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As I write my first blog, I want to share my thoughts on the business in the emerging markets.

The emerging markets are an interesting mix of challenges and opportunities. The opportunities lie in overall growth of the economy and fast increasing consumer base. The customer expectations are  very high and they want goods and services to be delivered  at global quality at locally affordable price points. It is interesting to observe that such an environment coupled with high expectations of value from customers is spawning innovations faster than ever before. In the case of products, companies have achieved this by understanding the local customer priorities and stripping away the ‘bells and whistles’ features of the products. Indian cell phone maker Micromax demonstrates a good example of this strategy. A relatively new entrant into this business, Micromax has notched up to the third position in the market by offering highly cost effective phones with features that are a big hit among the users. The strategy was to focus on providing the customers with high priority features such as long standby battery time (up to 30 days) and dual SIM and do away with other, more expensive but rarely used features. This is forcing the leaders like Nokia and Samsung to launch similar new products to compete with them.

In the case of services too, including the IT services space, the expectation of most customers is that there would be some ‘innovative’ way for providing the solution at much more attractive price points, is driving new innovations in technologies, service delivery and business models. Unlike the traditional view of innovation as a focused R&D effort, in the case of services in these markets, innovation is viewed as solving the problem with the means available at hand. Some may call it ingenuity and not innovation. But, it is such ingenious solutions that have eventually resulted in disruptive innovations. A large percentage of the worldwide developer population being in the emerging markets and a variety of interests on the part of government, industry and academia are encouraging adoption of open source software for solving critical problems.

The most visible innovation in the service delivery model may have been the application of mass-production techniques to services. But, after maturing to what is popularly known as ‘Global Delivery Networks’ based on tools and processes, IT service companies are proactively moving to service models akin to SaaS, where higher volumes of usage make pay-per-use models a win-win for both customers as well as the service providers. Likewise, the move to platform solutions where the service provider builds a robust software platform to standardize and automate the business processes for a particular industry (which in turn can be based on orchestration of one or more commercial off the shelf platforms), and uses that to provide end-to-end services to multiple customers in the same industry, e.g., end-to-end customer care and billing functions for an industry, etc.

The emerging markets are also witnessing a wide range of contrarian business models to the typical effort based consulting model. In a first of its kind deal in India, Bharti, the largest cellular service provider in India, outsourced all of its IT to IBM where IBM assumed responsibility for all of Bharti’s IT systems, infrastructure, and people for a percentage of Bharti’s revenues, which directly linked IT cost to business performance. The agreement construct was innovative not only from the perspective of the remuneration model for IBM, but also in terms of the scope of the delivery, which was comprehensive and included practically all of IT—current and future. As Bharti went through an explosive growth in the next few years, IBM benefited directly from the revenue growth.

As emerging markets have fewer legacies in systems and business models, I expect this innovation trend to continue. Organizations in the rest of the markets may not have similar business drivers, but they could all benefit from these innovations, of course adapted for the local requirements.