News & Analysis

IT Firms Bet Big on Digital Transformation Business

digital transformation

The digital transformation story has been in vogue for quite some time now. Enterprises began moving this story from one of customer focus to something much more deeper that impacts the core of a business. In other words, there is a marked shift in the manner that organizations and solution providers are perceiving this journey from technology-enablement to technology as core.

And mirroring this trend, IT solution providers too are shifting the focus from merely tweaking the customer-facing applications or the front-end of the organization to the more crucial core business processes that takes technology right up to and beyond the back-end and into the very foundations upon which the organization is built.

The Digital Beyond Digital

As Wipro Managing Director and CEO Abidali Neemuchwala says in this interview published by the Economic Times, “Digital is becoming default now…. And Digital is very close to business transformation.” And according to him, Wipro is shifting from going merely after digital to getting involved in how the enterprise interacts with and builds relationships with stakeholders across the business firmament.

“We are getting some very good success over there (in this domain) as we retrained our sales organizations and improved our stake-holder coverage. This is an important trend as we transform into a truly digital provider,” Neemuchwala says, with the emphasis being on what exactly a digital provider’s role is in the current scenario.

Interestingly, a shift is also being witnessed from customer-facing solutions to core business processes leading to increased digital deal sizes. A report published in the Hindu BusinessLine points to the highly profitable Q2 for TCS and Infosys, both reporting robust total contract values as being the highest over different periods of time, both attributing it to digital transformation initiatives.

The above article quotes Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas to suggest that TCS made early investments in digital transformation and participated in their customers’ transformation journey in right earnest. Infosys too tasted success due to the incremental investments they made on people and digital capabilities over the past 12-18 months. The article goes on to quote an analyst at Emkay Global Financial Services to state that digital spending was now mainstream as global corporates were investing on transform both their their mid-offices and back-offices.

The Mid-size Advantage

In fact, even mid-tier IT companies seem to be raking in the moolah. While the big guns have been witnessing growth in the high single-digits over the past few quarters, the mid-sized IT companies such as L&T Infotech and Hexaware Technologies are reporting double-digit growth. Of course, there is the mathematical side to it as the mid-size firms pale significantly to their big brothers when it comes to overall revenues, which reflects in higher percentages of growth.

  1. Srikrishna, CEO of Hexaware Technologies told the Economic Times recently that in order to be a partner in the digital transformation stories, it is insufficient to transform only the front-end. One needs to reach back and the beyond to transform the core. The company had acquired Mobiquity earlier this year to strengthen their digital offerings in the Cloud and the customer experience management space, a move that gave them 19 more deals with a ticket size of between USD 1-5 million in a single quarter as compared to a year ago.

The story is similar for Zensar, which receives more than half of its revenues from the digital business. The company CEO Sandeep Kishore is quoted in the same article suggesting that enterprise deal size were going up as clients brought multiple disparate systems on to the digital platform as digital transformation moved beyond sales into finance, HR and other operations.

As a result the very scale of digital business has expanded with multiple layers and more contracts building up as enterprises realize the value of transforming the entire business, instead of merely sticking with the sales or marketing part of it. In other words, customer focus has acquired a new meaning that includes internal customers as much as the external ones. The story is much the same with other mid-size companies such as NIIT Tech and L&T Infotech.

In fact, L&T Infotech CEO Sanjay Jalona was optimistic while announcing the company’s Q2 results last month about the fast-growing digital services across all verticals. “We won three large deals in this quarter, all of them from new clients, aggregating total contract value of about $100 million.”

What Next?

While there is no doubt that digital transformation has shifted from the surface to the core of businesses, there is a big challenge out there – seamless implementation. While enterprises are taking initiatives in this direction, the journey continues to be bumpy, especially when they are not planned to the minutest of details.

The cost of processes breaking and needing repeated fixes needs to be underscored time and again which is why the role of the right kind of subject matter experts becomes mission critical. Deal sizes may be going up, but there is margin pressure on enterprises as they need to ramp up faster on the quality of workforce entrusted with the task of transforming enterprises.

As Jon Payne says in this article published on IT Pro, the journey of digital transformation can be successful only if and when everyone in the boardroom engages in the journey in some way. The CEO takes the lead and urges everyone else to walk on their respective paths to a common goal.

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