The IT and Business Process Management industry in India has been like the legendary phoenix for over two decades — literally rising from the ashes of its own past time and again and building new revenue and profit streams to keep all stakeholders happy.

As one tentative financial year ends and another begins, there is a new air of confidence that is visible in the industry. Nasscom has already upped the ambition for the industry to grow at least two percentage points higher in FY 14 in comparison with the 11 per cent expected growth number in FY 13.

There is reason to believe that even as one sigmoid of traditional outsourcing services and on site and offshore staffing moves into decline, another set of growth drivers will see the industry start a new sigmoid of growth that will serve us for the next three to five years.

The reality that is staring us in the face is that it is time for a change — in industry structure, the offerings of firms and even the nature of leadership needed to take the sector forward.

OLD AND NEW

The poster child of the industry, IT services, seems to be reaching the natural end of the first sigmoid of growth, which was time and material-based services, whether rendered on site at the client premises or offshore in swanky campuses in the seven IT cities.

The much-touted second sigmoid of growth, products and solutions, which have held out the promise of providing non-linearity to industry revenues, have failed as yet to deliver on the promise, while the announcement of outcome-based pricing has yet to graduate beyond the hype to provide a robust wave of new growth opportunities.

A related industry segment which has held out much promise for years has been engineering services, which was once seen as the most exciting white space for incumbents as well as new players as they sought to expand their contact footprint in client organisations beyond the CIO and CFO. Offshore design, drafting and product life-cycle management services and more leading edge areas such as product engineering and embedded systems have flattered to deceive as the growth of captive units as well as third-party service providers spluttered in recent times.

The opportunity still beckons for new services to be explored at the intersection of the shop floor and the enterprise requirement planning system, but it will need serious investments in manufacturing execution systems and niche solutions like traceability and operations management to get data out of core manufacturing into the extended value chain of the enterprise.

EMERGING AREAS

The winners in the next few years will be those companies which continue to ride the wave of application and infrastructure management services and smartly transition BPO offerings to platforms and business process management built on steady bedrock of vertical domain understanding.

The SMAC opportunity (Social Media, Mobility, Analytics and Cloud) will provide the necessary hot buttons for growth.

Various initiatives are already underway at industry as well as firm level to ensure that there is less of cannibalisation and more of new revenue opportunity that occurs because of these trends.

The attempt to push the envelope of information systems towards the cloud through use of SaaS, PaaS and IaaS models, enable touch point extensions through mobility and enterprise social media and mobilise big data and analytics to provide focused information solutions that truly transform decision making accuracy in large and small enterprises, is being made by the industry in all geographies.

The software vendors have already sharpened their focus on these areas. The services focus will have to follow suit and make the markets for the edge areas, even as they retain the country and industry’s stranglehold on foundation software services.

At an industry level, the challenges are clear. There are a host of entrepreneurial wannabes and fledgling players in products, gaming, animation, electronic commerce and even cloud solutions which are waiting to be discovered on a larger canvas and they both deserve and demand their place in the sun, which has hitherto been dominated by IT and BPO firms.

The case for the small firm has also yet to be made forcefully by industry associations. The ability to propel millions of new ideas into the limelight and provide them with the stages of finance and eco-system support needed on the path to scaling and profitability is something we have to demonstrate as industry leaders to win the respect of the young entrant.

TECHNOLOGY SHIFTS

The third area of focus has to be to stimulate and grow the domestic market.

From large corporations to government to the needs to make India truly inclusive in education healthcare and financial services, there is both a challenge and an opportunity for all industry players to provide as much value locally as we have done globally and demonstrate the value that we can bring to the process of restoring India to the eight percent growth track!

For companies in the IT and BPM sector, which have learnt through a series of economic shocks and technology shifts to stay the course and continually rediscover themselves, the challenges of the coming years are not so daunting that they cannot be overcome.

However, there needs to be a larger investment in research and development and an acceleration of intellectual property creation and non-linearity initiatives to ensure that the entire organisation is prepared to deliver value to more discerning customers.

A stronger consulting capability, core and extended enterprise capabilities built on a bedrock of application infrastructure and business process management capabilities and the understanding of transformation at a business outcome level — all these are pre-requisites to be the organisations of the future in this industry.

As we enter a critical year of industry change, there is a confidence that we are all up to the challenge and will again emerge triumphant.

(The author is Vice-Chairman and CEO of Zensar and Co-Chair of the National IP Council of CII.)

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