Time to soak in sunshine

The rapidly rising demand for cloud-based technologies and digital transformation has attracted heavy investments in the setting up of massive data centers in India. Global investments are estimated to touch a whopping USD200 billion annually by 2025. Here are some key deals that throw light on the technological developments and trends in the industry.

• Cloud computing, social media, and data analytics are three avenues in which IT companies will witness massive opportunities for growth. The SMAC (social, mobility, analytics, cloud) market is expected to be valued at over USD200 billion in the current fiscal year.
• In January 2021, TCS launched a tailored version of TCS Cloud Exponents on Microsoft Azure, its flagship platform for offering smart cloud-based services.
• In February 2021, HCL Technologies entered a five-year ‘Digital Workplace Services’ agreement with Airbus to create an enhanced platform for enabling Airbus employees across the globe to provide customers with a better experience and service quality.
• In March 2021, Tech Mahindra partnered with Enate, a UK-based Robotic Process Orchestration (RPO) solutions company that offers an RPO-based platform for business process management (BPM), workflow, and workforce management. The partnership was aimed at improving the synergy between the employees and technologies such as RPA bots, artificial intelligence, machine learning, and natural language processing.
• In April 2021, Infosys and BP partnered to implement an integrated energy-as-a-service (EaaS) offering. This was aimed at effectively managing customers’ energy assets and services.
• In April 2021, Infosys collaborated with ArcelorMittal to deliver the next-generation application and BPM services to the company’s European arm.
• Other key players in the industry are focused on the development of differentiated and superior cloud platforms/products to maintain a competitive advantage.

Cloud computing, social media, and data analytics are three avenues in which IT companies will witness massive opportunities for growth.

The IT and ITES sector is already witnessing a surge in the demand for transformative technologies, which will continue to drive growth in the coming years.

Growing challenges

With the accelerated digital transformation during the pandemic, IT/ITES companies are under pressure to scale up to meet the demand and ensure that the systems they deliver work seamlessly. Moreover, these systems must function smoothly with all the security enhancements while ensuring that the increasingly stringent regulatory demands are met.

Rapid response during COVID-19: Bringing the entire workforce online is no easy task and poses serious challenges for IT/ITES companies. Scaling up cloud capacity, improving accessibility, enabling remote training, managing the increasing use of VPNs for data security, and meeting the constant need for upgrading new apps to cater to the changing demands are some of the major challenges these organisations must overcome.

Research has shown that ~70% of all the ransomware victims end up paying the ransom rather than risk losing critical data.

Evolving security threats: As technologies evolve, so do the methods of compromising their effectiveness. With the number of scammers and ransomware on the rise, IT leaders need to rethink their strategy in dealing with credential management and create a strong culture of cyber awareness within the organisation. Research has shown that ~70% of all ransomware victims end up paying the ransom rather than risk losing critical data. IT/ITES companies must therefore focus on protecting data with stringent security measures.

Integrating SaaS with containerisation: As businesses transform, the applications of evolving technologies are many and the need for creating a one-size-fits-all solution is a high priority for CTOs and CIOs. 2021 will therefore witness increased adoption of the ‘container’ approach which simplifies the development, shipping, and deployment of SaaS solutions.

Data privacy and governance: Data privacy norms are becoming stricter, thus making data security and its governance one of the most pressing challenges for IT/ITES companies. This is especially challenging when third-party service applications are involved in the process as it raises the need for maintaining constant communication with all departments to ensure

thorough vigilance.

While focusing on these concerns, IT/ITES companies will have to ensure that the consumer experience is not affected. With all the changes happening at the back end, a smooth front-end experience will become critical.

Here are the solutions

According to IBEF, companies are applying various strategies to deal with the challenges at hand, some of which are listed below.

Migration to the SMAC space: Clients in the SMAC space work majorly with big data and rely upon the inferred trends and observations to make business decisions. IT/ITES companies are fulfilling this need by offering comprehensive big data services to provide clients with meaningful insights.

