This is that time of the year we take an appraisal of the Indian IT industry and performance of the key segments. The DQ Top 20 FY 18 riding on the theme – ‘Surviving Disruption’ attempts to unfold how the Indian IT industry is taming the nexus of disruptive technology forces that are altering the very fabric of the IT adoption dynamics.
As C P Gurnani, CEO, Tech Mahindra says, “ The Indian IT sector has managed to perform well in FY’18 despite the market being volatile. The services industry is witnessing fast growth in the use of cutting-edge digital technologies such as Blockchain, 5G – Telecom of the Future, Artificial Intelligence, Automation, Robotics, and the Internet of Things. According to NASSCOM, a 7-9 percent growth in the IT industry is forecast in 2018-19. Such growth numbers are encouraging, especially during this technology shift in the context of the global economy where people are talking about 0.5 - 3 percent growth.
THE DQ TOP 20 2018
|Ingram Micro India
|HP Inc India
|Source: DQ Estimates (Revenue Rs Crore)
THE DIGITAL MANTRA
If one looks at the ground zero, FY 18 was all about making the most of Digital. Most of the companies in the DQ Top 20 list focused on the Digital opportunity and recalibrated their business and delivery models tuned to an emerging tech play. In sync with Digital opportunities, companies trained their HR. The country’s #1 IT company TCS articulated well, it said, “We firmly believe that there are no legacy people, only legacy technologies. In FY 2018, over 247,000 TCS employees were trained in digital technologies. For TCS Revenue from digital engagements accounted for 21.2% of its revenue in FY 2018 and Digital grew 35.3% year on year.
Industry experts told Dataquest that in every industry around the world, companies are keen to pursue an ideal mix of best practices, technologies and thinking, to be truly digital. Digital transformation is not all plug-and-play. Going digital is definitely not a hasty leadership push to outdo the competition by purchasing bespoke technology stacks, laying out the piece parts and assembling them together to get a digital enterprise. It is a complex and introspective journey that demands bold decisions to simplify, modernize and secure the company’s digital assets to achieve the nirvana.
A look at Top 5 and beyond, except for a few companies most have grown in single digits. This in a way shows that companies in the fray tried hard to sustain their position rather seeking a big topline growth. Instead, they focused on upping their competencies and providing new age services to the clients.
THE TOP 5: HOW THEY STACKED UP IN FY 18
Source: DQ Estimates (Rs Crore)
ISSUES AT LARGE
One of the biggest issues over the last year relates to the visa changes the US government pursued under Trump leadership, as a result, the industry has to grapple with a range of work permit related issues pertaining to the US H1B visa changes.
According to Gaurav Jain, VP, ICRA “With a view to protecting US jobs and wages, the United States Citizenship and Immigration Services (USCIS) has been gradually tightening the H-1B visa scrutiny. This is bound to have several implications for Indian information technology services companies in the near and medium-term. As a prerequisite for H-1B visa, the USCIS in March 2017 issued an internal memo clarifying that all entry-level programmers will not generally qualify for a position in a specialty occupation. This will affect the profitability margins of Indian IT companies as a result of the direct impact of restrictions in the movement of low-cost skilled labor from India.”
Clearly, instances like this will hamper the free flow of tech resources to the US as we move forward. The only way Indian outsourcers can manage their onsite human resources is to hire more locally, that will reduce their dependence on H1B, but it will have an impact on the compensation metrics.
As we look at FY 19, most of the Indian IT companies will focus their energies and resources on escalating their emerging tech play and look at adding value to existing client organizations. Moreover, the leading companies in the DQ Top 20 list have already taken to automation in a big way and automated several key processes in areas like software testing. In terms of growth and profitability margins, companies in the fray need to have a multi-pronged strategy cutting across- geographic diversification, upping the ante on the domestic space, focused business units balancing out legacy vs. modern mandates, a well-meshed emerging technology strategy.
If one looks at FY 18, with the Government’s aggressive digital push, the companies, which have an aggressive domestic play, are gaining more traction. For instance companies like IBM in India are growing impressively on the domestic outsourcing market and companies which are dependent on one geography one vertical domination play will face tough times as we move forward. The domestic IT spend in India is growing in excess of 11% and it makes sense for companies to have an aggressive focus on India.
Industry experts say that in FY 19, in order to stay relevant to the changing market dynamics induced by the advent of next-gen technologies, it has now become imperative for players in the outsourcing industry to enhance their technical capabilities to deliver desired customer experience.