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Rakesh R. Mishra
Doctoral Student
(0)-9339273557
Indian Institute of Management Calcutta
rakeshr@email.iimcal.ac.in
 Contents
‡ Background and Research Context
‡ Growth of Market for Indian Software Service firms
‡ Indian Software Service Industry Structure
‡ Research Questions?
‡ What is Innovation ? Service ?
‡ Types of Innovation
‡ Approaches to Study of Innovation in Services
‡ Theoretical Paradigms to study Innovation in Service
‡ Drivers of innovation in services
‡ Model of Industry dynamics (Mehra, 1994)
‡ Innovation is Indian Software Firms:
‡ Model of Indian Software Service firms
‡ Dominant Drivers of Innovation in Indian Software firms
‡ Hypothesis about emerging trends of New service design
 _
   

‡ Phenomena of Disintegration (Outsourcing) - relationship
between the market size for the product of a firm and the extent of vertical
integration optimum for the firm (Stigler 1951, Langlois, 1988, Pavitt, 2003)
‡ Outsourcing in Software Services ±
± Separation of Software and Hardware (IBM, 1960)
± Standardization (Greenbaum 1976, Kraft 1979)
± Globalization
Service producer makes a bundle of competence available to the customer
at their disposal which is used by client organizations according to their
inputs
 Indian Software service Industry
Structure
roductivity Vs o of E oyee
ev enue er
roduc tiv ity
y ear
Standardi ed

Standardi ed o  of Eoy ee

Data Source: DataQuest - 7 to Survey

Continued «««
‡ A long tail structure of the industry
‡ It has been found that major R & D expenditure and technological
innovations are not likely events where all the firms are offering
similar products and main market dynamics is price competition
(Desai 1982; Siddharthan 1988; Nath 1993)
‡ large and small firms all are likely to be engaged in minor cost
reducing innovations. Arrow(1971)
 Research Questions?
‡ What is the strategy of firms or group of firms
‡ What is the type of Innovations Indian software
firms do ± technological / non-technological
‡ What is the driver of the Innovation? (Market/
Strategy / R&D/ Competition)
‡ What are the determinants of the innovation
‡ What is the model of innovation adopted in
Indian Software firms
‡ Is the boundary of the firm stable
 What is Innovation ?
‡ Adoption of an idea pertaining to device, system,
policy, program, process, product or service which is
new to the organization at the time of adoption. Idea
may be generated in the organization or may be
purchased from outside. (Daft, 1982; Damanpour and van 1984;
Damanpour 1991)
‡ Innovation thus has become a means of effecting
changes that are needed to meet the new strategic
challenges. (Damanpour and Schnieder, 2006; Schumpeter 1934).
‡ innovation is measured only after idea has been
successfully implemented
 Representation of services
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$   $
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The
Provider¶s
direct
Client¶s competences
compet # 
ences

Final or
Service
& Characteristic
s
%

Supplier incl.
Consultants
characteristics
 Types of Innovation Damanpour, 1987
‡ %



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Tool, technique, physical equipment or system by which
the employees, the units or the organization extend their
capabilities Schon (1967).
‡ '$  |


Implementation of new policy pertaining to recruitment of
personnel, the allocation of resources, the structuring of
tasks, authority and rewards are examples of
administrative innovation (Damanpour, 1987).
‡ ' 

|


Innovation in boundary spanning units e.g. marketing
and public relations
Types of Innovation (Oslo Manual 3 rd d, 2005)

‡ Product Innovation (Technological)

Introduction of a good or service that is new or significantly improved with
respect to its characteristics or intended uses. Product innovations can
utilize 

 or 


 .
‡ Process Innovation (Technological)
Implementation of a new or significantly improved production or delivery
method
‡ Marketing innovation
implementation of a new marketing method involving significant changes in
product design or packaging, product placement, product promotion or
pricing
‡ Organizational Innovation
implementation of a new organizational method in the firm¶s business
practices, workplace organization or external relations
' 

|

  
JGallouj, 2002]

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± Impact analyses
± Sectoral technological trajectories (Pavitt, 1984)
± Lakshmanan(1987) also pursues evolutionary approach but diff.
‡ %!_ ' 
 $

 
 (Drejer, 2004)
± highlights the existence of particular form of innovation in
services different from technologist approach
± It attempts to produce µlocal theories¶ of innovation more closely
tailored to particular service industries.
‡ | ' 

± an integrated analysis should be possible
(Drejer, 2004;Gallouj and Weinstein (1997); Preissl(2000)
 %

"$ Sundbo, 1997

‡ %


!

