The $118 billion Indian information technology (IT) industry is on the cusp of major transformational changes which is expected to spin the sector into an altogether different orbit of crafting technologies for the digital world and create a new virtual reality. The Indian IT industry, which is globally known for labour arbitrage, is expected to move towards the path of more valuable intellectual arbitrage. The sector become the game changer for the world given the talent pool and vast repository of knowledge on the key technology changes.
At the annual meet of National Association of Software and Services Companies (Nasscom), the IT industry?s trade body?India Leadership Forum 2014, the three days were devoted towards evangelising the new digital wave and how firms could strategise to capture these market opportunities.
Nasscom chairman Krishnakumar Natarajan said, ?Technology itself has journeyed from hardware, to enterprise software, into digital solutions becoming an integral part of every industry. This evolving landscape presents our industry with rapid growth prospects.? He further emphasised, ?India can become a global hub for digital revolution.?
Nasscom has termed this entire shift as transformational outsourcing which would bring certain irrevocable changes and none of the old ways of doing business is likely to make much of a difference. The shifts would be multifold; capacity addition to creation of intellectual property, skill over scale, size to agility and from efficiency to transformation.
R Chandrashekar, president, Nasscom, said, ?The need of the hour is to prioritise domains based on potential size, market readiness and growing significance of policy evolution. Going forward the industry?s mantra will be to ?collaborate, connect, co-create? offering specifically tailored model for each specialised domain in the IT-BPM sector.?
The buzz words for the Indian IT companies have been a digital strategy and SMAC is something which is liberally thrown around. There is recognition of the fact that technologies surrounding social, mobile, analytics and cloud (SMAC) would be the key elements which will define how businesses will be run in the future.
Tata Consultancy Services (TCS) CEO N Chandrasekaran said, ?The whole evolution of technology is happening very fast and is having a significant impact on businesses irrespective of the industries in which they operate. The adoption of digital technology is a big opportunity.? Though, there is no quantitative measure on how much these technologies is being contributed to the overall growth of the industry but Nasscom estimates that SMAC revenues is about 5-10%.
A senior official from Infosys said that there are many underlying factors which will lead to an explosion of digital technologies, adding, ?We are just touching the tip of the proverbial iceberg.?
A key differentiating factor would be the creation of intellectual property (IP). A report by KPMG and Nasscom said that Indian IT-BPM firms have achieved only limited success in the field of IP, their growth having being initially by the cost advantage over North American and European destinations. In the past decade, Indian firms have acquired the scale and skills necessary to deliver large scale, complex transformation projects. However, the vast majority of these projects are linear in nature, with their revenue directly linked to resources. As far as IP is concerned, most Indian firms are at an initial stage of IP development.
The report said that there is a growing need for more breakthrough technologies and product oriented outlook in India. Going forward, technology vendors should seek to work closely with their customers to stay abreast of the latest technological developments and come up with solutions that can take advantage of SMAC.
R Chandrasekaran, vice-chairman, Nasscom, said that the entire digital trajectory for the Indian IT industry would be an evolutionary process as well as a big leap.
Cutting to the present, the Indian IT industry seems to have shrugged off the not so good years of 2012 and 2013. Now there seems to be a renewed confidence and optimism about the future. Nasscom has projected that the Indian IT industry in terms of exports would grow in the range of 13-15%.
The combined revenue of the Indian IT industry including the domestic segment is expected to reach $118 billion for FY14 as compared to $108 billion for FY13. The export component is expected to reach $86 billion in FY14 as against
$76 billion in FY13.
Among the segmental growth of exports, IT services is projected to record 14.3% growth, business process management at 11.4%, engineering R&D?11.1% and software products at 10%.
However, the domestic IT market does not seem to enjoy the same level of confidence as the 10% growth projected for FY14, is below the Nasscom guidance of 12-14%. The trade body attributes multiple factors for the slowness in growth: economic uncertainties, slowdown in decision making, inflation, rupee volatility, 2014 elections, which are impacting spending decisions both in government and private sector.
Today the big factor infusing energy into the Indian IT industry is the entrepreneurial startups growing in numbers every day. There has been three times the growth in numbers post 2005 with the Silicon Valley of India?Bangalore being one of the largest places for setting up the startups.
The Indian IT industry is now poised to take a different path which is going to be very different from the past but the fundamentals of doing the business is likely to remain the same of listening to the market requirements coupled with ability to execute the plans.
As Malcolm Frank, executive vice president?strategy & marketing, Cognizant said, ?India is going to navigate this transition quite easily having gone from labour arbitrage to intellectual arbitrage. The best thing about India is that this industry has captured imagination of the entire generation. So the best and brightest come into this business, which is not incase of the other countries.?