The future of Indian IT

The future of Indian IT

Bright sunny days over, Indian IT industry braces for big churnWith revenues of $ 160 billion employing a workforce of nearly 4 million, the Indian information and technology (IT) sector is without exception the first industry that showcased India's prowess at low cost problem solving to the wide world. Kick-started largely thanks to the Y2K scare that gripped the world in late 1990's, India firmly established itself at the forefront of outsourcing game.The industry today contributes over 9 per cent of India's GDP and 45 per cent of country's total services export and is at the centre of the country's economic progress. By 2025, it is expected to more than double its size at $ 350 billion. Yet, not everything is hunky dory as the low hanging fruits have been plucked and the days of high growth are over.While presenting the company's first quarter results on July 15, 2016, Vishal Sikka, CEO and MD of Infosys Ltd, cut a somber figure. India's second largest exporter of IT services took everybody for a surprise by slashing its annual revenue growth forecast. The firm's revenue and profit for the quarter itself were below market expectations. Infosys was not alone in reporting a disappointing set of numbers. The largest exporter of Indian IT services Tata Consultancy Services, had also reported weak numbers. Wipro, the fourth largest India-headquartered exporter of IT services, has been in a turnaround mode for the last five years.Even erstwhile market darlings like Cognizant, Tech Mahindra and HCL Tech, which in recent years had managed to grow faster than their peers, reported muted numbers. Mid-sized companies like MindTree, Hexaware, Cyient, Genpact and Mphasis all turned in sub-par performances.Not that there is no growth just the pace is much slower. This year, Nasscom expects exports to grow at 10-12 per cent, the lowest in more than a decade. Even during the global economic meltdown in 2008-09, Indian IT exports grew by 16 per cent.The change has largely been due to the industry's complacency and inability to adapt quickly enough to automation aided by Artificial Intelligence. Global IT sector has moved on from mere low cost drudging and automation is replacing hundreds of employees for routine and mundane maintenance work.Ideally, Indian companies should have led the way but high margins and availability of cheap labour cocooned them complacency. The inevitable change started only recently as large Indian IT players launched their own AI platforms-Ignio for TCS, Mana for Infosys and Holmes for Wipro.At the same time, the size of contracts have shrunk and billion-dollar outsourcing contracts are hard to come by. While in the past price was the only criteria today customers not only want somebody to trim costs but also grow business. This works in favour of those IT services vendors that have deep understanding of a customer's industry. A player like Accenture, which has a consulting legacy, is likely to grow at a faster pace than Infosys, which has a mere third of its revenue base. Unlike most MNC that have C-Suite, CXO relationships, Indian companies have had conversations with mostly information managers, IT departments and at best CTOs.From being the biggest beneficiary of the global IT phenomenon, Indian IT industry today finds itself in the position of the hunted. As the industry braces itself for the fight, more churn is in the offing.

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