Tectonic shift seen in IT services next decade

Written by Corporate Bureau | New Delhi | Updated: Apr 22 2009, 08:20am hrs
The IT industry would see a paradigm shift in the next decade, driven by global mega trends, with 80% of its incremental revenue coming from newer verticals, customers and geographies, industry body Nasscom said on Tuesday.

The new opportunities will take export revenues to $175 billion by 2020. Moving with the mega trends, the domestic industry will grow four-fold, with revenues rising from $12 billion in 2008 to $50 billion by 2020. The Nasscom-McKinsey report, based on a year-long survey and released on Tuesday, outlined the steps needed to tap the opportunities.

The meltdown could cast a longer shadow on the industry, it said. The global economic crisis will have far-reaching and as yet uncertain impact on the industry. Near-term volumes and pricing is likely to come under pressure, the report said, reiterating that the targeted revenue of $50 billion by 2010 would be delayed by three to four quarters.

Nasscom said by 2020, the business landscape would be radically different from the decade gone by, as it would be driven by opportunities thrown up by the global mega trends. There are likely to be new verticals in the public sector, healthcare, media and utilities, which have adopted global sourcing only to a limited extent.

There would be newer customer segments like the small and medium businesses and outsourcing would come from newer geographies in BRIC, GCC, Japan and the rest of the world.

Marking the challenges ahead for the IT industry, the report said while the industry can generate potential revenues of $375 billion in 2020, up to $150 billion of this opportunity is at risk without a radical transformation in the business environment, innovativeness and talent development.

The report said Indias dominance in the industry is likely to be threatened by a staff shortage of up to 3.5 million and ill-equipped infrastructure. Indian policies and the business environment have not kept pace with industry growth. The industry is still governed by laws not tailored to the service sector and inconsistently applied across states.

The report said the government can reform policies and incentives to support the industry and ensure parity with other emerging nations. Fiscal incentives, for example, can be extended beyond 2010 and domestic spending raised through IT budget allocations for e-governance.