Is the Best of Indian IT Outsourcing Industry Yet to Come

By Daya Mukherjee May 22, 2020
Is the Best of Indian IT Outsourcing Industry Yet to Come

IT industry has been the crown of Indian economy for long. However, between 2008 to 2012, the combined annual growth rate (CAGR) of the industry dropped to 7 % from erstwhile 32 %. The nature of outsourcing had changed and other destinations had emerged. This led to several experts predicting downfall of the industry.

The industry, however, retained its poise pushing through the challenges and adjusting quickly to the changing scenarios. Experts now opine that the best of Indian IT industry is yet to come.

Expanding into Domain Specific Solutions and Consulting

Indian IT service providers were quick to realize that low skill projects such as manual data entry, BPO and tech support would not bring long term growth. As a result, they shifted their focus on bringing technology and research projects. They found a way to progress by expanding into solutions and enhancing skills in consulting and domain specific expertise.

Move to Complex IT-enabled Business Processes

One of the strategies of India-heritage tier 1 service providers has been to grow their non-Indian employee base at a faster rate and performing strategic acquisitions to reduce the leakage of business to competitors in highly commoditized services. The future of IT outsourcing lies not in the low-end work, but the more complex IT-enabled business processes related to specific industries.

Working on Alternatives to Public Sector Contracts

Indian IT companies expect protectionist legislation to inhibit their growth in public sector IT outsourcing. This has prompted them to try and explore opportunities in other geographical areas. At the same time, they continue competing for public sector contracts that are large in size. Complex public sector deals are hard to win, but these are also sticky and profitable. Companies would like to retain these deals, but are working on alternatives as well.

Using Cash to Protect and Expand Turf

Several Indian companies have abundant funds. However, they have preferred to keep their cash surplus rather than making proactive investments in their business. Experts predict that the changing times will encourage them to actively use cash to protect and expand their turf, strengthening economies in various parts of the globe and creating jobs. Many service providers are likely to invest in less commoditized IT services – social, mobile, analytics, or cloud computing – lying at the intersection of IT and the business.

Moving the Needle

IT industry is currently undergoing a seismic shift. Start-ups are willing to take home, negligible revenues in the initial years, spending this time in building potentially lucrative solutions for clients. The time requires them to move the needle and be innovative, floating their way into the new business model. Companies that have a flexible business model and keep reskilling their employees in line with the changing requirements are more likely to succeed. They have to be on tenterhooks all the time, always trying to keep up with the times and do the best in the scenario.

Final Word

Indian providers are focusing on breaking the mold of linear growth that requires greater investment in human resources for increasing revenues. Investing more in automation and new age business platforms enables them to increase profits without surging their overheads.

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