$ $ (Dosi et al. 1988)

Innovation as technological development

‡ (    $ (Kent, Sexton & esper, 1982)

ntrepreneur¶s act is the core innovation process

‡ |

 $ (Teece, 1987; Kanter, 1989;
Nystrom, 1979, 1990; Porter, 1990; Rumelt, Schendel and Teece, 1994;
Sundbo, 1995).
Firm¶s strategy as the core innovation determinant.
Innovations are largely market driven and formulated
within the framework of a strategy.
 Drivers of Innovation
‡ ( 

1. Customer needs (Customer demand, reconstructed need)
2. Changes in the nvironment (Abstract need
‡ |  

1. Market Orientation
2. Strategy Plan of the organization
3. Organizations resources vis-à-vis its ability to adopt certain
innovations
4. Constrained resources or path-dependencies (Ghemawat, 1991)
5. Competence to innovate
6. Organization structure and decision architecture (Quinn, 1985)
7. Intelligence gathering ability of the Organization (regarding
technology, competitor strategy and customer requirements)
Dynamics of Industry (Mehra, 1994)
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Model of Industry Dynamics (Mehra, 1994)

 Fig1: Model of Indian Software Service firms




xisting Client¶s
Strategy |


Organizational Knowledge
Base
Competence

Potential
Client

Competition (Number of
Players Bigger in size)
Continued ««.
1. Knowledge Base
‡ Knowledge of employee JC],
‡ Knowledge embodied in capital goods, components and
supplies JT]

2. xperience Base
‡ Information Management Competence
‡ Organizational competence
‡ Competence achieved due to performance
‡ Competence in the use of theoretical Knowledge

(Guilhon and Gianfaldoni, 1990; Guilhon, 1992).

 lements of Indian Software
Service firms and Innovation
‡ Knowledge Base ± Change in the Knowledge
base. Conquest of new source of raw materials
(Schumpeter)
(Radical innovation)

‡ xperience Base - Change in the xperience

base.
(Incremental innovation)

(Guilhon and Gianfaldoni, 1990)

Continued «..
 Dominant Drivers of Innovation
‡ 


±   


±   


 Trend of Change in environment
‡ Deepening economic integration, increasing
economic openness and growing economic
interdependence between countries
‡ Cross-border movement of goods and services
is easy
‡ Raw-materials (bundle of competence in case of
services) of various countries accessible to the
organizations
Trend of Changes in the Customer
need
‡ Organizations are increasingly focusing on their µCore
competence¶ and attempting to create value by focusing
on their core processes and outsourcing their non-core
processes.
‡ Services related to non-core processes are being
outsourced (procured from market).
 merging trend of new service
design
‡ Finding new service opportunities while interacting with
client or by customer canvassing
‡ New service development in provider¶s firms will be
focused on finding cost-effective new µbundle of
competence¶ Globally for the service opportunities found
above (Raw material focused)
Continued «.
‡ Dynamics of the industry predicted in the
model shows that Innovation charter of
these firms will focus on finding new
business opportunities to leverage their
complex resource mix and venture into
other industries.
‡ Firms will try to find new bundle of
competence that can meet customer¶s
need in a cost-effective manner
 Conclusion
‡ Identification of non-core processes and
availability of cheaper µbundle of competence¶
which can be procured in a cost effective
manner especially from geographically distant
locations will determine the new services.
‡ Looking at the dynamics of the industry model
we see that new service design and process
innovation will be guided by the consideration of
leveraging the complex resource mix of the firm.
 Case of Indian Software Industry
‡ Onsite µcoding¶ expertise
± full range of service involved in the software
development
‡ Call centers and Business process outsourcing.
medical transcription, digitizing of drawing etc.
± Business Consulting
  
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