This study will follow the mixed research method to analyse the current situation and provide insights on how the IT industry is changing and what the organizations and people employed in the industry can do to stay ahead of the game
Three major areas to cover through the literature review could be listed as:
Change which the industry is going through
Major focus areas for organizations to keep up with
Skills that will be required from future employability perspective
1. LITERATURE REVIEW
1.1. Concept of the Evolution Cycle
A large number of studies conducted over the past decades have shown regularities in the evolution of most industries. Conventionally, Industry Life Cycle research aims to follow industries as they increase using variables such as scale, products sold or volume of monetary sales. Therefore, the industry life cycle characterizes the observed regularities of how industries evolve, beginning with the initial development of a product, through its development to the mass market and finally the emergence of a mature and stable industry. Among the most frequently utilized model of an industry’s life cycle was developed by Michael Porter in 1980. Notwithstanding the variety of other frameworks that have developed over time, Porter’s model has been recognized as the cornerstone of life cycle analysis ( Peltoniemi, 2011). This model argues that the properties of the industry that a company operates under determine the competitive struggle.
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According to this theory of industry life cycle, all industries undergo through four distinctive phases that include Introduction, growth, maturity, and decline as shown in the figure 2.1 below. In a typical case, sales begin slowly at the introduction phase and then take off rapidly during the growth stage. In the maturity phase, sales begin to level out and gradually decline. In retrospect, profits generally continue increasing throughout the life cycle, due to the ability of businesses to in the industry continue to utilize expertise and economies of scale to reduce unit costs over time.
Industry Life Cycle Model
Each stage requires the development of strategy with the ability to absorb specific conditions associated with each phase. This is due to the fact that the structure of an industry impacts on the rules of competition and the necessary strategies required for surviving and developing ( Ter Wal & Boschma, 2011). Consequently, changes in industrial structures, level of demand and technological requirements through the industry life cycle have important implications for a company’s sources of competitive advantage at each stage. Thus, scholars insist that it is vital for organizations to understand the industrial context and find an attractive competitive position within the industry.
1.2 Concept of Industry Life Cycle in the Context of Technology Companies
Thus, the following section will aim to highlight the concept of industry life cycle in the context of five major Indian technology companies that include Infosys, WIPRO, Cognizant, Accenture and TCS.
In the introduction phase, an industry is usually at its infancy, where a unique of new product offering may have been developed and patented. At this stage also, a firm may be alone in the industry, existing as a small entrepreneurial business or a big company developing a new product through R&D. Since the success of the product or lifetime of the industry is unproven, marketing refers to such new product offerings as “question marks” ( Neffke, Henning & Boschma, 2011). Structural elements that form this phase include technological uncertainty, high entry costs and early adopters buying for the first time. In the technology sector, the introduction phase occurred in the early 1980’s, which consisted of the manufacture of Personal Computers (PC). The development of computers was experimental, and mostly occupied by hobbyist firms. In addition, products were differentiated, which made reliability a key factor. Real commercial growth occurred after IBM introduced its PC in 1981, which allowed “compatibility” in software and hardware, consequently increasing the demand of PCs. The complexity of maintaining such Computers and information systems led to the growth of the information technology (IT) services industry. Consequently, this led to the emergence of companies like Accenture and Infosys, which saw an opportunity in providing IT services at low costs.
In the second phase, the industry experiences high growth due to factors such as increase in demand and quality of products and services. Further, reliability becomes a key factor, with services being differentiated on their performance. The technology industry experienced high growth rate in the period between 1980 and 2001, where TCS, Infosys, Wipro and Cognizant Technology were the leading Indian software exporters respectively ( Peltoniemi, 2011). During that period, there was an exponential rise of stock prices and investments in the Internet industry. Currently, the service sector has also been experiencing rapid growth as businesses shift to cloud based services and wider adoption of digital-based services. However, this growth was halted abruptly in the same years, where the IT industry also experienced an unprecedented downturn. Consequently, most companies in the IT industry including Cognizant, Accenture, Infosys, TCS and WIPRO suffered immensely. Nevertheless, these companies began investing in several initiatives aimed at strengthening their competitive advantage in the market.
An industry then transitions to the maturity phase, where the market has already become saturated with growth slowing down. The period of transition from growth to maturity stage has been underlined as a critical period for majority of firms in a particular industry. However, most of these companies, particularly Infosys, have managed to maintain consistent revenue growth for the past years as evidenced in figure 1.2 below.
