The signals from this year’s Nasscom India Leadership Forum are not very encouraging for India’s IT industry. For the second year in a row, Nasscom has projected a flat growth in industry revenue at 7-9 per cent in fiscal year 2019 compared to an estimated growth of 7.8 per cent in 2017-18. It is not clear how the industry, beset with headwinds due to changing business models and slowing global markets, will be able to achieve even this muted growth, given that most IT companies have been reporting flattish top-line numbers in recent quarters. Even though the top IT players have taken steps to change their business models to win transformational deals in the digital space, the journey has been quite sluggish. Competition from global IT giants such as Accenture, and a workforce dominated by legacy engineers trained in old technology platforms is holding back Indian IT services firms from making big inroads into winning new-age technology projects. In the traditional IT services space, India’s cost competitiveness in providing IT services, which is approximately three to four times cheaper than the US, had been the mainstay in the global sourcing market. However, this is under threat due to tougher H1-B visa rules imposed by the US administration under Donald Trump.

Things are not looking spectacular on the domestic front either despite various schemes such as Digital India and the Smart Cities project. Revenues from the domestic market account for just 5-10 per cent of the overall revenue for the top IT companies which is not enough to move the needle. The introduction of GST has added another challenge as IT companies, hitherto used to a single point of taxation, now have to deal with multiple taxation points. Even if the Nasscom growth projections were to be achieved under these trying conditions, it would still be a far cry from the double-digit growth witnessed by the sector a few years ago.

It is time for IT companies to show that they are much more than just about shipping low-cost skilled labour to countries such as the US to drive higher margins. The industry needs to look inwards and find that entrepreneurial spark again, to quickly move up the value chain in terms of switching over to new transformational platforms such as robotics, artificial intelligence and automation. This also requires re-skilling its legacy work force on mission mode to make them ready to take up jobs that require very different capabilities compared to implementing an enterprise resource planning software. To compensate for any loss from traditional outsourcing jobs from other geographies, IT companies should harness the potential in the domestic market, given that India is at the cusp of a major digital transformation. Incremental push on these fronts will not be enough to resurrect the IT sector to its former glory.

Related Topics