Perspective 2020 – the NASSCOM-Mckinsey study

The preview of the report presented today at the NASSCOM Leadership forum by the Mckinsey team has clearly spelled out the numerous benefits that the growth of the industry in the last ten years has delivered to the country. Tertiary education in the key IT states has grown over six times, the opportunities for youth, particularly young women has multiplied with women now constituting over thirty percent of the knowledge workforce and over forty-five percent of urban job creation can be directly attributed to our industry – that’s a lot to be proud about. Most important, we can all take pride in the fact that this is one industry which has put India on the world map!

However there are some dramatic shifts expected in the nature of work done by software exporters which need to be understood by all firms who do want their portfolio to be rendered obsolete by market shifts. Automation of basic services will see popular present day services like voice based call centers and even application development, support and testing go into a growth decline and rapid productivity gains and increasing standardisation will limit the job creation potential of the industry. The recessionary trends in the core markets of USA, UK, Europe and Japan will also necessitate the search for new markets like Brazil, Russia and China and a sectoral shift into more recession proof segments like public sector, utilities and healthcare. Product and services innovation and even process and business model innovation through the deployment of truly global delivery models will be necessary for firms to shift from being arbitrage players to true transformation partners and global supply chains will need to be set up for just in time recruiting at development centers established on a global footprint.

All this will mean that industry players who want to survive the slowdown and become leaders in the next wave of growth will have to consider multiple “step-out” models. These could be delivery optimisation through lean factories, customer centric full service provider approach in chosen verticals, domain expertise or even new solutions like Software as a Service etc, all of which would need strategic choices to be made for the future. Companies can emerge as winners through four action sets. The first set oriented at a rebalancing of customer and services portfolio will call for end to end capabilities in recession resilient areas like Healthcare as a segment and BRIC as market. The second set will be an adaptive sales offering like impact sourcing or a portfolio which targets the quick savings sought by recession hit customers. The third set will be for operations and delivery strengthening to bite twenty to thirty percent from the cost base of existing providers and the fourth and final set would be to make strategic investments in transformative acquisitions, strategic alliances and key markets like India.

An action agenda is clearly needed for the entire industry and its eco-system partners like the government and academic institutions. Catalysing growth beyond today’s core markets will enable the reinvention of business models and the development of new verticals and geographies, establishing India as a trusted sourcing destination will need a wider location network including dedicated knowledge towns, a high caliber talent pool of over four million people will need to be developed with employable skills through industry-academia partnerships and there needs to be a sharp focus on innovation both for the external markets and for enabling inclusive growth in our own country. Opportunities abound but there are also challenges – to be faced by entrepreneurs, firms and the entire industry. We are confident that we will prevail!

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