New Business Model for Information Technology

By VARINDIA - 2020-10-02

New Business Model for Information Technology

Asoke K Laha, President & CEO of Interra Information Technologies

 

Recently I had the opportunity to address a group of IT professionals in a webinar and the theme was, of course, related to Covid-19 and the impact it would have on the ICT sector. Many important issues and challenges cropped up during the deliberations.

 

I had the opportunity to raise a few points there with trepidation, since I was not very sure how people would react to such radical propositions. Let me flag an issue I had raised at the meeting, where an assortment of experts from various segments of the ICT sector attended from all over the world: Should we script a change in the present model of employee - employer relationship? The present structure is that of paid executives, who are compensated in accordance with a contract entered upon between the company and the employees. A company is required to pay salary, most often, at the end of a month as per the contractual conditions entered between the employee and employer. Instead, my proposal was to overhaul that widely practiced model into a more business- like conundrum by linking the compensation (instead of salary) with the business the employee (professional) can bring on the table for the company one is working for. I am aware it is not a simplistic proposal, which has to be debated at every level, though it is common knowledge that concepts like this are in vogue in several enterprises, and may be in an informal manner.

 

Of course, that requires every employee to re-orient his/her approach to the work. He has to be a marketing person as also a hardcore professional in the field. That would mean he should bring in more businesses to the company and should devise strategies for executing such works in time according to the conditions laid in the contract including quality, testing, delivery etc. Let me explain what would be the advantage to the employees. Foremost, his compensation is based on the businesses that he/she brings to the company. He/she can fix up the percentage in terms of the value of businesses and complexity of the task accomplished. That would mean, first the company will have a contract with the customer who gives the contract. Subsequently, the person who is instrumental in getting the contract signs another contract with his employer specifying his/her share from the business that has been contracted upon. The employees’ compensation becomes directly proportional to the businesses that he/she brings in. That can be in addition to the monthly salary and perquisites as the case agreed upon by the management and the employee. Depending on the businesses he /she rakes in, the compensation can be several times more than their present one drawn now. That will also motivate the person to bring in more businesses to help the company to move in the value chain.

 

How does it help the employers? Every employee becomes a marketing person in his / her own rights. Presently, the promotion of businesses is mostly undertaken by the business development department. In some cases, they may have insights on the type of businesses that they are trying to get. In most of the cases, business development executives or marketing guys, by the very nature of their work, need not have that domain knowledge to respond to the clients searching queries and other follow up questions. In such events, they may have to revert back after consulting the employer or the experts, which may lead to loss of time and sometimes there would be the possibility of disconnect in the flow of information. Having a domain expert to negotiate on the business deals would shore up the possibility of getting the contract.

 

Let us look at this arrangement from the employee side. He or she is assuming a larger role in the given dispensation and considerably enhances the bargaining power within the company. The company will have to recognize his/ her expertise not only for executing the work but also for turning the tide in favor of the company and become a stakeholder in the company, a profile much bigger than an ordinary employee. That enhances his/her esteem with the management, shareholders and other stakeholders in case it is a limited company. The balance sheets have to be re-oriented to reflect the contributions in terms of the businesses one brings in and also the compensation that is being given. Secondly, in the process of getting business, he/she develops the marketing skills which would give him/her the confidence to start ventures on his/her own and to become an entrepreneur. This arrangement also can break the traditional way of going up in the hierarchy. One can assume situations, where an employee draws more compensation than the chief executive.

 

The employer also stands to gain from such an arrangement. Salaries and perks can be pegged at minimal and those bring the businesses can be accordingly compensated. His /her revenue outflows can be matched up with inflows. This is particularly helpful, I feel, during the post-Covid -19 days, when disruptions have taken place. The new normal that will be unfolding as and when the infection curve is flattened will be completely different from one that existed before.

 

The system may have its own flipside. There can be situations when the employee can hold the employer for ransom. He/she can leverage the contract gained from the client for extracting more from the employer. He/she can even pass on the contract to another company for a better return. To avoid such unsavory incidences, the contract the employer is entering with the employee and the client company should take notice of such infirmities and should protect the interest of all three involved. It can also happen that the employer after getting the contract through the employee can terminate the person’s service and can pass on the work to another employee or group of employees. A well thought out legal contract can take care of such eventualities.

This is only one set of the new normal that may dawn upon us after the Covid-19 pandemic. There can be multitudes of changes that can take place in the course of time apart from how the IT companies are going to function hereafter.

 

Suggesting another model of staffing, should we recruit more free lancers against a specified work and not regulars on a full time basis?. Post Covid-19, I feel, more companies are going to adopt that business model, mainly for cutting down the cost and for keeping a minimal number of staff on the rolls. That also will help a company to scale up and down the operations depending on requirements. There will not be any concept like benching of employees etc. What could be the added advantage of this model? It will be a training ground for employees to prepare themselves for venturing into setting up something on their own, since they have to always be on the lookout for a new assignment. That will help a substantial number of them look forward to starting something on their own and the time they get between assignments can help them, to explore such possibilities.

 

I have a feeling that in the coming days, one segment, which is going to see a runaway growth, is the computer hardware sector.

 

Till date, India’s services sector is dominated by computer software and IT -Enabled Services ( ITeS). The figures of exports for the respective items are revealing. While IT and ITeS and other services segment contributed close to US$156 billion yearly as export revenue, the hardware segment, which can hark back its beginning almost to the same time zone, is languishing both in production and exports

 

What I am driving home is that an ICT segment, which includes IT, ITeS, electronics and telecom can be India's powerful response to the post-Covid-19 to bail out the economy, to provide employment to several millions, accelerate exports and importantly increase the opportunities for self-employment. What we need is capacity to change , adapt to new situations and the will to experiment.


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