The Year That Will Be: Crystal Ball 08

So, how will 2008 be? We asked a cross-section of CEOs and top executives to
name a few trends that they think will be clearly witnessed in 2008 as well as a
few challenges that they foresee before the industry. With diverse stakeholders
within the broader ICT community that Dataquest reaches out to, it was not
surprising to find diverse trends and challenges being mentioned by these
honchos. IT services, BPO services that are primarily export-based, of course,
mentioned rise of rupee as the most important challenge, followed by
manpower/skill availability. A few companies doing business in the domestic
market in India also shared the latter as a concern. But most domestic companies
are bullish about growth potential and see SMBs as a major opportunity in the
New Year. Green-friendly technologies also came up as a top-of-the-mind trend.
Productivity, possible end of tax holidays for IT companies, and rise of
on-demand model were challenges/trends cited by multiple senior executives.

Kris Gopalakrishnan, CEO, Infosys

Companies will continue to look at co-creating new
products and services with customers and partners to accelerate innovation
cycles. They will also collaborate across their value chain to have better
insight into demand and supply information so as to be able to adapt to changing
business cycles

Top Trends

• Emergence of new technologies that will address issues around the carbon
  footprint of global corporations. There is a business opportunity for IT
  companies here.
• Convergence of the mobile, web, and the real world
• Personalization and the overall user experience have become far more
  important

Neelam Dhawan, MD, Microsoft India

An increasingly customer centric view is the constant
refrain that we will hear the next year, and for some more years to come, and
this will drive tremendous innovation. If I were to look for a single trendthis
would be it, and all else will follow logically

• New ways to access IT such as Software + Services with SMBs as the biggest
  beneficiary
• Infrastructure optimization
• Virtualization

Top Challenges

• Piracy, Piracy, and Piracy

Pramod Bhasin, CEO, Genpact

There is an increasing need to strengthen public infrastructure if India has
to continue to be globally competitive. Our reforms process has made huge
strides, but there are still miles to go. For instance, the licensing procedure
required for setting up a new facility or a new telecom network is still tedious
and time consuming. One doesnt need laws or reforms for that, but a system
which ensures that existing systems work more efficiently

• Customers will demand real expertise and domain knowledge from their
  partners, and the industry will have to build capabilities to meet this
  demand.
• The BPO industry will be Indias largest private sector employer
• Improving infrastructure and a favorable investment climate will drive
  companies to expand their presence in tier-2 and tier-3 cities such as Jaipur,
  Indore, Gwalior, and Bhubaneswar
• Talent crunch will continue to be the biggest challenge facing the IT/ITeS
  industry
• Availability of better public infrastructure

Bhaskar Pramanik, president, Sun Microsystems

With the BIS rejecting OOXML as a standard, ODF (Open Document Format) will
assume greater importance in the government and related agencies in 2008

• The Indian IT industry will continue to report double-digit growth in
  2008. New verticals like retail, healthcare, and entertainment will fuel this
  growth.
• Virtualization will continue to make headway in enterprises
• Open source will continue to gather momentum
• Green concept in IT would assume a very pivotal role in the coming year.
  The primary driver will be cost savings provided by better energy efficiency.
• The client side will be driven by rich, real time, content-driven devices.
• Higher interest rates will depress consumer spending and new investments.
  Costs and profitability will have to be managed carefully through increased
  productivity.
• Short supply of skills in specific IT areas such as ERP, solution
  architecting, SOA, and industry-specific applications.
• The uncertain political situation at the Center and in some states will
  delay key pro-market reforms. This will delay decision making, especially in
  the government and public sector.

Krishan Dhawan, MD, Oracle India

As more and more Indian companies participate as suppliers, contractors, or
customers in the global commercial system, understanding of and adherence to
global compliance norms has become a practice. As a result of this, issues
related to compliance, transparency, and breach of information security are
taking centrestage

• From just an exporter of IT, India is also becoming a significant consumer
  of IT
• IT security and compliance
• Increase in adoption of innovations such as grid computing, business
  intelligence, and tools such as HCM solutions by midsize companies, and
  increased acceptance of the software as a service or the pay per use
  model.

Suresh Senapaty, corporate executive president, Finance and CFO, Wipro

Rupee is an external variable that needs to be watched carefully in 2008;
though we do hope that the rupee will reflect some mean-reversion

• Next Generation Global Delivery Model: Indian players will further
  carve-out a truly global delivery footprint.
• New Growth Drivers: In terms of opportunity, there is a vast white space
  that remains untapped. This includes fast-growing markets like Continental
  Europe, Canada, Australia, Middle East, and South Americas. Even as the UK and
  the US continue to drive the mass of work, accelerated growth will come from
  these new destinations in 2008.
• Non-linear Business Model: More R&D and innovation will gradually move the
  business model to less linear than it has been so far. Some of the models will
  be outcome-based pricing, risk-reward sharing, etc.
• Rupee Rise: In 2007, rupee appreciated by 15% odd. Industry lost more than
  7% of operating margin on gross basis though at the net level, the margins
  remained in a very narrow range due to resilience of the business model.
• Risk Management: As we remodel the business that focuses more on SLA-based,
  outcome-focused pricing, we also need to proactively invest in appropriate
  risk management frameworks and processes, so that the incremental risk is
  effectively managed and mitigated.
• Enculturizing People: Like earlier years, in 2008 too IT companies will
  spend a good share of management time to further enhance our capability in
  talent transformation.

