Challenges Faced by ITeS Sector in Attaining Operational Stability in the Digital Era
IT and ITeS are the two keywords that have placed India where it is today in the global business. The country is now a leading hub of software exports and ITeS services with the IT and ITeS sector recording an unparalleled growth and touching USD 181 billion in 2018-19. By 2025, the IT-BPM sector is projected to touch USD 350 billion of which BPM alone is expected to contribute USD 50-55 billion.
ITeS is the remote services that support the operations that use Information Technology. In this process, it paves way for organizational efficiency, where businesses can outsource the supplementary functions like finance, HR, health care, administration, manufacturing, and telecommunication to ITeS providers to focus instead on their core competencies.
This sector has a significant impact on the economy, and is also a major employment generator of the country. Today, digitization is bringing far-reaching changes in the ITeS sector and firms are realizing the need for innovation focused on customer’s needs to stay competitive. The growth potential of the sector is also attracting huge investments from venture capitalists and in Q4 2018 alone the venture capitalists had invested USD 53 million in IT and ITeS sector.
Keeping in mind the phenomenal growth of ITeS and the emerging digitization in the industry, I would like to share my views on the measures for attaining operational stability in the ITeS sector.
How can ITeS move towards operational stability?
Operational stability can bring predictability in an organization by reducing the uncertainties in the processes and inducing discipline throughout the business functions. It increases the output, reduces cost, ensures that service quality is maintained and guarantees sustainability.
Coming to ITeS, some of the glaring issues faced by the sector need to be addressed to eliminate the functional inefficiencies and attain operational stability.
Revamp the business process
The prevalent practice followed in the industry is the inside-out strategy where the focus is on the internal capabilities of the organization. However, customer understanding is now a prerequisite to remain innovative, relevant and provide quality solutions. The digital era is mandating a shift to customer values instead of the emphasis on the company’s process. ITeS can benefit from adopting a mix of Lean, Agile, six-sigma, and design thinking models to introduce efficient, flexible, innovative, and responsive business process.
Systemize your business process and embrace the lean business model. Since a big chunk of the ITeS comprises small and medium firms, the lean business process can prove to be the key for operational stability. It can result in a significant reduction of operation costs and lesser capital requirement.
Incorporate transparency and accountability in the operations. From the top management to the bottom rung of the organizational hierarchy, there should be complete transparency in the functioning. Responsibility and ownership of actions should be encouraged with tight integration of accountability in the process.
Improve technological viability
ITeS sector relies heavily on technology to deliver its diverse services. Artificial intelligence is making ChatBots or RPA rampant in providing customer service. The scale of technology to manage these new-age trends is beyond the capacity of the small players in the industry.
Is the ITeS sector equipped with the technological skills to manage BOT’s and VM’s? Digital technology will impact all areas of operation and high skilled human resources will become crucial for maintaining the operations. Firms will need to focus on staying updated on the technology and hiring skilled labor for smooth operations.
Operations should be responsive to customer needs and feedback. Agility should be in place for alignment of the operations according to the customer feedback.
Frequent downtimes can also affect the performance negatively and undermine operational stability. The small to medium-sized firms of this segment are too often short of the capital to invest in high-end technological infrastructure. Efforts to build strategic alliances with reliable technological partners can be an effective resolution of this hurdle. Technology should also address the issue of data security.
Immediate technological needs should be resolved by resorting to SaaS or PaaS models. Small firms should integrate emerging technologies into the business process to gain an equal footing with the big players in the ITeS industry. Cloud computing can be a lifesaver with its low initial capital requirement and pay- as- you- use model. It can be scaled up or down to meet the project requirements and ensures better operational stability and reduced downtime.
Remove capital insufficiency
The majority of the ITeS firms is small to medium-sized and run on low capital outlay. Attracting venture capitalists or big investments are tough for these firms and when the business is run under capital crunch it brings with it numerous quality issues.
The sector is plagued by long payback cycles. This hurdle is not easy to overcome and if not managed effectively, it can undermine the operational stability. The longer payback cycles and shortage of funding to meet immediate capital requirements too often lead to deficit budgets and capital borrowings. Unavailability of timely information leading to delay in processing refunds, and payment application issues might cause customer dissatisfaction.
Attract and retain talent
Talent management is a major challenge faced by the ITeS sector. Work pressures and tight schedules contribute to the high attrition rate of 15 % to 50 % and mounting recruitment and training costs. This has manifold negative effects on the service delivery quality especially when top talent leaves the organization.
Talent management and employee-friendly human resource practices are crucial to resolve the attrition and attain operational stability. Operations managers should also take responsibility for employee retention and skill development.
Adapting to rapid technological growth also requires regular training. Motivating and training the employees and driving their behavior towards customer service is another challenge. Talent development should be given due attention across the organization to equip the employees for the future challenges expected.
Establish a strong leadership with strategic vision
Steps towards operational stability require an alignment of the organizational culture and top management towards this goal. Systems and processes should be effectively set in place and constantly monitored for performance by the top leaders. Employee motivation by the leadership can go a long way in promoting a culture of performance and ethics in the organization.
Monitor and track performance
Set measurable and realistic goals for the business at all levels. Monitor the quality of service delivery and address the variations to eliminate operational inefficiencies. In-depth analytics tools can give an accurate assessment of the current performance and take corrective measures early.
Build lasting customer relationships
An already cash strapped ITeS sector might find acquiring new clients to be an additional drain on the resources compared to retaining existing clients. Acquiring new customers is 4 to 6 times more expensive than utilizing the existing customer base. Reducing costs is critical to achieving operational stability and a repeated client base can contribute to a significant reduction in marketing costs and often help to reap economies of scale in the business process.
ITeS sector needs to adapt itself to the rapidly changing technologies, assimilating the latest updates, features, and capabilities in their processes. The fast-paced business environment necessitates change management practices to scale up.
The ITeS sector is on a fast-growth track. Identifying the challenges this sector faces and working to rectify the issues can lead to operational stability, encourage entrepreneurs to venture into this sector, and invite more venture capital funding.