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GDM, the next big thing in IT

By R Raghavendra in Bangalore
August 17, 2004 09:58 IST
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The global delivery model is the next significant milestone for IT after offshoring, in terms of impact and significance, and Indian and first world companies are engaged in a battle for supremacy.

While Indian IT services companies like Infosys, Wipro and TCS excel in processes and quality, the other camp -- consisting of companies like Accenture, EDS and IBM -- have considerable domain expertise and relationships at the board level in companies in the US and Europe.

A recent study by Forrester which compares the GDM capabilities of these two major camps, finds that Indian companies have an advantage over their US counterparts. But the all important question is whether they will maintain the gap and continue to grow.

The competition is still neck and neck because when the scores are added up, all vendors are in the strong performer category. Even with the concentrated scoring, all six players have unique strengths.

Within this, the study finds that Infosys and Wipro have melded together a mix of CMMI, P-CMM, Six Sigma and ISO 9000 to create a culture focused on consistent and repeatable processes and value-added tools.

"The client sees a difference; one reference stated that the typical time and budget variance with IBM was 20 per cent; it dropped to less than 1 per cent when the application work was shifted to Infosys."

In the study called the 'Low-Cost Global Delivery Model Showdown,' Forrester says: "Higher user sophistication and shifting industry economics are forcing IT services vendors to ramp up their low-cost remote delivery capabilities. Traditionally, major providers have touted their global capabilities as a mechanism for serving clients locally wherever the client happened to be. This is in contrast to the low-cost GDM, which relies on using nearshore or offshore facilities to remotely service clients in other geographies."

In order to assess providers' progress in adopting a low-cost GDM, Forrester has graded the top three vendors from each starting point -- onshore (Accenture, EDS, and IBM) and offshore (Infosys, TCS and Wipro) using 60 different low-cost GDM criteria.

"The offshore players need to add more domain expertise and improve account management to better interface with the business buyer. The onshore players need to fully embrace CMMI and encourage their account teams to more consistently utilise low-cost GDM capabilities," the study said.

The combination of rising client requirements, coupled with cost pressures on IT services companies, signals a shift from simple one-hop offshoring -- US to India or Germany to the Czech Republic -- to a more evolved, sophisticated and distributed low-cost global delivery model.

Forrester defines a low-cost GDM as, "Integrating rich domain expertise, broad technical skills and project management discipline across a network of low-cost locations through consistent and robust processes, tools and infrastructure to maximise the timely delivery of superior IT and BPO solutions."

Forrester feels that with the evolution to a low-cost GDM, technology services firms will not only rely on a network of in-country staff, but also on the expertise in near and offshore locations.

Across the board, the six suppliers are making a broad range of GDM investments to build low-cost GDM capabilities, upgrading global networks and rolling out global workflow systems.

Despite the offshore hype and reflective of the hurdles that both camps face, Forrester feels that it is still early days for the shift to a full-fledged global delivery model across all of IT and BPO. It expects that evolution will continue for another three to five years.

Forrester adds that complexity and alternatives limit low-cost GDM development.

"Low-cost GDM-based development is hard to do and will take longer to develop than the vendors realise. As such, a combination of factors could stunt its growth. The decline in onshore IT wages coupled with serious inflation in locations like India significantly erodes the savings differential of a low-cost GDM. It takes vendors much longer to fully develop the processes and the locations to make low-cost GDM-based work viable."

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R Raghavendra in Bangalore

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