Infosys consistent revenue growth from 2013 ( Infosys, 2017)
Businesses also begin to adopt cost reduction measures in areas such as advertisement and R&D. The final stage in the model is the maturity level. This phase consists of significant drop in sales and high levels of rivalry between competitors, where some businesses finally decide to leave the industry.
1.3. Concept of Business Sustainability & Change Management
In today’s complex and dynamic business environments, organizations are facing intense pressure to remain competitive. Across most industries, companies are thus searching for newer and more innovative ways to adapt to these changes through transforming their technological and business models. In an article published by the Harvard Business Review, the authors argue that sustainability is now the key driver for modern organizations, and the single largest source of competitive advantage (Loorbach & Wijsman, 2013). I n most sectors, the quest for sustainability has already began to transform the competitive landscape, forcing businesses to change the way they think about business models, processes and technologies. Thus, it has been widely agreed that in such periods of economic crisis, key to progress for organization will be innovation.
Sustainable development has been defined as the ability to adopt business strategies with the ability to meet the varied needs of stakeholders needed in the future (Kolk & Van Tulder, 2010). Thus, the concept of sustainable development has continued to receive growing recognition from researchers and business executives. Scholars like Loorbach and Wijsman (2013) argue that in order to maintain competitive advantage in the market through sustainable development, they must be able to develop an effective management framework that addresses both innovation and technology. Thus, the concept of sustainable development must be integrated into an organization’s management and business planning systems. Further, truly sustainable organizations must be able to shift their perspective from minimizing negative impacts to understanding how they can create positive impacts in the business environment.
For most organizations, innovation has been recognized as the key component necessary to drive change and build sustainable competitive advantage. According to Ter Wal and Boschma (2011), innovation is defined as the ability of a corporation to apply new knowledge in order to boost the ability of a company to develop new services that create added business value. Henceforth, it has become a major priority for leading businesses in all sectors. Businesses can normally innovate in there key areas that include Process, Incremental and Strategic innovation (Schaltegger, Lüdeke & Hansen, 2012). Process Innovation is concerned with the ability of a company to re-engineer its businesses processes in order to achieve maximum efficiency and effectiveness. Alongside, incremental innovation is oriented towards creating new or improving the functionalities of existing services. The last component is the strategic innovation, which is the ability to radical revolutionize current business concepts for continued business success. In particular, modern researchers have identified that innovation is largely dependent on the availability and ability to manage knowledge. Thus, business can aim to maintain sustainability through adopting DRACS to innovate in these there key innovation areas.
2. RESEARCH METHODOLOGY
2.1. Introduction
The global software and services industries have been recognized as among the fastest and dynamic sectors in the world. According to Deloitte, the race for competitive advantage among various businesses has forced companies everywhere to embrace the new and cutting-edge technological advances ( Deloitte, 2017). Many technologies have been able to mature, which has consequently improved their capabilities and speed while also reducing the costs associated with delivering them. Some of the recent trends experienced in technology include data analytics; cloud computing; artificial intelligence (AI); cloud computing and robotics, which have opened up significant areas of opportunity for businesses. In addition, cognitive technologies like machine learning and pattern recognition are also being integrated in software applications, promoting the development of big data that has far more superior capabilities. Already indicating huge promises, these technologies possess the capacity to enhance enterprises’ applications through enhancing personalization, prediction and detection of anomaly.
. The following section will aim to conduct a comprehensive analysis of industry leading publications and to find out the industry trends. Company reports of five leading IT companies operating in India will be reviewed, which include Cognizant, Accenture, Infosys, TCS and Wipro.
1. Rise of Robotic Process Automation (RPA technology
In the modern competitive business environment, there has been a growing need for corporations to become cost efficient and improve efficiency of business processes. Thus, businesses now require fresh approaches for their organization models and processes through digitization and automation.
This has consequently led to emergence of RPA technology, which has the capability to work in blue and white ‐ collar environments. According to Deloitte, Robotic Process Automation (RPA) is defined as software or ‘robot’ that is used to capture and interpret existing applications for the purpose of transaction processing, data manipulation and communication across multiple IT systems. It is normally intended to replace or reduce the human intervention in executing tasks that are repetitive in nature. The report indicated that companies were confident in the ability of RPA to deliver financial benefits. On average, organizations that had already implemented such programs were able to reduce the costs of production by 16 per cent. In addition, RPA was also evidenced to enhance the accuracy and quality of business process, which consequently offered organizations with the flexibility to scale up their capacity. Most scholars agree that recent market trends indicate that robots aren’t just coming, but they are already here to stay (Kang & Kim, 2017).
