Indian IT: Achieving Non-Linear Growth
Jagdish Mahapatra, Senior Vice President, ITS Sales, Cisco India and SAARC
According to Nasscom's Strategic Review 2010 on the IT-BPO sector in India, the Indian IT sector will aggregate revenues of $88.1 billion in FY2011, with the IT software and services sector (excluding hardware) accounting for $76.1 billion of revenues. The domestic market is at an inflection point with the rise of India Inc. and growing adoption of IT to achieve greater efficiencies. The Government is fuelling IT adoption through the UIDAI and National eGovernance Programmes (NeGP), which create large scale IT infrastructure and promote corporate participation.
As the Indian IT sector witnesses rapid growth, increased competition along with customer demands to cut costs, is prompting the industry to seek ways of reducing TCO so as to maximize profit. Besides diversifying core offerings through new business and pricing models, IT companies are focusing on transforming process delivery by leveraging collaboration technologies to streamline processes and drive growth.
With the recession having forced companies to trim costs and improve efficiencies to remain competitive, IT companies that earlier followed a linear growth model to scale up are now seeking non-linear models, wherein headcount and revenues are not in tandem. High attrition rates, rising salary levels and shortage of skilled manpower (employability levels ranging from 4.22 percent for IT product companies to 38. 2 percent for BPO) are the HR challenges the industry continues to grapple with. Additionally, increased pressure from countries like the US to hire more local people is leading to an increased focus on lateral hiring.
Collaboration is in
A host of new technologies are available to help IT companies meet the changing business needs. Technologies like unified communications help to collaborate seamlessly, communicate easily, share information instantly, improve customer service and increase employee productivity. Business video/ Telepresence help IT companies ensure better resource utilization and achieve reduction in capex and opex, by enabling collaboration across time and geography, to reduce manpower and travel costs. Other technology tools like Virtualization Experience Infrastructure (Cisco VXI for example), enable organizations to free employees to work remotely and cut down on both real estate and energy costs.
These technologies when integrated with the learning management platform and content management systems are creating next generation learning environment for IT Services Organizations to reach out and train their employees(current & potential) at their convenience and provide most of the benefits of a large university at a fraction of the cost, thereby enhancing their skill sets and employability levels. Using collaboration technologies like telepresence, unified communications, rich media conferencing, Cisco for example, has successfully been able to decouple revenue and headcount growth from carbon emission growth - and reduced carbon emissions by 10 percent per employee (emissions of 98 telepresence meetings equals one international flight from North America to Europe).
Value added services
The Indian IT services sector is expected to grow rapidly -by about 3.5 per cent in 2011 and 4.5 per cent in 2012. As the correlation between headcount growth and revenue is beginning to break, growth is increasingly being measured by the number of value-added services that these organizations offer to customers through platform-based solutions, or by investing in intellectual property (IP) rather than pure application development and maintenance (ADM) work.
As clients demand high-end solutions to drive greater value and efficiencies, they expect IT service providers to come up with newer pricing models rather than traditional time and material contracts. Customers also demand value added services along with several other features to the products they get and look to derive maximum benefit with least cost.
Along with cost control and efficiency/productivity, customers are evaluating how investments in IT impact can further business goals. Virtualization, consolidation, and managed services that focus on ROI are driving market opportunities and alternative service models like Cloud, on-demand services and SaaS are helping to reduce infrastructure costs and provide scalability on demand.
In keeping with changing customer demands, Indian IT service providers have developed end-to-end service delivery capabilities across verticals through cross border collaboration and partnerships that enhance service offerings, and result in greater productivity and efficiency. Indian IT service offerings today include testing services, infrastructure services, consulting and system integration.
Service providers today are focusing on client relationships, mining existing clients and restructuring operations to provide focused vertical solutions. IT services is increasingly being driven by localized strategies designed by service providers. With a change in customer demand, IT Service organizations have also changed the way they serve their customers, and are making available 'on demand' and 'pay as you use' service models which help customers reduce costs considerably.
Going forward service offerings that are high-end deeply embedded in customer value chains will merge. Services and delivery will become location-agnostic leading to new opportunities such as design services in manufacturing, Remote Infrastructure Management (RIM), and more. Solutions for the domestic market will be a key focus area. Service offerings will shift from piecemeal, technology-centric applications to a range of integrated solutions and higher-end services, spanning new service lines (e.g., green IT). The Industry, Government and Academia will jointly take decisive action to harness technology and catalyze growth in the domestic market. By providing adequate policy support to keep the momentum strong, they will help India emerge as a global hub for professional services in the future.