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Outsourcing > Interviews > Avinash Vashistha, co-founder and managing director of neoIT >

Madanmohan Rao interviews Avinash Vashistha, co-founder and managing director of neoIT

September 24, 2001

Avinash Vashistha has over 17 years of experience in the IT industry. During the last two years with neoIT, he has worked with major Fortune 100 clients (P&G, Cardinal, Lucent, Nortel), as well as IT services providers (KPMG, CGEY, TCS, Wipro, Infosys, NIIT, Silverline, DSQ, VJIL) to outsource IT projects, both offshore and on-site. He was formerly at AT&T/Lucent, GTE and Nortel in North America, Europe and Asia. Avinash previously headed Nortel's software outsourcing operations in India, which also included evaluating software development providers in the UK, Vietnam, Russia, Israel and Ireland.

What is your assessment of the current dotcom bust and general IT downturn?

Economic cycles are a recurring phenomenon. In a boom, most companies do well -- including those with bad business models. Most companies raise capital in a boom economy and most spend that money with no regard to basic business fundamentals. Most dotcoms did not have a good business model, particularly a revenue model that was based on delivering core value (not just advertising, banners and click-thru). The dotcoms that are surviving and will be successful have to focus on a business model that provides value for a customer and one that customers are willing to pay for.

The downturn in the US economy is definitely putting pressure on IT budgets. Many decisions that would have been made easily are now being put through return-on-investment analysis. Long-term payoff project are being rejected or shelved and only the key strategic intitatives or short term net positive ROI initiatives are being approved. Remember though, the rate of IT growth is still positive, its just that the growth rates are lower than in the few previous years. This is only a temporary phase (say a year) and IT budgets will again see a higher growth rate.   However, this IT downturn is resulting in increased offshore outsourcing. These decisions take time and these projects will take 6 to 9 months to come to a contract stage. We should see exceptional growth for IT in India next year and an increased recognition of the time, cost and quality advantage of India.

What is your vision of what the Net can offer for a country like India?

The Net offers the opportunity to truly globalize availability and deployment of knowledge and assets. The Net can do wonders for India by making information available to public at large and help in e-governance, education, agriculture and overcome other hurdles because of lack of infrastructure.  India has a wealth of knowledge workers - engineers, accountants, lawyers, consultants - all of whom can easily become a part of the global economy without the issue of geography. India may have missed the "manufacturing opportunity" but the proper use and deployment of the Net can establish it as the "global service knowledge center".

What are the top challenges facing IT services firms today in the business technology sector?

         Quality: Ability to assure clients that they can be an integral part of their IT strategy, that they have the ability to "do good work"

         Cost: Possessing a human resources infrastructure that continues to be globally competitive

         Differentiation: Making clients aware of their unique value proposition

Technology spending is under immense pressure for the short term. The trend is to move IT offshore, and companies that did not build a core offshoring capability will find it harder to address this market need. There is a need for increased domain knowledge buildup, and again if IT companies do not have deep domain knowledge then getting business will be difficult.

What was the founding vision behind NeoIT?

The founding vision behind neoIT was to globalize the availability and deployment of human capital on projects through a Web-based technology.  Since then, the company has grown to become the leading technology solution for managing the "Services Value Chain". The technology enables a company to manage the sourcing, procurement, collaboration and delivery of IT and business services globally.  

neoIT is a venture funded private company and does not make its financials public. It has locations in USA and India with its headquarters in the Silicon Valley area. 

Our vision is to be the leading services value chain solutions provider in the world. This is implemented not just as a B2B marketplace but an i-builder.

Though outsourcing - on which much of Indian IT has thrived - is theoretically quite appealing, in practice there are many challenges. Unless you have a full-time manager devoted to tracking down and dealing with freelancers or software development companies -- and few start-ups do -- quality hired-gun software developers are hard to find.

Dataquest (USA) estimates that Global 2000 companies currently spend over $75,000 per project in the RFP process and up to six months sourcing and selecting an external services provider for each IT services project. 

The Gartner Group estimates that the worldwide market for IT consulting, development, integration and outsourcing will increase from $696 billion in 2000, to $1.3 trillion in 2004. And while 60% of Fortune 1000 companies indicated they would be outsourcing more than half of their IT services by 2004, 80% have no formal process in place for procuring those services, according to Gartner. The availability of IT services procurement and delivery management technology creates a significant market opportunity for an Internet-based software solution.

In that regard, our online exchange platform acts as a software development outsourcing marketplace, linking buyers and qualified providers on an Internet-based trading floor.

The exchange grew out of neoIT's traditional consulting services. In 1999, we successfully helped U.S.-based health care provider Cardinal Health manage outsourcing of project specifications, putting together a developer shortlist, evaluating the providers, and handling the bids.

What kinds of services do you provide today? How are they structured?

Our technology consists of four patent-pending technology components - neoRFP, neoMatching, neoSelection, and neoCollab - which form an end-to-end supply chain solution that facilitates the entire IT outsourcing process, from RFP through project delivery. The technology streamlines and automates a complex buying process, generating significant cost savings and providing end-users with visibility into the complete IT outsourcing process and increased speed to market.

Our  technology has been licensed by CIOL and GlobalOutsourcing.org to power their IT marketplaces. Registered service providers who have used the neoIT system include world's and India's leading IT services companies.

For clients, we act as a neutral party to assist in provider selection, pricing and project management for outsourcing. We broker complex development jobs to the global marketplace. The growth of the Application Service Provider (ASP) market has made globalization of the IT services market possible. That possibility is being matched abroad: the global availability of IT  talent and sheer volume of graduates produced is increasing sharply in countries like India, Singapore, Israel, and the Philippines. 

The result is that technology companies are looking beyond their borders to get the job done. And they like what they see -- provided they can find it. neoIT.com is designed to let them do that.

Our online platform is based on a proprietary technology  which simplifies the IT outsourcing process, beginning with the Request for Proposals (RFP) and ending with final delivery of software development and related consulting services. Within 100 days of launch, neoIT attracted over 500 providers and 20 buyers. 

neoIT now has 56 employees - we outsource our development. Our inhouse team focuses on technology, product definition  and design, provider development and delivery support but outsource the development and technical support. Our buyers are predominantly from US and Europe and providers from India and US - but we have significant buyers and providers from the other parts of the world. We are well on our way to be a profitable company by the end of this calendar year.

Who is your main competition and how do you stack up against them?

The main competition of neoIT is BAU: Business as usual!

Otherwise, our competition is a mix of companies that play in  narrow areas - in marketplace, it is IQ4Hire, ITSquare; in enterprise solutions we do not have a credible competition; and in offshore outsourcing we are recognized as established leaders now (particularly after our partnership with TPI - the largest BPO consultants in the world). 

We are doing well in all segments that we play in and the economy slowdown has given a  tremendous boost to our enterprise and offshore outsourcing consultancy and advisory business.

If you could go back in time and start everything again from scratch, what would you do differently the second time around?

We believe we have done the right things and business has been good. We have kept pace with technology and our customers and look forward to lead this market.

What are the Top Three technology trends that we should be looking out for in cyberspace over the next few years?

         Wireless access, terminals and delivery

         Integration with enterprise systems

         Intelligent robots/agents will help users get more out of Internet technology.

What advice/recommendations/tips do you have for Internet entrepreneurs and professionals in India and elsewhere?

Focus on delivering core value (content) - use Internet technology to change the way business is done and see what model best integrates with enterprise solutions to drive efficiencies. You have to have tremendous experience in your domain, technology and customer knowledge to make a difference. A fad is not commercially viable.

Follow your heart, never forget the basics, and remember that customers and people matter the most!

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