Information Technology Industry has always been in a flux. One innovation such as Cloud, and the entire eco system changes! Besides frequent product & technology changes, IT landscape is also defined by changing demand patterns and economic cycles etc. This volatility has always forced businesses to look inward and realign their strategies to stay afloat. It is often difficult to create permanent structures in unpredictable environment. Hesitating to go over five year horizon to define strategies but giving away long service awards in that period explains their predicament.
Over a decade ago, we conducted a research to investigate the socio-cultural patterns in the industry and we found some interesting facts. Our hypothesis which got proved was that economic drivers were adversely impacting relationships in IT. Let’s look at it top-down. Clients want to outsource work but they squeeze their service providers on price. Service providers flash credentials to secure business but clients quip, `if your processes are so mature, give us more discounts’. Negotiations are mostly about price, seldom about value. `Could you do this $1 job for 80 cents’ is the tone rather than `how would you deliver more value for $1’, let alone, `you’re the right service
provider because our business philosophies match’. The moment clients find another service provider with similar delivery capabilities and willingness to drop prices, relationships begin to dwindle. Economics drives relationships.
With IT being a non-core expenditure in most cases, there are obvious pricing pressures. Clients don’t build relationships in order to maintain an edge during negotiations. Having multiple service providers works well for them from pricing perspective. As a result, there is an accentuated sense of competition. And because service providers are never certain about the fate of their projects, they seldom deepen their relationship with their employees. It is purely transactional and based on money.
Bottom-up relationships have the same fate with employees becoming mercenaries showing loyalties towards their skill over their employer. Money is the only driver. A lady I met on a flight who worked with my ex-employer said she was very unhappy because they don’t send testers overseas and pay them less than developers. During Y2K time, people switched jobs saying `if I am doing the same monotonous work, let me do it for a few dollars more’. Make hay while sun shines. Once they become critical to their clients, they start holding companies to ransom. Unfortunately, IT companies also protect their business interest through covert processes like selling skills that they don’t even possess, creating dependence by writing a bad program, tamper internal delivery structure by billing for experienced people but deploying trainees, etc. This way the whole value chain, the entire eco-system is contaminated and that is called the `order’ in IT industry
Is there a place for relationships in IT businesses? Chip Conley suggests that businesses are communities of relationships. Goffee and Jones suggest that culture is an outcome of how people relate and it has become a powerful way to hold a companies together. Ranjay Gulati suggests that 70% value of the Fortune 500 companies is made of relational assets. However, relatedness may be among the lowest in IT company’s list of priorities. Their cultures are marked as `Fragmented’ with low sociability and low solidarity, as per Goffee-Jones model. Sociability is affected because of the factors mentioned above. They need very little collaboration anyway. Solidarity is affected because of low consciousness of organizational membership. People identify with technology or domain more than their organization. Money and technology defines organizational membership not business ideal, vision or goals. Fragmented organizations seldom gather moss because there is no
stability. People come and go, no plan sticks, no time for any strategy to fructify. As such, this cultural type suits IT companies perfectly well but only at the lower end of the value chain. If companies intend to move up the curve, then a conscious effort at culture change is imminent.
In recent past, I have heard many companies state their intent to move up the value chain but they haven’t managed it. They cannot possibly stop doing what they are that gets them success; but unless they stop, a new identity will not emerge. And the temptation to do more of what they thought made them successful, is too hard to resist. Unfortunately, many companies with right
intent are working at the wrong end. Solution is not only in obsessive focus on digitization which is the latest buzz word or not even in strategy/ planning, and definitely not in employee engagement, performance management and compensation.
There is a strong need for paradigm shift for these `upwardly mobile’ IT companies. They need to build `relational capital’. Big daddy’s have done it. This transformation, like any other, needs to be inside-out. It starts with companies building their identity which is a relationship of a system with itself.
Companies need to find their uniqueness and be rooted in their core strength, core capability which is beyond the technology or domain. It is more about learning from their corporate history, what have they done well in the past and what does that make them? It is about asking oneself `who are we, what do we do like no one else’? Finding uniqueness will help positioning, differentiation and trade-off; the three pillars of strategy. This will really ground those businesses in their capabilities and ideologies. This relationship with self will help build all other relationships in periphery. One must remember that in a saturated market, IT businesses will grow around these differentiations, not by being everything to every customer. I reckon this way, size or breadth will
seize to matter and businesses will be driven by depth and innovation of service or product capabilities.
With the clarity of identity, it would be easy for businesses to have a clear message. It would be easy to even push back and not bend over backward which will slowly build mutuality and respect in client relationships. Dialogue around value proposition and synergies could start from here. Building
relationships through affective processes should also begin. It is useless to create CRM structure and assume that relations are built, those CRMs need to have affective skills. Defining core capability will also transform business generation process. It may become more streamlined and predictable which
in turn will take pressure off hiring process. Once that pressure is managed, it would be far easier to get people with better alignment in terms of values and world view. This workforce is least likely to be mercenary. Motivation strategies would change from throwing monies and incentives at them to
more engaging ways of organization building such as making strategies, improving processes, analysing trends in business, market, technology and preparing for future changes etc. All this is not easy but no transformation was ever easy. Sceptics will make convincing argument against this but Apples’ and Intels’ of the world have moved up the value chain by re-defining themselves. Upwardly mobile IT companies have to introspect and make this happen. It’s time for them to go inward. It is time for them to reinvent themselves, this time around identity not technology.
