Business Models and People Management in the Indian IT Industry

From People to Profits

Ashish Malik, Chris Rowley

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317667476
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The global impact of so-called 'offshoring', including of information technology (IT) and related services, continues to be a topic of great interest to academics, practitioners and policy makers. The Indian IT industry has sustained high levels of growth in revenues and employment since the late 1980s. Even following the global financial crisis and meltdown in 2008, the industry has reported growth, albeit at a lower rate. Furthermore, the high rates of technological change and increased competition has forced businesses and managers to be innovative and create new business models.

This book examines how managers and entrepreneurs in the Indian IT industry have explored and exploited human capital opportunities at various stages of the industry's evolution to create innovative human resources (HR) practices and new business models. Based on extensive academic research and deep reflective practitioner accounts, this collection presents expert content, views and a coherent picture of the challenges and changes in the Indian IT industry and analyses how the industry has remained competitive in a constantly changing environment.

This book will appeal to researchers, students and practitioners, particularly in the fields of human resources and strategic management.

1
Profiting from people management practices

An introduction

Ashish Malik and Chris Rowley

Introduction

The global impact of ‘offshoring’, including that of information technology (IT) and related services, to developing nations such as India has been a topic of great interest and debate to academics, practitioners and policymakers (Arora and Athreye, 2002; Arora and Gambardella, 2006; Arora, Arunachalam, Asundi and Fernandes, 2001; Athreye, 2004, 2005; Banerjee, 2004; Budhwar and Bhatnagar, 2009; Malik, 2009; Malik, Sinha and Blumenfeld, 2012; NASSCOM, 2014a; Thite and Russell, 2009). The high rates of technological change and increased competition have forced IT businesses and their managers to continuously reinvent their business models. It is through such constant renewal of business models and change management efforts of business leaders that the Indian IT industry has continued to sustain high levels of growth, even in a post-global financial crisis era (Malik, 2013).

From humble beginnings in the early 1970s, the Indian IT industry has come a long way. Current estimates suggest that the Indian IT industry has revenues in excess of US$118 billion and employs around three million people (NASSCOM, 2014a, b, c). Numerous metaphors have been used to portray the growth story of India’s IT industry, for example, the ‘horse that flew’ (Vittal, 2004), the story of ‘blind men and the elephant’ (Rahman and Kurien, 2007) and ‘from underdogs to tigers’ (Arora and Gambardella, 2006) are among the most popular discourses.

Our book is different from earlier expositions on the Indian IT industry (Arora and Gambardella, 2006; Banerjee, 2004; Budhwar and Bhatnagar, 2009; Thite and Russell, 2009). While these accounts have tended to focus on the supply and demand side dynamics of human capital and related explanations of growth, our collection differentiates on a number of fronts. First, it offers an inclusive theoretical framework for examining the innovative approaches to the strategic management of human resources (HR) in the IT industry. By adopting a number of theoretical frameworks, richer explanations of business models can be uncovered. Second, it offers a much more nuanced view of how managers, entrepreneurs and consultants operating in the Indian IT industry have contributed to exploring and exploiting human capital opportunities at various stages of the industry’s evolution. These diverse groups of stakeholders implemented numerous changes to business models and HR management (HRM) practices to sustain high levels of growth. Third, it presents expert content and views from academics and practitioners who are actively researching and practicing in the Indian IT industry. Thus, our book is also an unique attempt to bridge the commonly noted practice-to-theory and theory-to-practice gaps (Swanson, 1997) prevalent in the Indian IT industry. Also, following the ethos of the ‘Working in Asia’ series, it gives ‘voice’ to organisations and practitioners. Finally, it presents an evidence-based analysis of how the industry has remained competitive in a constantly changing environment. Our book will benefit practitioners, scholars and researchers of management, particularly in HRM and strategic management.

To do this, our book is split into two major parts. In Part I we cover theoretical and empirical contributions from academics highlighting the context, key theoretical approaches, research gaps and empirical contributions covering the key sectors of the Indian IT industry. Further details of Part I are provided in the upcoming sections entitled ‘Context: Boundaries in a borderless world’ and ‘Theory: Theoretical foundations for informing practice’. In Part II we take a more practitioner-based approach with contributions that highlight in-depth experiences of HR practitioners from the Indian IT industry covering a range of topics, such as managing people in IT services and product environments, the role of coaching and organisational development interventions in exploring and exploiting human capital opportunities and how organisations can support development of large-scale generation and management of innovative approaches to business and people management. Further details of Part II are provided in the upcoming sections entitled ‘Practice: Bridging the research-practice-theory-research gap’, ‘The critical role of leadership and change management’ and ‘Integrating new knowledge into a coherent assemblage’. The different emphases of these chapters suggests the need for a different chapter structure and format through which the key messages are communicated. Nevertheless, for a comparative snapshot, we provide below a summary in Table 1.1. This provides readers with a quick overview of the book’s content and journey.

