Is the Indian IT industry off the globalization track ?
Came across an interesting article by Subir Roy (Link here ) on analysis of a recent Nasscom – Mckinsey study around the IT/ITES industry in India and exploring where the opportunities are for the future and how different those will be from those of the past.
As per the study the growth drivers till date – banking,finance, insurance, retail , manufacturing will not driving future growth. Future growth will come from energy efficiency, healthcare, mobile applications. Plus the size of the companies looking to outsource will be smaller and mid size firms and or individuals.
The core bread and butter of IT outsourcing – Application development and maintenance will contribute minimal to the growth and newer services like remote infrastructure management, process standardization among others will be growth engines.
The Indian IT industry and outsourcing industry in general has been dealing with economic crisis and the slowdown by adopting the model of back to basics. Cost management and not process innovation is the major factor driving offshoring within the corporates today. Cost containment within offshoring firms is the new operating model.
The recent earnings by the Indian offshoring vendors showcase the slowdown in transformation services, innovative services the vendors were looking to grow their topline with. Vendors are holding on to their existing clients with a firm grip because of steep fall in new business growth. The offerings to clients have been trimmed down to basic keep the lights on and the price point of services has stayed relatively flat or dipped slightly. A number of the Indian vendors have pulled back their onshore presence and are huddling back in the offshore locations. Higher offshore to onshore utilization is being used and promoted to have more staff back in India. Plans to grow centers outside of India, if the clients are not funding those has been scaled back or put on hold. It’s been like a coming home and being global is no longer the brand goal.
Does this mean that the current crisis and the back to basic mantra has severely set back the IT industry to participate in being global. Has the Indian IT industry been relegated back to being an offshore low cost provider of services – a model which sustainable and necessary in shorter term does not offer growth . Firms had been working hard for a number of years to shed the garb of being an ‘Indian low cost provider’ and be recognized more as a global player. Business model of a number of firms involved building consulting organizations and getting a seat at the CFO/CEO table. Some of the firms have been partially successful in being viewed as global players but will this current economic crisis wipe that progress ?
With the current financial crisis far from over, Indian IT firms will have to continue to work extra hard and smart to survive in the newer growth opportunities.
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