An assessment of annual financial reports from the five companies’ annual reports indicated that revenues arising from DRACS-related services formed a large share of the overall profits. In Accenture Company (2017), DRACS related services accounted for the highest share of revenue. The company’s annual financial report indicated that over 40 per cent of their total revenues in the 2016 were associated with offering DRACS services, which represents a total of about $13.5 billion. This was followed by Cognizant, which underlined that revenue associated with DRACS-oriented activities accounted for over 23 per cent of the total revenue in 2016 (Cognizant, 2017). This was closely followed by Wipro at 22.1%, TCS at 16.7per cent (Wipro, 2017) and Infosys (2017) at about 18 per cent.
Reports from the World Economic Forum have indicated that increased use of RPA will have some effects on the job market. They estimated that by 2020, more than 5 million jobs 15 countries will be lost as a result of disruptive market changes driven by robots. Therefore, understanding these technologies from an optimistic and objective perspective is anticipated to minimize such implications. Consistently, the Harvard Business Review also underlines that companies need to transform their business operations if there are to survive (Willcocks, Lacity & Craig, 2015). Thus, the need for cost reduction and improved efficiency and productivity still remains a priority for major businesses now and in the future. In order to survive and accomplish such goals, RPA could become a key enabler and the standard of automation to facilitate the new way of working. Recently, acceleration in growth of RPA has led to an increased number of vendors and consultancy companies that offer RPA-based solutions. Robots have also been getting increased attention from large technology companies that continue to inject huge resources to drive research and investment within the industry.
2. Trends in DRACS
DRACS – an acronym proposed by this research to denote the set up advance technologies that include: Digital process transformation, Robotics in business processes, Analytics of data, Cloud computing and social media technologies.
2.1 Analytics
Over the past 10 years, the explosion and availability of data has transformed data from an operational into a strategic business component. Historically, businesses have used data analytics to aid direct their business strategies, create value and maximize profits. This is because analytic tools aim to minimize uncertainty involved in understanding clients through tracking data patterns systemically to guide development of business tactical plans. Thus, the ability of business to harness the data through analytics has facilitated the emergence of newer approaches to engage with customers and develop skills and capabilities of employees. Leading reports in the industry claim that analytics assist business forecast on what might influence new customers and better serve current customers. Facilitating such process has been evidenced to be more cost effective when compared to other alternatives like establishing entirely new businesses. Increased demand for data analytics has led to scarcity of talent in this filed, where careers as data scientists continue to be highly prized.
KPMG research and consulting company underline that significant advancement in knowledge have taken place over the past few years (KPMG, 2017). Previously, robots were only able to only perform simple and repetitive tasks. However, advancement in related areas that include artificial intelligence (AI) and machine learning have improved statistical techniques necessary to drive digitization and automation of work processes. In particular, success is being witnessed in the health industry, where multiple hospitals across the world have adopted the Watson Software, which seeks to identify best treatment options for individual patients through a comprehensive analysis. This is achieved by comparing their medical information against existing case histories, research literature and input from expert medical doctors. Therefore, such cases reflect one existing example of how knowledge-based tasks can be automated to increase value of organizations.
D igital process transformation
In almost all industries business leaders have realized that customer expectations have created tremendous pressure for business to change the way in which they strategize and run their organizations. However, the ability to manage traditional operations with new requirements through information and interactivity contribute raising the costs and complexity of doing business. However, modern corporations have a wide range of IT-related solutions at their disposal that they adopt to simultaneously increase the efficiency of operations business capabilities (Deloitte, 2017). Digital transformation is associated with the ability of business to rethink what customers value most in order to create operating models that can enhance competitive differentiation.