Business models and people management practices

From our review of the literature on strategic HRM, there is an extremely limited body of research that explicitly links HRM practices to a firm’s business model and its key elements for creating and realising value (Bae and Rowley, 2003; Cascio, 2005; Clark, 2009; Hunter, 2006). This gap in the literature is rather strange, especially as there have been calls for linking HRM practices and firm performance (Buller and McEvoy, 2012). While we acknowledge there are numerous factors that create and realise value in a firm’s business model (Johnson, Christensen and Kagermann, 2008; Zott, Amit and Massa, 2011), we believe there is merit in furthering our understanding of how various sets of HRM practices contribute to a firm’s business model (Johnson et al., 2008). By developing such an understanding one can make critical advances in the HRM–performance debate and explain how

Table 1.1 Business models and people management in the Indian IT industry

Chapters		Key emphasis
1	Profiting from people management practices	Organising framework for the book
Part 1
2	Context and evolution of the Indian IT industry	Theoretical review focusing on context and industry evolution
3	Skills, strategy and people management in the IT industry	Theoretical foundations focusing on key HRM, strategy and HRD studies
4	HRM and firm performance: the case of Indian IT/BPO industry	Theoretical propositions for high-performance work practices paradigm
5	Orchestrating human capital in the Indian IT service market: from entrepreneurial management to professional management	Empirical findings tracking changes in managerial orientation for exploiting human capital opportunities
6	Innovative HR practices: evidence from three IT software services organisations	Empirical study highlighting key innovative HRM practices in IT services firms
7	Innovative people management approaches from three software research and product development firms	Empirical study highlighting key innovative HRM practices in product development firms
Part II
8	Managing people in an IT software services environment	In-depth and reflective ethnographic insights on the role of skills in IT services firms
9	Managing people in an IT product and research and development environment	In-depth and reflective ethnographic insights on critical HRM and leadership practices in software and product development firms
10	Process consulting and adaptations of organisation development in the Indian IT industry	Case studies of role of organisational development interventions in the Indian IT industry
11	Senior management mentoring and coaching for exploration and exploitation	Case studies of the role of executive coaching in supporting exploration and exploitation behaviours
12	The world’s largest ‘ideapreneurship^™’: putting employees first so the customer never feels second!	Practitioner insights of how to manage innovations and new ideas in a large IT product and service environment firm
***
13	Towards an integrated model of human capital development for business model innovation: synthesis and new knowledge	Synthesising the findings to highlight (1) the HRM practices conducive to exploration and exploitation; and (2) key HRM practices that support business model innovation

each element of a firm’s business model can be supported by certain HRM practices. Through our review and analysis of the research on business models in the Indian IT industry, we map the key stages of business model evolution, shown in Figure 1.1.

Figure 1.1 Indian IT industry: mapping business model transitions.

Applying the resource-based view approach (Barney, 1991), it is critical to understand how firms create and realise value through unique HRM configurations and practices. Our review of business models suggests that in addition to changes in HRM practices, certain practices from organisational development, change management and HR development (HRD) are needed to gain a fuller understanding of how firms undertake business model innovations. Evolving business models require concomitant changes to an organisation’s HRM practices to be able to successfully deliver new customer value propositions. Achieving this transition is never easy as firms have to undertake a number of changes not only in the way they attract their talent but also how they modify work design, HRD and retention strategies. For example, the nature of HR that were recruited and developed for the early stages of the ‘body shopping’ era were very different from the industry’s ‘Client locale to service provider locale’ business model, as in the latter stage firms needed to attract and develop a very cost effective and trainable pool of technical resources, with strong programme and project management capabilities to deliver global IT services from Indian markets. Similarly, in the maturity stage of the ‘anytime, anywhere’ or the global service delivery business model stage, a very different set of specialised domain and business development skills and international HRM practices are needed for managing young expatriates. Finally, in the current stage of the industry’s growth, ‘Crowd and cloud’, the management of disruptive technologies such as SMAC (social media, mobile, analytics and cloud) services poses real opportunities and challenges and requires a very different skill base for crowdsourcing of ideas and engaging in open innovation, something the industry has not been very familiar with so far (KPMG, 2013). To this end, we develop a novel organising framework for understanding the relationship and interplay between theory, context, practices and leadership for sustaining high performance through people management practices, as shown in Figure 1.2. The role and important context of country, culture and competence, for leadership in Asia is also outlined in Rowley and Ulrich (2012).

Figure 1.2 Profit through people: an organising framework.

The following section briefly explains the importance of each of the four components of the framework, with specific references to the relevant contributions covered in our book.

Context: boundaries in a borderless world

The strategic choice a firm can exercise is limited by the nature of its institutional environment and the strength of its dominant coalition of stakeholders (Kochan, McKersie and Cappelli, 1984; Nilakant, 2005). The importance of context is understated in a number of theoretical models of strategic HRM that often adopt a prescriptive best-practice model approach (Huselid, 1995; Pfeffer, 1998). Others have argued for the active role of human agency in managing institutional pressures and achieving a better strategic fit (Boon, Paauwe, Boselie and Den Hartog, 2009). To this end, our collection begins by analysing the Indian IT industry’s contextual environment in Chapter 2. Highlighting the importance of context and the evolution of the Indian IT industry, this chapter traces the evolution of four generations of the industry. It highlights how certain actors and institutions have facilitated dealing with the contextual barriers and institutional pressures faced by the industry. These actors, or the human agency, created opportunities for developing an expansive environment, which provided much needed leeway for industry leaders to develop and expand their strategic choice options. The chapter presents an account of how India’s resource endowments, institutional dynamics and deliberate choices, as well as the confluence of certain happy accidents, all shaped the development of the IT industry. The change in the landscap...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• List of contributors
• Foreword: HR Value Creation
• 1 Profiting from people management practices: an introduction
• PART I Human capital issues in the Indian IT industry
• PART II Reflective practice: practitioner insights
• Index