Mergers and acquisitions: In April 2021, Wipro acquired Ampion, an Australian company providing engineering services, cybersecurity, and DevOps. Even Quess Corp (a business services platform) acquired a 30% stake in Conneqt Business Solutions Ltd. for USD27.9 million.

R&D investments: Companies are investing heavily in R&D and the training of their employees to create a workforce that is efficient as well as productive. R&D also takes up a major chunk of the companies’ investment strategy, which is also critical when the margins are under tremendous pressure from underperforming markets. Innovation is key amid the changing business landscape.

Differentiating product and pricing: Since most IT/ITES companies have similar offerings in the market, companies are working on introducing key differentiators that make their services stand out among the rest, e.g., ‘Building Tomorrow’s Enterprise’ by Infosys. Indian IT firms are also adopting global pricing strategies to enter the rink with global giants such as IBM and Accenture.

Dedicated verticals: In February 2021, TCS strengthened its association with Amazon Web Services (AWS), by introducing the TCS AWS Business Unit (BU) – a dedicated vertical that combines the technical know-how and market expertise of the two giants under one roof.

Tap the opportunities

The Indian IT sector is set to be driven by robust demand and expertise. Some drivers of growth include the following (Source: IBEF):

Cybersecurity: The Ministry of Home Affairs and the National Critical Information Infrastructure Protection Centre have come together to work on strengthening the nation’s cybersecurity amid allegations that Chinese attacks may have disrupted the operations at a certain stock exchange in Mumbai. The strategy could unlock a plethora of opportunities for IT/ITES firms.

Talent pool: In FY21, the industry is expected to recruit over 138,000 net new employees, raising the total employee base to 4.47 million. As more companies embrace digital transformation, IT roles in 2021 will be focused on technologies like IoT, AI, AR (augmented reality), and VR (virtual reality). Considering the scale of transformation and the number of organisations adopting it at once, the IT workforce will witness increased activity this year.

Cloud market: The public cloud market in India stood at USD2.32 billion in FY2020. It is rising at a CAGR of ~30% and is expected to touch USD8.61 billion by FY2025. This market is going to be one of the key drivers of growth in the coming years. From 2019 to 2025, the cumulative investments in data centers in India are estimated to reach ~USD28 billion, at a CAGR of ~5% (two times faster than the global average).

Companies are investing heavily in R&D and the training of their employees to create a workforce that is efficient as well as productive.

Infrastructure: The demand for Security-as-a-Service and the need for improved detection and rapid response capabilities are all set to skyrocket the infrastructure software revenue in India, which is estimated to touch USD4.6 billion in 2021, an increase of 12% YoY.

The outlook

The outlook for companies in the IT/ITES sector looks promising. Special economic zones are expected to drive the IT sector. Tier-II and III cities are also expected to emerge as the new data centers. To further boost growth, Software Technology Parks of India (STPI) has set up 57 centers across the country to facilitate rapid single-window clearance and the availability of necessary infrastructure facilities. STPI units can claim excise duty exemptions on the procurement of indigenously manufactured goods.

The expansion of focus areas will also contribute to growth in the future. Areas such as telemedicine, remote monitoring, and clinical information systems will continue to remain in demand and push the IT sector forward.

In the utility segment, the need for standardisation of set processes is expected to require immense assistance from the IT industry. Meanwhile, digitised content is on the rise and in conjunction with superior connectivity, which has led to the adoption of IT services by the media as well. RBI is also looking at reducing the cost of digital transactions to promote digital banking in India.

Furthermore, the release of 5G wireless technology by telecom companies is expected to fetch at least USD10 billion worth of global business to Indian IT firms during 2019-25. With all the above facts in mind, we are optimistic about the IT/ITES industry’s performance in the days to come.

During 2019-25, cumulative investments in data centres in India are estimated to reach ~USD28 billion at a CAGR of ~5% (2 times faster than the global average).

By Abhishek Agarwal, President, Judge India – Global Delivery, The Judge Group