Given that customers are clearly the most important stakeholders of any business, digitizing the customer e xperience has been a focal point within the digital transformation. In order to serve customers more effectively, the first step should be essential to know them. Through adopting systems such as Customer Relational Marketing (CRM) and the internet, companies can be able to identify the products a particular customer has historically purchased for enhanced customer care. In addition, customer insights acquired through digital technology can also be utilized for digital marketing (Loorbach & Wijsman, 2013). Newer channels of interaction like social media and mobile have raised the expectation of customers, where they expect all their engagements with a business to remain consistent across all available channels. In addition, today’s firms have increasingly realized that they can no longer focus on selling products alone, but they need to also sell an experience. Since majority of products are interconnected and generate data, increased business intelligence allows them to be monitored to improve service delivery. The ability to automate and standardize processes has enabled organizations to become more agile, respond to changes in demand and sustain profitability.
. C loud computing
Cloud computing is an emerging approach to shared infrastructure in which large pools of systems can be linked together in various networks to provide and enhance IT services. The need for such environments has been driven by dramatic growth in real-time data streams, adoption of service-oriented architectures (SaaS) and connected devices. Cloud computing is described as one of the innovations that has the ability to embody the desire to gain an advantage over direct competitors, through improving efficiency and effectiveness in customer satisfaction (Kang & Kim, 2017). It essentially involves the use of a network from remote servers on the internet to process and disseminate data. Compared to traditional systems, cloud computing use remote network servers rather than personal computer or local serves to manage and store data. Thus, it is undoubtedly the present and future illustration of business efficiency and effectiveness.
The first advantage that it offers is the ease of implementation within the business. Numerous technological innovations are normally complicated in installation and operations, which makes them ineffective for business operations. Proving cloud hosting, as a platform, enables business to continually use the same applications and processes without having to meet the backend technicalities, which would normally inconvenience the support staff. The unique feature of cloud computing allows it to operate with a high level of effectiveness that is unparalleled in the current business world. Various cloud features are easily accessible through the internet, which makes cloud infrastructure readily available to multiple enterprises. Their high speeds and accuracy of the operations ensure customer satisfaction and guarantees that employees are able to access data anytime and anywhere, which consequently affects decision making processes in real. Consequently, this facilitates collaboration and joint decision making that would not be possible in traditional system.
S ocial media technologies
Top among the forces for transformation are the high rise in devices like smart phones and tablets, and the creation of social networks, such as Facebook and Twitter. The two developments are creating an exponential explosion in data, which have forced business analytics to make sense of the information and take full advantage of it. Currently, social networking has been growing up with over 2 billion people connected over the Internet (KPMG, 2017). Thus, this makes social media the primary means for communication and collaboration across the world. The scale of social media impact can be staggering for businesses, where real-time information is able to amplify the network effect.
In addition, social media allows the creation of dialogue with a very large and specific audience. This is unlike traditional marketing channels, which only broadcast in one direction and in a general way. Other advantages are that social media has the ability to runs across all channels like phones, web and mobile. In such a highly connected community, customers don’t have to visit physical stores to get help. Thus, the ability to truly exploit the power of social media for businesses requires the understanding of how this new channel differs from the more traditional channels.
3.3. Company Reports
There has been large and growing demand for strategy and digital technology services among leading companies across the globe. Cognizant, Accenture, Infosys, TCS and WIPRO are among the leading Tier-I services firms in the world. These companies’ new business capabilities and digital practices have enabled them to win in the digital era and spearhead the digital service industry.
Cognizant
Cognizant is a leading global provider of information technology, business process outsourcing and consulting services that is dedicated to helping the leading companies across the globe build stronger businesses. It is also a member of the Fortune 1000 Companies and NASDAQ-100, and has been ranked among the fastest growing and top performing organization in the world. It began its IT development and maintenance services business in 1994. In 2016, the company records that it experienced record revenues of about $13.49 billion, which was an 8.6 per cent increase from the previous year.
Reflecting the growing importance of digital, the company broke its digital-related services into distinct business units. Consequently, Cognizant Digital Systems & Technology was formed to assist clients simplify, modernize and secure their IT infrastructure and applications through DRACS. Automation, analytics and agile development have been at the core of the business, which has helped unleash the power of their technology environments. DRACS has helped their clients create and evolve systems that meet their needs by delivering industry-leading standards of performance, cost, and flexibility. Revenue associated with digital-oriented activities accounted for 23 per cent of our total revenue in 2016, and thus growing above the company average (Cognizant, 2017). Consequently, the company has been rapidly accelerating their digital initiatives through innovation as they move into the future. DRAC projects have been reported to help their clients create more engaging experiences by applying AI and advanced analytics to build customer loyalty and drive revenue growth. Additionally, their clients have been able to automate and modernize their core business processes through bots, which have allowed business to simplify operation and deploy secure, cloud-as-a-service models that optimize efficiencies.
