By Vikash Jain & Aditya Shangloo
Since the year 2000, the Indian IT-BPO industry has grown 40X to about $160 billion today. At today’s Nasscom Technology and Leadership Forum (NTLF), the trade association will probably share the updated numbers. On a 30-year basis, this is 800X since 1990, with key players having grown as much as 50-200X in the same period. It, in fact, is a phenomenal story of long-term value-creation for customers, employees, shareholders and the nation (7%-plus contribution to the GDP, building of brand India). The big question—and especially with so much changing around—is will this journey continue?
The one phrase that captures the ongoing change is the transition of IT and tech from G&A (general and administrative) to COGS (cost of goods sold) in the enterprise. Tech is truly at the core of the business now. As someone said, all businesses will become technology businesses. This has profound implications, most important being that $1-trillion IT services will expand by 5X or more. While there are many trends, a few that will make a significant impact include:
Everything is software: In his 2011 article ‘Why Software Is Eating the World’, Marc Andreessen believed that all of the technology required to transform industries through software finally works at scale. Everything from car to appliances to banking will be software driven. Spaces that hitherto were not open to this industry are now legitimate opportunity with the right combination of capabilities.
Data becomes ubiquitous: Everything consumers and businesses do today is producing massive amounts of data, driving a $225 billion analytics services spend by 2025. Importantly, this can be harnessed and the profit pools will shift towards data (think Google, Facebook!). This creates a massive opportunity for players with businesses, services or business models around data.
Experience is key: Experience is increasingly becoming the centre stage of all design and development enabled by new technologies and data. It is fundamentally transforming business processes and the underlying operating models to support it. The digital transformation opportunity is huge, underpinning a $900 billion opportunity by 2025.
The disruption will only accelerate. Technologies like quantum computing, blockchain, machine learning, smart devices, mixed reality, and so on, which will further accentuate this are seeing unprecedented interest (more than $45 billion invested in 6,000-plus companies since 2015).
What does this mean for Indian IT? While new players have emerged across the stack, Indian IT has doubled its market share to 10% in the last 20 years, with several in the top 10. In the last 10 years (2010-20), eight of the top 20 have fallen off, and the share of global/European has dropped from 60% to 30%. However, interestingly, in the same period, cloud (AWS, Salesforce, Microsoft, among others) and consulting firms have increased their share by 5X.
While this share shift has been under way, heterogeneity of the competitive landscape is only accelerating. Winning in the 2020s will require many shifts and we will like to call out five key themes:
Bring problem-solving to the fore: Addressing business needs versus providing competency or a service;
Create heterogeneity talent: Engineers are good, but not enough, and delivering business outcomes with seamless experience will need much more;
Build flexibility in business models: IP, products and platforms will be key and each has a distinctively different model than pure people-based services;
Create an ecosystems mindset: DIY is dead. Capabilities required to succeed will include those that are outside the organisation;
E2E delivery and accountability: Delivering business outcomes will require integrating the stack and partners in a flexible and agile manner.
For an industry that has been so successful with the traditional proposition, this change is not going to be easy. The 2020s will definitely be turbulent, but the upside is huge for those who mature well through this decade.
(Vikash Jain is India lead, Technology, Media & Telecom and Aditya Shangloo is an expert on IT Services, BCG India. Views expressed are their own.)