Combining SMAC technologies is the next big infotech revolution
28 Dec, 2013, 0411 hrs IST, Hari Pulakkat, ET Bureau
Social, mobile, analytics and cloud are technologies that have been present for a few years, but this year they started combining and growing together as a bunch, feeding off and reinforcing each other.
BANGALORE: In November 2011, during an earnings call with analysts, Cognizant CEO Francisco D’Souza spoke of the company’s big investments in social, mobile, analytics, cloud (SMAC): “Today, SMAC collectively represents a very small percent of revenue. Our goal there is not necessarily short-term revenue.”
Although the company coined the acronym widely used in the industry, Cognizant was not expecting big revenues quickly from SMAC. It is set to earn $500 million (about Rs 3,000 crore) in 2013 from its SMAC division, set up early this year.
Gordon Coburn, president of Cognizant, said at a technology conference in Boston last month: “If you had to ask me two years ago, would it be $0.5 billion, not in my wildest dreams. That shift has happened really quickly.”
The year 2013 was a watershed for the IT industry, as one of the most powerful forces in its history started taking roots quickly. Social, mobile, analytics and cloud are technologies that have been present for a few years, but this year they started combining and growing together as a bunch, feeding off and reinforcing each other. Never in the history of the IT industry have so many trends happened simultaneously, and never have they combined so powerfully. “When you combine technologies,” says Sanjay Purohit, global head of products, platforms and solutions at Infosys, “they grow exponentially.”
The contours of SMAC are not so well mapped out, and neither is its full commercial potential. Yet a few details are well known, and they are enough to cause tremendous excitement in the industry. Market research firm IDC had estimated last year that that 90% of all growth from 2013 to 2020 will come through what it calls the ‘third platform’ and others refer to as SMAC. This month, IDC predicted that third-platform technologies will grow 15% every year and capture 89% of the growth.
Gartner says that cloud computing will form the bulk of new IT spending. “SMAC is now among top three CIO priorities,” says Naveen Mishra, Gartner research director in India. “In 2014 CIOs will make the investments.”
The Indian IT companies that serve these CIOs, sensing this opportunity next year, have been making investments in people and technologies around SMAC.
Companies do not disclose specific investments, but the anecdotal evidence of 2013 is powerful. Wipro made two strategic investments: $5 million in cloud services company Axeda Corporation and $30 million in big data firm Opera Solutions. TCS set up a business unit in the Silicon Valley, bringing all SMAC services under one roof. Both Cognizant and Infosys launched SMAC products this year.
“SMAC in 2013 was different from last year,” says Mahesh Venkateswaran, executive vice-president of SMAC in Cognizant. “It went across geographies and industries, and made inroads into the processes and business functions of organisations.”
In short, SMAC has started touching every department in an organisation. SMAC technologies are now monitoring the effectiveness of sales force, helping the HR department with employee retention, getting machines involved in manufacturing to talk to each other, and letting the IT department to predict failures in advance. This is in addition to the mobile commerce that had already started to happen a year or two ago. In the next year and beyond, SMAC will revolve around big data, bringing context to the business.
Some of the forces that shape SMAC are easy to see. There will be 5 billion mobile devices and hence $52 billion mobile applications by 2016, according to Gartner. India will have 85 million smartphones by 2015, and they will drive a substantial amount of commerce.
This is why many companies have adopted a mobile-first strategy this year around the world, building mobile applications first rather than as an afterthought or extension. In India, ING Vysya Bank was the first to do this. HDFC Bank is following suit. Banking customers in India are largely over-banked, and finance companies need to use analytics to extract value out of them. “Banks have realised that analytics needs to be more scientific,” says ING Vysya CIO Anirudha Paul, “and in 2014 we will see desire in action.”
Financial regulation in India is also driving a lot of SMAC adoption, as the Reserve Bank of India has started implementing its three-year vision document drafted last year. “In 2012 SMAC was a low-cost alternative delivery model,” says Avinash Joshi, vice-president sales and business development, IBM India and South Asia. “Now it is leveraged as a combo.” Indian banks are among the first to use this combination.
Moving on to Healthcare
Healthcare is the next big adopter of SMAC, as personal health monitoring picks up significantly, and monitors start being connected with hospitals. This is big business for Indian IT compa nies.
Cognizant has been driving the IT strategy of Narayana Hrudayalaya, where Devi Shetty is overseeing a transformation that connects remote patients to the hospital for monitoring and intervention. Six hospitals in India are experimenting with a remote fetal monitor developed by Wipro, which can obviate the need to make frequent trips to the hospital during the third trimester of pregnancy. It is not clear what Wipro will ultimately do with this device, but it will definitely use it to showcase its capabilities in SMAC.
Cloud has had an impact on the revenues of many IT companies dependent on IT infrastructure outsourcing. Many of their customers are automating low-end BPO; IT companies with people-intensive business models are thus struggling. TCS, Wipro and Infosys are moving low-end businesses to the cloud.
Smaller firms, who don’t have the capacity to make big investments, are struggling. Organisational structures are changing, and IT companies are re-skilling their employees. These are not normal times for the industry. “SMAC is forcing IT companies to do a substantial amount of financial engineering,” says Sid Pai, Asia-Pacific president of ISG, a technology intelligence and advisory services firm.
This means that IT companies need to follow completely different pricing models, by skilfully combining hardware and software from different vendors. They would need to make more acquisitions or strategic investments. In fact, SMAC will drive consolidation in the IT industry over the next few years. It will see the entry of completely new players with ingenious business models. A Microsoft buying Nokia and Amazon moving into cloud computing are just early warning signs.