Direct and indirect costs of acquiring a technology


Attempt all the questions.

Section-A

Question1) What in your assessment are prevailing conditions of Intellectual Property Protection (IPP) in developing countries?

Question2)(i) What are the direct and indirect costs of acquiring a technology?

(ii) What are the various modes of payment for technology?

Question3) Enlist the advantages and disadvantages of technology transfer from advanced /industrialized economy.

Question4) Write brief notes on:

(i) Channels of Technology acquisition

(ii) Competitive position analysis

(iii) The system concept of Technology

(iv) Technology strategy and Management

Section-B

Case Study: Leading Players

Frontline software companies in India like Wipro, Satyam and TCS had successfully employed global delivery model – executing projects of various sizes and scale for Fortune 500 companies. This model not only helped them add value to their customers by considerably reducing their costs, but also helped them boost their own revenues. Revenues of TCS, India’s largest IT Company, reached $1.6 bn in the fiscal year 2003-04, whereas Wipro’s revenues were $1.35 bn.  Its net income was $220 mn.  Similarly, revenues of Infosys were $1.06 bn, whilst its net income was $270 mn.

With increasing competition in low-end niche operations from smaller players in an industry, leading companies were forced to re-think their strategies to expand their business. They further diversified portfolio of services, where size and scale advantages can be used as differentiating factors.  This made most of them add new revenue streams into their business, most recent inclusion being BPO. Companies started focusing increasingly on the ways and means to partner with their customers and build stronger relationships with them.  This not only helped them in understanding their clients’ requirements better, but also doubled as the customer retention strategy.

Infosys

Infosys is one of the most successful companies in an Indian IT software and services industry.  This could be gauged from fact that during 1999 and 2004, the company registered the eight-fold increase in its revenues from $121 mn to $1.06 bn.  Among IT majors, Infosys was known for its relentless customer focus and extending its relationship with them to a new level by entering into specific partnership agreements. Its relationship with its clients went so well that it came to be called co-sourcing rather than offshore software outsourcing.  For example, in June 2001, company entered into the agreement with Burlington Northern and Santa Fe Railway Company (BNSF), second-largest rail network in North American, to enhance operations and number of customers. According to agreement, Infosys adapted the co-sourcing model, where employees of Infosys and BNSF jointly participated in design, deployment and management of some of BNSF’s IT systems.  By this, rather than sourcing software at the Infosys’ centre in India and then integrating it with its own system, BNSF can directly deploy requisite systems at its workplace. This further reduced costs.  On the benefits accruing from collaborating with Infosys, Jeffrey J.Campbell, Vice-President of Technology Services and CIO, BNSF said, “Collaborative relationship with Infosys has enabled us to reduce application development costs, as well as to benefit from Infosys’ quality assurance and project management processes.” This partnership was recognized as the example of the successful offshore service delivery model.  In November 2002, Aberdeen Group, the market analysis and positioning services firm, included a case study on Infosys-BNSF partnership, in its report titled `Software Outsourcing – Best Practices’.  In report, Stephen Lane, IT Services Research Director, Aberdeen, wrote, “Having evaluated the case studies for such offshore outsourcing best practices as collaboration, onsite/offshore team integration, knowledge transfer and relationship continuity, Aberdeen named Infosys as a company that exemplifies these practices through its dedicated sourcing relationship with BNSF.”  Over the years, Infosys developed similar relationships with several of its other clients, both big and small.

TCS

When Infosys stressed partnering with clients and serving them better, TCS extended customer relationship to next level – developing relationships with the customer’s customers.  For example, hardware vendor Compaq (prior to the HP-Compaq merger) was one of the chief customers of TCS.  Two of its products- Compaq NonStopTM and Himalaya TM systems arena were developed by TCS.  For Compaq, TCS developed products in exclusive set-ups, comprising 110 engineers and consisting of newest product -–NonStop Himalaya server.  This apart, TCS also provided maintenance support to users of the NonStop Himalaya customers, across the world.  These customers in turn used these servers to delivery applications to their customers.  For example, Ameritech, a US-based telecommunications company provided telephone, paging and Internet services to its customers in the Eastern US.  Most of the technical work in providing these services was conducted on the NonStop Himalaya servers that provided round clock customer support.  TCS also assisted Ameritech in developing the order entry system for its telephone services.  Company maintained similar relationships with other customers of Compaq servers like AXS Sunlife, Bombay Stock Exchange, Belgacompact Solutions, Proton World International and more. By giving support to customers of Compaq, TCS demonstrated its commitment towards developing better relationship with its customers.

Apart from IT software products & services, there are other connected industry segments, that witnessed tremendous growth in recent times.  These segments include engineering design services and embedded systems.

Case Question:

Compare and contrast diversification and service collaboration strategy for TCS and Infosys.

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