The world's largest buyers of technology such as Cargill, Target Corp and Lowe's have advice for India's biggest software firms: Adapt new technology and transform fast or become irrelevant.
At an exclusive session with ET, the technology heads of several global companies said Indian IT firms need to overhaul their businesses and strengthen in areas such as digital, analytics and cloud, particularly as many of the clients are building their own capabilities in advanced computing.
"If you see, areas such as digitisation are largely not being outsourced right now," said Arindam Sen, senior vice president at Schneider Electric India.
Companies globally are channeling efforts into developing in-house expertise in areas such as analytics and cloud computing to stay ahead of their competition, also because large IT firms haven't been nimble enough to build capabilities in emerging technology more efficiently.
"Over a period of time, over 8-10 years, GICs (global in-house centres of companies) have built leadership maturity, credibility within the organization and high level of business value... it is this that has changed the game," said Nitin Seth, country head at Fidelity Worldwide Investment.
American retailer Target, for example, outsourced projects to large Indian software firms such as TCS and Infosys for nearly a decade. Now, the 113-year-old firm is building more technology capability at its captive centre in India than ever before.
Last year, the Minneapolis-based company launched a corporate accelerator program to tap into India's emerging startup ecosystem for talent and technology solutions that it hopes will help it survive the battle against new-age competitors such as Walmart and Amazon.
"For Indian tech vendors, rather than coming to us and saying this is what we can do, they should come to us and say these are your business problems and we have these solutions for you. Also, Indian IT firms should not view captives as threats, but should view them more as partners," said Narayan Ram, managing director of Lowe's India, the domestic arm of the American home improvement chain.
"The big question is are vendors ready to change and evolve? The answer to that question will determine what happens next," said Navneet Kapoor, managing director of Target India. "I think we are facing the highest levels of disruption in our history. If we don't change and adapt, we won't be around a few years from now."
Traditional Indian software services firms are struggling to make the transition towards newer business models that are very different from the classic 'pyramid model', where revenue growth was directly linked to manpower addition. Whereas over the years, companies' in-house technology centres have evolved to more than just vendor-management centres.
"What we tell our people in Bengaluru is 'don't think like we think' — because that's why we've brought them in, because we're looking to make improvements and changes that you've never thought of before," said Kathy Fortmann, business unit president of US agricultural conglomerate Cargill.
Fred Giron, vice president and research director at Forrester Research, said companies want IT firms to function more like consultants and advisers.
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