Mr. Murthy

A random chat

So, was talking to a fellow from a product-based software company for the first time. During chat, randomly, name of Mr. Narayan Murthy came up. Now, his 70 hrs. a week thing was fresh in media. I never comprehended the mostly negative reaction (more on that some other time). Though I totally understand people’s tendency to exploit an opportunity to be in news using whatever method- they are quite creative at that. And being a contrarian is one of the easiest ways. What they call cancel culture is not new at all, is just a newer manifestation of being a contrarian.

Mr. Murthy & Indian IT Sector

Anyways, the point came up about Indian IT sector (2 product managers talking) suffering because of likes of Mr. Murthy. Now, I understand that you have a hammer but look for a nail before using it. Not that I need to defend Mr. Murthy in any form but this thing seemed a bit low on logic and so I asked a few questions. Like, would it have been better if there was no Narayan Murthy (or any one like him), or, would it have helped if he started 10 years later? Assuming, that he did potentially crowd out others who could have done better things for Indian IT sector.

Low Value added initiative

Now, my friend’s logic was he didn’t try higher value-added things. Like product-based company (remember a product manager talking). My point- of course he started with low value addition items. Maintenance job, short term projects, custom development, service & support, even placing software professionals, in numbers, as a purely body shop company which is into recruiting and deploying on client sites. In a way a like a contract manufacturer in a manufacturing world.

What were his options?

But what were his options? For example, product development means higher caliber resources, people with deep domain knowledge, not just programmers but developers, rather consultants. And deep pockets- gestation period is long, branding is expensive, so is sustaining big sales and marketing team.

In the hindsight

He started where he could, with whatever he had. Unskilled, semi-skilled labour, with low experience, and hardly any domain expertise. In the hindsight, body shop was a blessing in disguise, a preparatory step. The same resources which he helped place in developed markets, in next 10 years majority of them had worked on enough projects, gained sufficient experience, and in many cases deep domain expertise, in a multitude of field. Not at all bad! Almost seems like a winning strategy of a shrewd businessman, executed perfectly.

Value addition life cycle

So, value addition has some dependencies, and it follows a life cycle. You start low and move up the value chain. The learning curve may be steep, and the competition may be strong. So, what do you do? Be aware of your weaknesses, look for your niche, and slowly move up. My value addition on the topic

Introduction: The software development industry is a dynamic landscape, offering diverse opportunities for value addition. From fundamental tasks like website development to intricate enterprise applications, the spectrum of value creation is vast. Companies can strategically ascend the value chain by carefully navigating through different stages, each presenting unique challenges and opportunities.

Software Development Companies & the Value Chain classification

1. Basic Coding Services Providers: Description: Primarily execute code based on provided specifications. Characteristics: Involved in fundamental coding tasks, limited involvement in project planning.
2. Project-Based Developers: Description: Engage in specific projects, handling coding and development tasks. Characteristics: Execute project requirements, contributing to more complex tasks within defined projects.
3. Web Development Agencies: Description: Specialize in website development, covering frontend and backend. Characteristics: Develop standard websites, offering customization within established frameworks.
4. Application Development Firms: Description: Focus on developing standalone applications with specific functionalities. Characteristics: Handle more intricate logic and user interactions, delivering functional applications.
5. Industry-Specific Solution Providers: Description: Specialize in creating solutions tailored for specific industries or domains. Characteristics: Offer customized features addressing industry-specific challenges and requirements.
6. Technology Consultancies: Description: Extend services beyond development, providing strategic technology advice. Characteristics: Engage in consultations, contribute to technology roadmaps, and optimize existing systems.
7. Innovation-Centric Development Teams: Description: Prioritize innovation, implementing cutting-edge technologies in projects. Characteristics: Proactively introduce new technologies, design frameworks, and contribute to clients' long-term success.
8. Full-Service Development Partners: Description: Provide comprehensive end-to-end solutions, from ideation to maintenance. Characteristics: Act as a strategic technology partner, delivering high-value, fully-integrated solutions.

Rising Up the Value Chain:

1. Skill Enhancement:

• Objective: Invest in continuous learning and development for the team.
• Actions: Encourage employees to acquire new skills. Facilitate training programs and workshops. Stay updated with industry trends and emerging technologies.

2. Expand Service Offerings:

• Objective: Gradually expand services to include a broader spectrum of development.
• Actions: Identify adjacent services or technologies to integrate. Develop capabilities in areas beyond basic coding.

3. Client-Centric Approach:

• Objective: Focus on understanding client needs deeply.
• Actions: Conduct thorough client consultations. Tailor solutions to address specific client challenges.

4. Industry Specialization:

• Objective: Explore industry-specific expertise.
• Actions: Research and understand industry challenges. Develop solutions with features specific to certain sectors.

5. Innovation and R&D:

• Objective: Allocate resources to research and development.
• Actions: Establish an R&D team. Proactively introduce innovative technologies.

6. Strategic Partnerships:

• Objective: Build strategic partnerships with other businesses.
• Actions: Identify potential partners in complementary domains. Leverage partnerships to enhance service offerings.