Accenture
Accenture is also a leading professional services company that offers a wide range of services and solutions in strategy, digital technology and consultancy. It has employs over 270,000 skilled professionals in more than 120 countries spread across the globe. In 2016, the company reported that it net revenues grew be 10.5 per cent, to a record of over $32.9 billion. Consistent with Cognizant, the company has also developed new business to accommodate DRACS related services. The company’s annual report highlights that together, this area accounted for about $13.5 billion, which represents a share of over 40 percent of our total revenues in the 2016 (Accenture, 2017).
The company’s DRACS are divided into three critical levels, which include: Accenture Interactive, Accenture Analytics and Accenture Mobility. Accenture Interactive is focused on delivering internet marketing services to customers, in order to transform their digital customer experiences. Accenture Analytics is used to analyze business process by embracing the Internet of Things to transform decision-making. Finally, Accenture Mobility is among the world’s leading developers of mobile apps, which has developed over 2,800 apps across iOS, Android and Windows for different industries.
• Tata Consultancy Services (TCS)
Tata Consultancy Services (TCS) is a global leader in the provision of information technology services, consulting, and digital and business solutions to a wide range of enterprises. It has been recognized as the benchmark of excellence in software development. TCS has also managed to make investments in driving innovation in Digital and technologies services in DRACS, which include cloud, artificial intelligence, automation, and analytics. Its largest success has been in the energy sector, where it has developed cloud-based energy management-as-a-service (SaaS) platform that leverages IoT, machine learning, and predictive analytics to monitor energy consumption on a real-time basis and identify ways to reduce consumption (TCS, 2017). In 2016, the company also won also won the Asian Banker Technology Innovation Award under the Data & Analytics Project category. It FY 2017, the Company delivered a steady performance, with a reported revenue growth of over 8.6% over the previous year. TCS has been identified as the most profitable Company in the IT services industry. In addition, the DRACS services areas made up about 16.7 per cent of this revenue, crossing $3 Billion.
• Infosys
In the last year, the company also managed to renew their core service offering in DRACS through providing services in cloud computing, IoT and analytic services. Revenues increase by 8.3 per cent to $10 billion, with the DRACS sector experiencing the highest growth of over 42 per cent (Infosys, 2017). The company claims that this new area represents a rapidly growing portion of their overall revenue. Infosys most successful DRAC software has been the Infosys Nia, which is an AI platform that integrates between Big Data, machine learning and cognitive capabilities. In addition, Infosys managed to make new investments in six startup companies specializing in AI, data insists and cloud computing. Through the company Innovation Fund, Infosys has managed to partner with over 13 startups, where over $45 million has been invested up to now. In the social media services, the firm is planning to develop the next generation CRM, to promote collaboration and real-time data analysis. Education programs have also been rolled in the company to enable employs develop critical skills in AI and Machine Learning to over 13,000 employees.
• WIPRO
Wipro is also leading global information technology, consulting and business process-services company. The firm has also harnessed the power of DRACS through cognitive computing, hyper-automation, robotics, cloud, analytics and emerging technologies to aid their customers adapt to the digital world. The company’s gross revenues grew by 7.4 per cent to $8.5 billion from previous year. Despite being three years old, this sector constituted 22.1 percent of total revenues in Q4 FY 17. In addition, the company managed to train over 39,000 employees in the area of Digital technologies through investing in emerging technology areas like Data Analytics and Artificial Intelligence, where the company employed over 603 patents in 2016 (Wipro, 2017). In FY17, Wipro also received many client recognitions, which includes the Citi Lean Partner award from Citibank, for its high levels of service and performance. Additionally, the organization formed the Integrated Services Group (ISG) to drive the integrating of end-to-end technology solutions through robotics, infrastructure services and analytics. This is meant to build integrated offerings across key business themes, particularly customer experience.
Result Analysis
It is evident from the above analysis that most companies increases their revenues from our the growing demand for a broader range of DRACS services, including business process services, advanced data analytics and automation. Therefore, most companies have been making tremendous investment and research in all of these trends, which will be expected to lead to the emergence of computer systems with the ability to deliver more added values. Alongside, the digitization of the enterprise has also been cited to open up entirely new markets that extend beyond multiple sectors.
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