Survey IT-ITES industry have grown at a very fast pace in India and has created a nitche for itself as a preferred destination for most of the global MNCs. English speaking ability, high commitment levels of computer literate and highly flexible work force in India has given edge to Indian cos over their rivals in other parts of the emerging economies like China. Pursuit of quality through well proven methodologies like Six Sigma and Capability Maturity Model (CMM) Level 5 achieved by many Indian Cos have enabled them to compete internationally. The study has clearly brought out the underlying factors for continuity forces and change forces. Results of the survey conducted through personal interviews of over 100 senior executives from IT-ITES companies using a tested structured questionnaire is given in Table I. The questionnaire included 29 items for forces of continuity and 21 for forces of change. These have been grouped as per factor analysis into 7 factors for forces of continuity and 7 factors for forces of change. The average score for each factor has been given below.
Table I Results of Survey of Factors for Forces and Change of Continuity for IT-ITES Industry Factors for Forces of Continuity 1 2 3 4 5 6 7 Factors for Forces of Change 1 2 3 4 5 6 7 Globalization New Opportunities Competition Customer Needs New Technology Mergers and Acquisitions Government policy Average Score 4.49 3.86 3.47 4.18 4.59 4.14 3.61 4.05 Average Score Customer Base Infrastructure Technology. Core competence Supply Chain and Distribution network Culture Performance Average Score 2.40 2.50 1.89 2.37 1.00 2.57 2.96 2.24

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Continuity and change matrix Average score for the above seven factors for continuity forces has been plotted in Continuity and change Matrix on x axis and average score for the above seven factors for forces of change has been plotted on y axis ( Figure 1 ). The above industry falls in second quadrant signifying Strategic Renewal and Transformation (Gupta (2011)). This industry is responding to changes in environment and is slow in maintaining continuity. For Industry to maintain high growth rate in this highly turbulent environment, it need to focus on underlying factors of continuity.
5 X (2.24. 4.05) 2.5 Average Score for Underlying factors for Change forces 0 2.5 5

Average Score for underlying factors for Continuity Forces Figure 1 Continuity and Change Force Matrix for IT-ITES Industry

5. Conclusion
IT-ITES industry is responding to factors for change forces very well. However, it seems to be very low on factors for forces of continuity exposing it to high risk levels. Equal or more focus on underlying factors for forces of continuity can help it to maintain a balance and give ability to survive and grow consistently.

6. Acknowledgement
The author would like to acknowledge guidance and support provided by Dr Sushil, Professor Strategy Management and Dean Academics, IIT Delhi for the above work.

7. References
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