7. Client Success Stories:

• Objective: Showcase successful client projects.
• Actions: Create case studies and testimonials. Highlight the impact of solutions on clients' businesses.

8. Thought Leadership:

• Objective: Establish thought leadership in the industry.
• Actions: Contribute to forums, write whitepapers, and participate in industry events. Share insights on emerging trends.

9. Client Feedback Integration:

• Objective: Actively seek and integrate client feedback.
• Actions: Implement feedback loops into project cycles. Use feedback to refine service offerings.

10. Invest in Talent:

• Objective: Attract and retain top talent in the industry.
• Actions: Offer competitive compensation and benefits. Foster a culture of continuous learning and growth

11. Expand Market Reach:

• Objective: Explore new markets and industries.
• Actions: Identify potential markets for service expansion. Diversify client base to gain varied experiences.

12. Strategic Acquisitions:

• Objective: Consider strategic acquisitions to augment capabilities.
• Actions: Identify potential acquisition targets. Evaluate how acquisitions align with company goals.

By following these steps, a software development company can systematically progress from a lower level of value addition to becoming a high-value, strategic partner for its clients. Continuous improvement, client-centricity, and a commitment to innovation are key elements of this progression.

Ways of classifying a software development company

So, a software company can be classified based on its current position on the value addition ladder- highlighting the value addition life cycle. A software development company can be classified in various ways based on different criteria. Here are a few alternative ways of classification:

1. Technology Stack: Frontend/Backend Specialists: Companies may specialize in frontend technologies (user interface), backend technologies (server-side development), or be full-stack developers covering both aspects.
2. Project Size and Complexity: Freelancers/Small Teams: Individuals or small teams handling smaller projects. Mid-sized Agencies: Handling medium-sized projects with a moderate level of complexity. Enterprise Solutions Providers: Specializing in large-scale, complex projects for corporations.
3. Industry Focus: Generalists: Companies providing services across various industries. Industry Specialists: Focused on specific sectors such as healthcare, finance, or e-commerce.
4. Development Methodology: Agile Practitioners: Companies following agile methodologies for flexible and iterative development. Waterfall Adherents: Following a more traditional, sequential approach to development.
5. Geographic Location: Local/National Companies: Operating within specific geographic regions or countries. Global Players: Companies with a global presence and clientele.
6. Client Type: B2B Service Providers: Companies primarily serving other businesses. B2C Solution Providers: Focused on direct consumer-facing applications.
7. Outsourcing Models: Onshore Development: Providing services within the same country as the client. Offshore Development: Operating in a different country or region from the client. Nearshore Development: Located in a neighboring or nearby country.
8. Project Type: Custom Software Development: Tailoring solutions based on specific client requirements. Product Development: Developing and maintaining proprietary software products.
9. Specialization: Mobile App Development Companies: Focused on creating applications for mobile devices. Web Development Agencies: Specializing in web-based applications and websites.
10. Service Offerings: Full-Service Agencies: Providing end-to-end services from development to design and marketing. Specialized Services: Focusing on specific aspects such as UI/UX design, testing, or maintenance.
11. Open Source vs. Proprietary: Open Source Supporters: Engaging in projects based on open-source technologies. Proprietary Solutions: Developing and offering proprietary software products.
12. Company Culture: Startup Culture: Emphasizing innovation, flexibility, and a dynamic work environment. Corporate Culture: Following more structured, formal practices.
13. Revenue Model: Project-Based Revenue: Earning revenue through individual project contracts. Subscription-Based Revenue: Offering ongoing services with subscription models.

Each of these classifications provides a different perspective on a software development company, allowing clients, partners, and industry observers to understand its focus, strengths, and areas of expertise.

Case Study: Infosys Limited - Navigating the Software Services Landscape

Background: Founded in 1981 by N.R. Narayana Murthy and six co-founders, Infosys Limited emerged as a pioneer in the Indian IT industry. Starting as a small software development company, Infosys strategically navigated the software services landscape, experiencing substantial growth and evolving its service offerings.

Stages of Evolution:

1. Founding Years (1980s):

• Description: Infosys began as a provider of end-to-end software development and maintenance services, catering to global clients.
• Value Added: Basic software development services, including application development and maintenance.

2. Global Expansion and Y2K Opportunity (1990s):

• Evolution: Recognizing the Y2K challenge, Infosys capitalized on global demand for IT services. It expanded its footprint, establishing a significant presence in the United States and other key markets.
• Value Added: Y2K remediation services, global delivery model.

3. Diversification and IT Consulting (2000s):

• Evolution: Infosys diversified its service portfolio, moving beyond software development to offer IT consulting, business process outsourcing (BPO), and package implementation services.
• Value Added: Strategic consulting, business transformation services.

4. Embracing Agile and Digital Technologies (2010s):

• Evolution: Responding to the digital transformation wave, Infosys embraced agile methodologies and invested in digital technologies such as cloud computing, analytics, and mobility solutions.
• Value Added: Digital services, cloud solutions, advanced analytics.

