The Indian technology sector rallied round to grow at 2.3% year-on-year on the back of rapid acceleration in digital transformation and tech adoption. It is expected to add over 1,38,000 net new hires in FY21
Nasscom chairman UB Pravin Rao
By Srinath Srinivasan
As the financial year 2020-2021 comes to an end, Indian tech industry has a lot going for it. The resiliency shown by both large technology firms and startups have made India one of the strongest digital markets despite the disruption caused by the Covid-19 pandemic. The current quarter and the new year ahead present a host of opportunities for Indian tech industry.
According to a recent Nasscom report, Indian IT services revenue is set to touch $194 billion by end of FY 20-21, a 2.3% increase from the previous year. The commentary from the Indian IT giants, post their Q3 FY21 results, were all positive as they closed large deals and estimated a strong Q4.
For instance, Infosys raised its revenue guidance to 4.5-5% in constant currency terms from the earlier estimated number of 2-3%. When it comes to startups, Nasscom has earlier reported that more startups are raising their first round of funding in 2020 (nearly 42%) as compared to 2019 (around 29%). The first-time funded startups were in BFSI, ed-tech, agri-tech and gaming. In 2020, despite the disruption caused by the pandemic, over 12 unicorns were added to India Inc, as reported by Nasscom in its report.
As far as the large global brands in the IT industry in India, digital transformation will set the tone for the decade ahead. In one of the CEO surveys conducted by Nasscom with 100 key CEOs in the tech industry, it was found that 97% CEOs expect the global economic growth to be better than 2020, 71% CEOs expect global technology spend to be significantly higher than 2020 and 67% expect Indian tech industry to grow significantly higher than 2020. Says Nasscom chairman UB Pravin Rao, “Our CEO survey for 2021 indicates almost 70% firms expect investment in global technology higher than the previous year.”
The main driver behind this is the need for digital transformation. While the large IT services brands continue to bag large deals abroad, startups in India have opportunities within the country as well by working closely with large companies and by offering services/ products to MSMEs. For instance, the demand for deep-tech startups and their services is increasing. In the last five years, 2100 deep-tech startups have come up focused on specific technologies.
Nasscom estimates that this pool is expanding at 5-Year CAGR of 41%, faster than overall ecosystem growth rate. AI, IoT, Big Data, Blockchain, AR/VR and 3D printing are some of the technologies that the startups specialise in. Fintech and health tech startups saw a surge in the demand for their services such as digital contactless payments and telemedicine. Similarly, retail tech startups benefited from the demand for e-commerce, digital payments from the small businesses and kirana stores. According to Paynearby, since the back-to-back lockdowns in 2020, around 30,000-40,000 kirana stores are being added every month onto its platform. It expects this trend to grow in the period ahead.
“In this hyper-digital economy, trust with the four cornerstones of competence, reliability, integrity, and empathy, will be the single-most-important currency, leading the industry growth towards a better normal,” says Rao.
The focus of technology will become more experience centric. Salil Parekh, MD and CEO, Infosys, at the Q3 FY21 results announcement, said the company will focus on keeping the momentum going by delivering on client centric strategies. The CEO survey also mentions an estimate of nearly ~20% increase in tech spending on digitising the core, enhancing customer experience and redesigning product portfolios. The survey mentions that 60% CEOs expect larger digitisation deals and recovery of investments in core markets such as BFSI, manufacturing and retail.
New-age digital skills will be priority for talent in large IT firms as well as growing startups, especially in the areas of blockchain, AI, IoT, security, AR/VR and data analytics. Nasscom predicts that digital skills demand will outstrip supply by FY24. “Encouraging tech and domain specific professional skills among the talent will be priority in the next decade for making India a talent nation,” says Debjani Ghosh, president, Nasscom.
KEY PRIORITIES FOR INDIAN IT Build digital talent, make India a talent nation Get used to a hybrid working model Accelerate new markets in India and abroad, form new partnerships Increase spend on cybersecurity, threat awareness Become more customer-centric, improve customer experience in products and services