The information technology sector of India stands at a whooping US$147 billion as of 2015. However, the future growth trajectory seems to be diminishing. Companies life Citigroup, Target Corp and Royal Bank of Scotland believe that the traditional labour arbitrage model of Indian IT is becoming less relevant due to its rigid structure.
According to the round table summit held by ET, where the top leadership of Global giants claimed that Indian IT outsourcing vendors need to adapt and transform fast to the growing Global demands. In addition, India’s software services firms need to offer more than just cost benefits and strengthen their capabilities in newer, futuristic areas of technology.
The list of such clientele includes retail giant Lowe’s, food processing company Cargill, financial institutions etc. Believe it or not but India’s IT industry is slowly but steadily losing its unique selling point of being the world’s foremost destination for lowcost software development and maintenance and therefore the top Global companies are contemplating to rather insource i.e shift business to their Indian operating centers.
“I think it’s also about changing the dynamics around how it is looked at today, and how it was viewed in the past. For example, in the past we looked at arbitrage, we looked at headcount, it was more like “you’re told and we will do” versus looking at customer outcomes. Headcount is no longer a discussion — so I think it’s more about customer-centric outcomes,” said Pankaj Phatarphod, managing director and country head of services at Royal Bank of Scotland, which currently outsources IT to companies such as Infosys.
On the other hand, a shortsighted view is that Indian software firms are currently working to cannibalize their future business. They are helping clients go digital by moving data to the cloud and integrating cloud applications to clients’ IT systems. Once the migration is complete, there will presumably be nothing for these firms to do.
To meet this challenge Indian software firms have been acquiring niche firms with technologies relevant for tomorrow.
While if we reflect on the IT business’s side then, recruitment is falling, the capabilities needed to land an IT job are stiffening. Indian firms are extensively retraining their staff and those who can make the best use of it are seeing their compensation levels go up.
Reddy, who is also the Chairman of Nasscom, says IT companies are fast adapting to the changing market needs and tapping newer segments to stay ahead of the curve. The pack is being led by Tata Consultancy Services, Infosys, Wipro, Cognizant, HCL and Tech Mahindra.
The move of global IT majors towards automation, cloud, digital and software as a service (SaaS), was seen as a threat to the Indian IT services industry. However, the Indian companies were quick to react and have invested substantially on innovation, building intellectual property, platforms, and using artificial intelligence (AI) and automation to deliver value. And now they are evolving more as solutions providers to ensure business outcomes, moving out of the shadows of the lift-and-shift model – taking and executing orders at lower cost.