Service with a Smile

Would you pay for something that you can’t take home with you? Something that even when have you really don’t? Something that is intangible but is perishable, i.e. if “it” doesn’t get sold within a certain period of time, it disappears?

If the question sounds funny, think again. When you fly from Chennai to Bangalore, do you carry the seat back with you home even though you paid for it, you actually bought that seat, not rented it or leased it but actually bought a seat in the plane, Still at the end of the flight the seat isn’t yours to take home. Why? Because you didn’t buy a product here, you bought a service from the Airline to transport you. Now if in the flight there were 10 empty seats would the airline be able to hoard those up and sell the next time the plane flies? No. Once the flight took off without people seating on them, the seats perished.

Welcome to the crazy world of Service Industry. So why should you even be bothered to know about anything like this, you ask. Well, 50% of India’s GDP comes from the Service Industry today, so it perhaps makes some sense to understand what drives this engine.

Service has been defined as an act, performance, process or benefit that doesn’t result in the customer owning anything. By its very definition Service embeds a few inherent features that makes it different from Products. An example can explain this best.

Let say that on Sundays you go to the neighborhood hair-cutting saloon to get a relaxing head massage, while his is pounding away on your head, meditate a little upon a few key aspects of the service you are getting such as

• Simultaneity – the masseur giving a head message needs to have the said head in his hands
• Heterogeneity – the message by two masseurs or even the same masseur at different times of day may feel different
• Intangibility – Barring from the feeling that you come out with, you really didn’t bring anything back with you (did you?)
• Non-Inventorablity – The masseur, if he didn’t give the head-massage at 1.00 can’t store that massage to be given the next day, hour or sec. What’s more if at the end of the day if you drop by and ask him how many he has in store, he will perhaps turn you over to a shrink.

If the British have been called a nation of Shopkeepers, we Indian have probably done well in the Service industry particularly in IT and IT enabled services. Technology, Standardization, Process Adherence, Branding etc ensure that even after being remote we can overcome the hurdles that the head masseur faces. During the N-Deal debate in US Senate yesterday even those opposed to the deal acknowledged India as a technology powerhouse and a key ally to the United States.

Interestingly it wasn’t always so, India with its initial experiments on socialism and license raj, ensured that for decades after Independence we remained proud under-achievers.  However once the nation started on its path of liberalization the pent-up potential of the nation and the Outsourcing/Offshoring Industry really took roots.

You are out-sourcing when you get your work done outside the organization, and when the people who do it do it from another country, Lo and Behold, you have off -shored.

Today, Nike outsources shoe making to Vietnam, and Industry Majors get their code written by people in India. For a bank, doing banking is the main business, not being a technology company. By out-sourcing work to India they not only enjoy cost benefits but many other advantages such as quality and scale.

India’s journey as an technology outsourcing destination of choice had its genesis in the liberalization process we spoke about a little while back, it got stronger with falling communication costs, improved skills in people and finally got ingrained when Indians started to realize that future was in moving up the value chain, such as coding to consulting, process implementation to re-engineering etc and started to offer higher values to the customers.

This shift was also reflected in the way outsourcing strategies evolved from In-house development, to on-site (body shopping), to off-site coding houses, to full function off-shore development centers. A few questions beg answers from a evolutionary perspective

• Why did firms chose to outsource to India: They came looking for low cost, found high quality and stayed on because of the Knowledge we bring
• How the evolution unfolded: The pioneers started with Captive development centers and sometimes Joint Ventures. With time other models such as BOT (Build-Operate-Transfer) and 3PSP (Third party service provider) became popular
• Where did the work actually take place: During this evolution the work used to happen onsite, out-sourcing was a business imperative, cost considerations moved work offshore, the quest for leveraging the best value proposition now moves work to what is termed “Best-Shore”.

India, most certainly is the best shore for most of the Software Development type of work. Jack Welch 70:70:70 rule in GE was an acknowledgement of the value he saw in India.

Outsourcing, as a concept however was thought of much before GE or Edison was born, and evolved from the Adam Smith’s concept of Absolute Advantage, to David Ricardo’s theories of Comparative Advantage. Michael Porter theory of Competitive Advantage of Nations now rules the roost. The story of Porter’s diamond is a story for another day. Perhaps the future lies in Collaborative advantage, the genesis of which can be seen in the Open Source Movement.

Outsourcing and Off-shoring are touchy topics and have been demonized justly and unjustly. Humans make businesses what they are, so human factors can’t ever be undermined.

Off-shoring does bring a lot of advantages such as cost benefits, profitability, high returns etc, but more importantly if organizations use the surplus generated creatively and responsibly it helps the out-sourcing nation to take steps towards higher innovation. At the end everyone benefits.

Today India is doing well, but our enemy is not China or S E Asia, it is complacency. Like we can’t let down our guard in our borders, we can’t let our levels of competency and the quality that we deliver slip even a bit. It takes effort from every software engineer, manager, engineering school to keep it that way. Providing value, focusing on innovation and finally offering our service with a smile shall ensure that we remain ahead in the game and bring genuine value to all that choose to come to India to work.

That would be true Service With A Smile.