What change means for India IT companies

MUMBAI: The Indian software services industry is talking non-stop about the revolution coming their way as large corporations adopt emerging technologies at a hectic pace, but experts question if companies are really walking the talk. As some 1,400 executives from 35 countries gathered here under the aegis of industry group Nasscom for an annual meeting, not everybody is convinced that the industry is investing enough to succeed in the future.

For the $100 billion (5.4 lakh crore ) industry, built on the foundation of cheap and abundant supply of engineering talent, changing the fundamental way they do business is hard even as they admit that change is inevitable.

“It is hard to play that piano,” said Frank JH Ridder, research vice-president for IT outsourcing at Gartner, referring to the need for Indian outsourcers to think beyond volume and about value creation. “The starting point is admitting that the people game is getting over.” Despite endless talk about cloud computing, few Indian IT companies own assets such as large data centres in their largest markets such as Europe and the United States to be able to offer cloud-based solutions, according to the Gartner analyst, who attributed some of the reluctance to Indian companies’ risk-averse attitude.

Pradeep Mukherji, head of outsourcing advisory Avasant, identified the ability to adapt to changes in market requirements as the single-biggest challenge facing the industry, which is expected to close the current financial year with a little over 10% growth, compared to 17% in the previous fiscal.

“Every business is getting reimagined,” said N Chandrasekaran, chairman of Nasscom and CEO at Tata Consultancy Services, India’s largest software services exporter, referring to clients’adoption of new technologies such as cloud, mobility, social media and data analytics, forcing service providers to cater to new demands .

Despite India becoming the technology services backyard for the world over the past three decades of the sector’s evolution, there is still plenty of more work that can find its way here . In the year to March 2014, the industry is expected to grow slightly faster at about 12-14 %. “The external threats are not serious enough yet to force Indian IT companies to take change seriously ,” said Vineet Nayar , vice-chairman and joint managing director at $4.4-billion HCL Technologies, India’s fourth-largest software services exporter and one of the fastest-growing in the top tier in the sector .

“There are incremental attempts at innovation , but nothing fundamentally disruptive and I doubt it will happen as long as there is sufficient headroom to grow in traditional technology outsourcing work.” The need to change is less urgent also because waning competition from some of the multinational competitors such as Hewlett-Packard have made it easier for Indian companies to win business in the global technology outsourcing market . More charitable observers of the industry said that winds of change are blowing , albeit slowly .

“While there is change happening at different levels , the results may not be perceptible yet because of the size of the industry and the companies themselves ,” said Hitesh Shah , technology analyst and director at brokerage IDFC Securities . Sector leader TCS said that its intention is to change in the ways that market is demanding. “We will need to build several new products , platforms in the coming years,” TCS CEO Chandrasekaran said.

“That’s what we’ll be doing .” But the writing on the wall is clear . “Though the traditional business is not going away , but 3-4 years down the line if they do not evolve , they will become irrelevant ,” said Jaideep Mehta , country manager and the Indian arm of technology market researcher IDC.


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