Friends,

It’s been a decade that started with fear, uncertainty and doubt and seems to be ending that way again for the Indian IT and Business Services Sector. But the industry proved the pessimists wrong then by moving up the value chain and enabling multi process outsourcing through innovative processes with the result that the first eight years saw all significant players report CAGRs of over twenty percent plus. The downturn which began over eighteen months ago has seen the inevitable decline in growth numbers and it is to the credit of the industry that growth has continued in both revenues and profits, albeit at a slower clip!

As global economies limp back to positive GDP growth and the high unemployment percentages in the West continue to create protectionist voices that work against outsourcing to other countries, the industry will continue to face the twin pressures of low incremental demand on one hand and persistent demand for more for less higher output from the same offshore resource base and reduced prices while volumes remain near stagnant.

To attain and sustain the level of growth that we have seen in the past, the imperatives for the industry are broadly in three areas- First is the need to explore innovative business models to move from the linear model and dependence on constantly increasing manpower. Investments in intellectual property and hosted applications and platforms and transformed processes where global centres around the world can be seamlessly integrated to deliver value are needed. In addition, revisiting revenue and gain sharing arrangements with customers and charging premium for expertise and result guarantees while developing deeper trust based relationships with customers will enable more sticky relationships to evolve. Second, the services portfolio will have to come under a microscope as a major share of new opportunities will come from new markets where wage arbitrage is not the key driver and a much more consulting led approach will be required to find real solutions to complex business and technology issues. New industry segments like public services, healthcare and education will need integrated solutions to be developed and high end segments like industrial design and clinical research outsourcing will need more investments by incumbent and new players in the industry.

The third and possibly the most significant challenge will be to reduce the industry concentration in the top seven cities which are already bursting at the seams and unable to cope with the pressures on physical, digital and social infrastructure and develop skilled resources all over the country. Industry has to see itself as part of a skills eco-system which enables robust partnerships with academic institutions and Governments at the State and Central levels to build technology enabled learning infrastructures that include young aspirants in every part of the country in the larger talent building effort.

Though the coming year might lead to slower growth in terms of revenues and profits, it will be about with opportunities for all. Let us dream of even bigger dreams for the future and another decade of astounding growth for the industry!
Ganesh

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Posted by Ganesh Natarajan

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