In my view, the offshore business has a "value add" problem. By that I mean, there is a problem that adequate value is not being added.

In a recent conference where I was a panelist, Rajesh Hukku of iFlex compared the Indian Offshore Model to Bollywood story lines. He said, very accurately, that there were, but a handful of story lines in Bollywood - the lost brothers, the rich girl meets poor boy; the rich boy meets poor girl, etc - and that as soon as any one of them became a successful movie, all the other production houses rushed to create a movie with the same story. He added that the Indian Offshore Model was the same - there were in essence a handful of story lines.

About 10 years ago the offshore model's sales story went like this

• we can do it in India where there are abundant resources,
• we can do it faster taking advantage of the time zone differences and running 2/3 shifts in a 24 hour day,
• we can do it cheaper because of the cost arbitration, and
• we can do it better with the ISO/CMM/6 Sigma certifications.
  

The offshore model's story today is...., you guessed it - almost the same. More services (like BPO) & service lines (QA, etc) have been added, but the fundamental basis remains the same for most companies. While the top 5-6 companies have been able to climb up the value chain either to business consulting or organizing their services vertically, the bulk of the offshore companies are still hawking the same story.

The offshore model has gained tremendous acceptance, very fast and most companies are scrambling to hire fast enough to deliver their projects. One thought hence could be - we are obviously adding some value; why change what is not broken.

This argument will stand the big players in good steed - the TCS, Infosys, Wipro, Cognizant, etc. They have an established base, a critical mass, a repeat clientele from where they make 90% plus of their yearly revenue. But it will not hold good for the small and medium sized companies, as other companies and countries replicate their current "value".

The small and medium companies cannot be content with being a clone of the big players. They need to innovate into untested areas and create their own niches and/or open up new markets.

Where are these opportunities? Let us explore that for a moment.

While the offshore model has been successful in pulling the rug from under CSC, Cambridge Technology, Sapient, (ineffect, forcing them to join them), it has not been able to make a dent in the business models of services companies like Convergys, ADP and others.

Convergys is a leading telecom billing services company, while ADP is predominantly an employer services company. These companies have domain expertise in specific industry segments around which they built proprietary technology around which they wrap their services (think something like Quickbooks). This is a value add driven from Intellectual Property and has more sustainability. It has sustainability beyond cost arbitration, beyond process certifications, beyond hiring resources.

Indian Offshore companies need to acquire or build IP in specific industry segments areas and then wrap their IT and BPO services around this. This will propel the small and medium offshore companies into their own.