Outsourcing: Naresh Lakhanpal And Hiro Notaney Of Patni Computer Systems (Part 5)

By guest author Tony Scott

Tony: In terms of the percentage of the business that you have right now, I assume that some is driven primarily by labor rate arbitrage.  Obviously, labor rate arbitrage is a component of everything, but how much do you think of your business now is still more pure labor arbitrage versus the value-added services with value-added pricing, and how has that shifted over the past ten years?

Naresh: I would say at the beginning a significant portion of the business was labor arbitrage because that made sense. I would also say that has become less of an issue now. It’s more about what is the value add, how you’re adding to my business. Not through pure consulting, because we’re not there yet, but it’s through the amount of thoughtfulness, what is our shared learning, what are the benchmarks we see in the industry, and how are other people in similar situations looking at it? It’s moving away from time and materials pricing to outcome-based pricing, to some extent.

We even have some customers who work with us on a revenue-sharing model.  But that’s not necessarily a good thing for us because, honestly, I think our quality and capabilities should be rewarded. I can’t tell somebody else how they run their business, so how do you do a fair revenue share? However, I think over time what you’ll see are organizations like ours finding revenue-sharing models that work.

Tony: Especially if you create the IP, right?

Naresh: Well, or co-create it.

Tony: Do you see yourselves, as you create IP, moving into creating products yourselves?

Naresh: That won’t happen. I’m not going to compete with my customers, I’m here to enhance my customer’s business, become their partner. Look, over time, if they trust me and they recognize that the quality of our work is strong, they will bring us along. It’s a relationship at the end of the day.

Hiro: I think there are things that we’ve made that you would consider products that are sold by our partners.  For example, we have something called Supplier Hub that was created for Oracle. It’s on Oracle’s price list. It was created by us, and it’s used to manage supply chains.  So while we wouldn’t necessarily brand it and sell things as a Patni product, we are creating products, packages, and so forth that we can sell through our partner’s front line, if you will.

Tony: Do you see the shift to the SaaS model and cloud-based computing enabling more of that?

Naresh: Yes, absolutely. I think that the move toward distributed infrastructure, the ability to take advantage of unused cycle time, processing power, and decoupling the memory to processors, it’s the way of the world as we go forward.

I think the market understands the cloud exists; people are just trying to figure out what that really means. Everyone claims they’re in the cloud. Okay, you put e-mail in the cloud, wonderful. But at the end of the day, what it comes down to is, does the customer perceive value in what you are doing?

What we’re finding is that the market wants to go to the cloud, but it does not really understand what the necessary steps are. Since I’ve been with the company, we’ve spent a lot of time educating the marketplace on the cloud, making sure our folks are aware of it, getting feedback, and partnering with the right folks. For example, Amazon is one of our partners.

Hiro: I think for the cloud – we were having this conversation just this morning – one of the things to be careful about is that you have to distinguish between the cloud as a delivery mechanism, which is the idea that anything that you want we can deliver to you on-premise or in the cloud, and cloud as something can actually help to make you more efficient.  As an example, shared services in the cloud is more along the lines of a product, as opposed to a delivery mechanism.

Tony: It’s like electrical power infrastructure, right?

Hiro: Exactly.

Tony: In my mind, the cloud is basically a case in infrastructure. What you do with it, how you use that to change the way you might have been doing something before that can make you more efficient, or deliver something different, that becomes the interesting part. But most people confuse those two parts when they talk about it.

This segment is part 5 in the series : Outsourcing: Naresh Lakhanpal And Hiro Notaney Of Patni Computer Systems
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