Naresh Wadhwa, president and country manager, India & SAARC, Cisco

Experts believe that the rupee is set to appreciate even higher and that
coupled with rising salaries is bound to impact the profit margins of the IT/ITeS
sector, with companies looking at ways to hedge against future appreciation as
well as enhance productivity

• Continued growth and transformation across sectors like manufacturing,
  infrastructure, banking, government and defence, IT/ITeS, telecom,
  outsourcing/offshoring, retail, and SMB
• Greater traction coming from the increased adoption of collaborative
  technology, unified communications, datacenter and security solutions in India
  as trends like remote working catch on and enterprises focus on productivity
  improvement
• Emphasis on local innovation as tier-2 and tier-3 markets will emerge
  stronger and companies will focus on areas such as rural banking, connected
  agriculture, and healthcare.
• Productivity enhancement and risk management
• War for talent to continue
• Meeting rural teledensity targets

Atul Nishar, founder & chairman, Hexaware Technologies

The growth in the Indian market will complement the growth in software and
services exports. Indian IT companies will have to look at the home market to
deliver services and solutions

• Indian IT companies will increase focus on non-dollar economies,
  particularly Europe and Asia
• Several other lower cost destinations will see much higher growth of their
  outsourcing industry due to factors like cost competitiveness as well as the
  currency factor in India. Indian IT companies will set shop in these countries
  to leverage such benefits while ensuring business growth.
• The growth in the Indian market will complement the growth in software and
  services exports.
• Rupee appreciation will pose a big challenge in the coming year for IT
  companies to sustain the profits and revenue stream
• Attracting and retaining the best talent
• Infrastructure

Raman Roy, chairman & CEO, Quatrro BPO

I begin the year with more concern than optimism. Rupee appreciation and end
of tax breaks in 2009 will mean tougher times ahead. India should remove all the
regulations that do not allow the international BPO industry to increase their
per seat realization by getting into the domestic market at the same time
creating millions of new jobs. These restrictive policies should be changed

• Large scale consolidation in BPO industry
• Captives selling out to third parties
• High-value business processes attaining maturity
• Rupee appreciation hitting the business
• Challenges of finding people in large numbers
• Possibility of political rhetoric about outsourcing re-emerging toward the
  end of 2008

Lakshmi Narayanan, VC, Cognizant Technology Solutions

“Countries such as China and Philippines are investing in and providing
incentives to companies for innovation to let the service industry flourish
there. As a result, the competition will no longer be restricted to the level of
companies alone. Instead, it will rise to the next level: Competition between
nations and regions”

• More captives in India
• Analytics at the higher end of BPOs
• Collaborative development
• Leadership Bandwidth and Talent Mobility: Even today talent isnt really
  mobile. There are still constraints such as visa restrictions and limits on
  the time for which professionals can stay abroad. Companies abroad are not
  able to hire managers from India and Indian companies are not able to recruit
  professionals from elsewhere.
• Innovation: The challenge is to encourage small companies and new sectors
  like BPO to be innovative
• Competitive structure: The competition will now be between geographies

Manoj Chugh, president, EMC India

Compliance will be the next wave of IT investment by organizations in India.
Enterprise spending on just the hardware, software, and computer services to
develop an IT infrastructure to support compliance initiatives are expected to
increase significantly in 2008

• Green IT: As the energy costs continue to rise upward and power grid
  capacity is pushed to the brink, enterprises in India are likely to embrace
  Green IT products and solutions
• Compliance: Compliance will the next wave of IT investment
• Information Security: In 2008, information centric security will be a
  significant trend
• Skills Gap: One of the biggest challenges would be the lack of skilled IT
  professionals
• Attrition: Retaining the talent would be a significant challenge
• Global Economy Slowdown: One of the most significant challenges would be
  the impact of the expected global economy slowdown in 2008

Ajit Balakrishnan, MD, Rediff

Broadband is creating possibility of rich user interfaces, which will impact
applications design too

• Rise of Web services architecture
• Broadband

Neeraj Bhargava, group CEO, WNS Global Services

As the cost advantages of outsourcing become a norm, sophisticated customers
will push the envelope on business value being delivered in addition to cost
savings. Service providers will need to ensure that conversation with the client
extends beyond cost savings and more toward business outcomes

• Vertical knowledge of service providers will become more important
• More business outcome-based deals
• High quality talent
• End of tax benefits in 2009