5. Focus on Automation and AI (2015-Present):

• Evolution: Infosys intensified its focus on automation, artificial intelligence (AI), and machine learning, aiming to enhance efficiency and deliver innovative solutions.
• Value Added: Automation-driven services, AI-powered solutions.

Success Factors:

1. Global Delivery Model: Infosys pioneered the global delivery model, leveraging a distributed workforce and establishing offshore development centers to provide cost-effective and efficient services.
2. Client-Centric Approach: The company maintained a client-centric approach, focusing on building long-term relationships, understanding client needs, and delivering tailored solutions.
3. Investment in Talent Development: Infosys heavily invested in talent development, establishing its own training facility (Infosys Training Center) to ensure a skilled workforce capable of adapting to evolving technologies.
4. Agility and Adaptability: Infosys demonstrated agility and adaptability by evolving its service offerings in response to changing industry trends, including the shift towards digital technologies.
5. Strategic Acquisitions: The company strategically acquired firms to enhance its capabilities and expand into new areas, such as the acquisition of Lodestone Management Consultants for SAP consulting expertise.

Challenges Faced:

1. Increased Competition: As the IT services industry became more competitive, Infosys faced challenges in maintaining its market share and differentiating itself from other global players.
2. Employee Attrition: The industry's high demand for skilled professionals led to increased employee attrition, posing challenges in talent retention and recruitment.

Conclusion: Infosys' journey from a small software development company to a global IT services giant is marked by strategic evolution, adaptability, and a commitment to excellence. The company's success in navigating industry shifts, embracing digital transformation, and delivering value-added services positions it as a key player in the Indian IT landscape. As the technology landscape continues to evolve, Infosys remains a notable case study in the dynamic world of software services.

Value addition life cycle exists, even for Microsoft

Case Study: Microsoft Corporation - A Journey Up the Value Chain

Background: Microsoft Corporation, founded by Bill Gates and Paul Allen in 1975, initially gained prominence as a software company focused on personal computer operating systems. Over the decades, Microsoft strategically evolved, moving up the value chain to become a diversified technology giant offering a wide range of high-value services.

Stages of Evolution:

1. Foundational Operating Systems (1970s-1980s):

• Description: Microsoft's early years were marked by the development of operating systems, notably MS-DOS and later Windows, providing the foundation for personal computing.
• Value Added: Basic operating system services.

2. Desktop Software Dominance (1980s-1990s):

• Evolution: Microsoft expanded its product line to include essential desktop software such as Microsoft Office (Word, Excel, PowerPoint), solidifying its dominance in personal computing.
• Value Added: Comprehensive desktop productivity solutions.

3. Enterprise Solutions and Services (1990s-2000s):

• Evolution: Recognizing the shift to enterprise computing, Microsoft ventured into server technologies (Windows Server) and business solutions (Microsoft Dynamics).
• Value Added: Enterprise-level software solutions, server technologies.

4. Cloud Computing Era (2010s-Present):

• Evolution: Acknowledging the transformative power of cloud computing, Microsoft made a strategic shift towards Azure, a comprehensive cloud platform offering infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS).
• Value Added: Cloud services, advanced analytics, artificial intelligence, and a holistic suite of enterprise solutions.

5. Diversification into Hardware (2010s-Present):

• Evolution: Microsoft expanded into hardware with products like Surface devices and Xbox, diversifying its portfolio beyond software.
• Value Added: Integrated hardware-software solutions, gaming platforms.

6. Focus on Artificial Intelligence and Edge Computing (2020s-Present):

• Evolution: Responding to emerging trends, Microsoft intensified its focus on artificial intelligence (AI) and edge computing, embedding intelligence into various services and products.
• Value Added: Cutting-edge AI applications, edge computing solutions.

Success Factors:

1. Adaptability and Visionary Leadership: Microsoft displayed adaptability, with leaders like Bill Gates and later Satya Nadella providing a visionary roadmap for the company's evolution.
2. Strategic Acquisitions: Key acquisitions, such as LinkedIn and GitHub, allowed Microsoft to integrate new capabilities and expand its service offerings.
3. Investment in Cloud Technologies: Recognizing the transformative power of the cloud, Microsoft heavily invested in Azure, positioning itself as a major player in the cloud computing industry.
4. Customer-Centric Approach: Microsoft maintained a strong customer-centric approach, listening to customer needs and adapting its solutions accordingly.
5. Diversification into Hardware: The strategic move into hardware (Surface devices, Xbox) showcased Microsoft's commitment to offering integrated solutions beyond traditional software.

Conclusion: Microsoft's journey exemplifies a remarkable transition up the value chain, from its roots in operating systems to becoming a global technology powerhouse. The company's ability to adapt to evolving industry landscapes, strategic leadership, and continuous innovation has solidified its position as a key player in enterprise solutions, cloud computing, artificial intelligence, and beyond. Microsoft's case serves as a testament to the importance of strategic evolution for sustained success in the dynamic technology sector.