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Can the franchising
model work for Indian IT houses?
Corporate
America has perfected the art of franchising. MOHAN BABU writes that
the Indian software industry can effectively follow this model of business
expansion for greater global status
An
interesting business model perfected by hundreds of business in the US is
the franchising model. Entrepreneurship has always been a strong component
of the American economy and in their quest to live an “American Dream”,
individuals have long dreamt of starting their own businesses. However,
because of the complexities involved in starting and running an own
enterprise, individuals have received the support of large businesses.
Corporate America has perfected a win-win business model that basically
translates to franchising, a model whereby the franchiser provides support
for marketing, gathering leads, brand name and support and the franchisee
operates the business independently.
Franchising
is a method of distributing products or services. At least two levels of
people are involved in the franchise system: (1) The franchiser, who lends
his trademark or trade name and a business system; and (2) The franchisee,
who pays a royalty and often an initial fee for the right to do business
under the franchiser’s name and system.
Perhaps the
most famous franchise model is McDonald’s, which, with its golden arch has
built a presence all over the globe. Almost every kind of business, from a
pizza outlet to supermarket chain, hotel chains and even consultancies can
be franchised. An interesting website, www.Franchise.org, managed by the
International Franchise Association (IFA), provides a wealth of information
on franchising. IFA is a membership organisation of franchisers, franchisees
and suppliers.
Interestingly, even accounting partnerships like Andersen and other Big-Five
consultancies closely resemble a franchise model. A typical “senior partner”
of a Big Five is akin to a franchiser. The partnership
operates,
using the KPMG/Accenture/CG&EY (etc) process, but is responsible to bring
about a growth in the business, manage clients, hire and manage consultants,
branch billing and operations. A share of the profits of the branch is
generally funnelled back to the head office. They act as their own boss but
have the protection of their head office.
Can the
franchising model work for Indian software and IT houses? Sure it can. Say,
for instance, if Wipro wanted to expand its operations across America, but
did not have the time, resources and local market know-how to invest in
offices, they could explore the franchising model. Individuals with
resources and contacts with an understanding of the local market at the
grassroots may be willing to franchise the Wipro brand.
Like any
other franchise, they would own the branch, handle the marketing, project
management and delivery of solutions, billing, etc. Along with all this,
they will be in a position to tap into Wipro’s global network as and when
the need arose. Wipro too would benefit from a greater exposure to their
brand. With Indians getting exposed to international business practices, I
see a growth in this model.
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