I was catching up with an analyst-friend recently and finding out how he is reading the current business environment. Needless to say, the recent Mumbai attacks have added to the woes of Indian It companies, with customers postponing trips, re-evaluating closure dates etc.
With regard to the overall situation, like everyone else, he too felt that we are in for a prolonged period of weak demand, and hence opined that the larger companies with deeper pockets would be able to tide over better.
Which brought us to the topic of niche players, who were some years back, the flavor of the season. Every industry watcher and strategist recommended that if you don’t have scale, then develop a deep specialization.
In principle, I still believe that this holds true. However, companies have probably faltered in its implementation. So, what transpires is that niche players do the hard work of exploring new areas and trying to build capabilities ( which are unfortunately not deep enough, or unique enough), and in some eays, create a market opportunity, and when the opportunity becomes serious enough, the scale players just swoop down and grab the space.
Take independent testing or IMS, today the Infosys’, Wipro’s and TCS’ have much larger practices in these areas than any “pioneering” niche player.
The solution or way forward therefore in my view is not to abandon the niche strategy but to try to build a genuine differentiation in your delivery capability, and anticipate that competition will come by eventually, especially from the big players.
This is espcially critical, and probably that much more challenging, for services companies.