Banking on a sustained focus on customers, with add-on services, using innovative technologies, the $120-billion Indian IT industry witnessed a turnaround of fortune in 2014, with topline companies registering double-digit growth.
But if we introspect and look at other global peers, can we say that Indian IT companies succeeded in bringing out products and services which are disruptive in nature, and with a true Indian stamp of frugal innovation?
This where the malice of inheritance comes to picture, as we have the nature of calling ourselves the second-best and imitate what others do. Even though mergers and acquisitions did not make that much impact during the period, leading IT bellwether Infosys made changes in its higher echelons with Vishal Sikka becoming the CEO, and startup companies earned huge fortunes in the industry.
Technologies in cloud, big data, analytics, mobility, social media and the Internet of Things (IoT) have become the order of the day. Indian companies are keeping track of these trends and gearing up to change their products and services to accommodate these areas where clients are looking for more innovations to enhance delivery.
The industry also had to face the headwinds of the economic slump globally in the first half of the year and its effects on the cut in government expenditure. In India, the Narendra Modi government provided a positive momentum to industrial and investment activities with a new policy push. His revised National e-Governance Plan (NeGP), Digital India campaign and development of Smart Cities also added impetus to Indian IT companies with other government-initiated economic measures in European and the US economies.
The Indian IT industry landscape comprises small, medium and large firms, including global services majors like TCS, Infosys, Wipro and HCL, multinational companies captive units and sectors providing software, hardware, process management, engineering, research and development and innovative products. This also includes ever growing startups vying hard to receive global attention with their so-called innovative products and brimming with high valuation expectation.
Churning in the country’s IT industry is very much linked to global trends. As automation makes inroads globally, Infosys and US-headquartered Cognizant have partnered with automation specialists such as IPSoft and Tata Consultancy Services and HCL Technologies have built automation tools in-house. Here an important fact to be noted is that the sector has highly depended on the American and European markets. The former still accounts for 60 per cent of India’s software exports. As per Nasscom estimates, the industry is projected to register 15 per cent export growth for this fiscal (2014-15) as against 13 percent last fiscal (2013-14).
“We expect the industry to add overall revenues of $13-14 billion this fiscal compared to $118 billion achieved in last fiscal, with software exports touching $100 billion and domestic sales reaching Rs 1,28,000 crore ($20 billion),” says Nasscom President R Chandrashekhar.
In a scathing attack on the trends in the industry, Infosys CEO Vishal Sikka said that the industry is moving in the wrong direction. “All of us in the industry find ourselves in a downward spiral, it is like a treadmill of increasingly lower cost, hiring people faster and faster from more and more mediocre places, training people less and less, putting them into jobs faster and faster,” he said in a pre-recorded keynote delivered through a video link at the recent Cebit India in Bengaluru.
He also opined that a better idea for the companies will be to innovate, and move towards automation and artificial intelligence (AI). “That is the future that our clients are looking for, that is what they are looking to India for,” he said.
“We are great at following orders from our clients, but we are not great at raising issues and we are not great at raising opportunities that we see for our clients. That change in mindset is what we (Infosys) fundamentally go after. I think the way to get there is to rely on our greatest strength, education,” he said.
Indian companies should be very careful and not give the domestic market to foreign companies. “We have new initiatives of the government in sectors like education, healthcare, agriculture, financial services, logistics, infrastructure and manufacturing to implement various programmes with other stakeholders. Here the digitisation campaign, Aadhar, smart cities and industrial corridors will have its impact with the help of IT hardware and software supports,” says PWC analysts Pallavi Singhal.
IT spend to surge
As per a study by research firm Gartner, Indian IT spending will reach $73.3 billion in 2015, up 9.4 per cent from $67.1 billion in 2014. The pace of IT spending in India may make it the third-largest IT market in the Asia-Pacific by 2016 and second-largest by 2018, after China, it said.
The Indian IT sector hiring will witness a churning with majority of the companies deciding to go slow on hiring plans. “Besides automation, the decision of companies to focus on non-linear services, move services to the cloud platform and the pressure on billing rates will impact hiring in IT service companies.
There is a possibility that middle-level engineers with around ten years of experience, who can handle things better, can be wiped out,” says CRISIL Research Director Ajay Srinivasan. But leading IT companies are saying that they will go for massive campus hiring.
According to Nasscom President R Chadrashekhar, the Indian startup ecosystem is rapidly evolving and driven by an extremely young, diverse and inclusive entrepreneurial landscape, with more than 3,000 vibrant tech/digital startups, which is the fourth largest base across the world.
“Indian startups are witnessing a four-fold increase in access to capital through VCs, angel investment and seed funding. This helps them to work on building tailor-made products for their customers. Simultaneously, we need to also work addressing challenges on creating supportive government policies in terms of ease of doing business, tax incentives, participation in government contracts and availability of risk capital. Nasscom will continue to actively engage with stakeholders across to address these challenges,” he said.
With the world moving towards the Internet of Things, the market for which will surpass the PC and mobile markets combined by 2017, the IT software and hardware industry will have to address the issues related vulnerabilities like hacking and piracy. Here, the industry is also facing the challenges of privacy and security of information.
CRISIL Research forecasts the industry growth rate to remain below 15 per cent annually over the next two years globally. Gartner Senior Vice-President and Global Head (Research) Peter Sondergaard said that the IT services segment is forecasted to grow 15.7 per cent while the software sector may grow 14 per cent in 2015.
This spells good news for Indian software services exporters like Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro and Tech Mahindra, which have also reported improved growth and large deal wins from key markets of the US and Europe, which together account for over 85 per cent of their business. “By 2015, we expect that one in three jobs will be connected to software, smart decision-making or robotics. By 2018, digital businesses will require 50 per cent fewer business process workers. However, by 2018, digital business will drive a 500 per cent boost in digital jobs,” said Sondergaard. Gartner said that devices will continue to account for the second-largest part of the Indian information and communication technology (ICT) market, after IT services.
Opportunity in connected life
The IT industry is going through churnings of technological advancement. Here the question is how they can recoup themselves to take on these challenges. Prospects of the IT industry gearing up to tackle interoperability issues and the idea of using software to control hardware.
As per rough estimates, up to 50 million things will be connected on the Internet by 2020 bringing together sensors and smartwatches, smart meters and smartphones, washing machines, fridges, wearable devices, and much more. The Internet of Things, Industrial Internet, and Internet of Everything in 2015 will morph into the Internet of Anything. Here companies will have to take head on the challenges of making a common software “ecosystem” capable of accommodating any and all sensor inputs, system states, operating conditions, and data contexts, an overarching “Internet Operating System”.
Besides, the prospects in predictive analytics used by a variety of businesses to identify risks and opportunities, the augmented reality applications pave the way for over 2.5 billion mobile augmented reality app downloads per year by 2017.
Rather than squirming in the shallow waters of second-rate IT products and services, it is high time that IT companies should come up with world-class products and services following the footsteps of the impact of Indians, who are donning the mantle of topline tech companies and part of startups in the Sillicon Valley.