Symbioun News

Next Decade of Growth in Indian IT Services Market

The Indian IT services Industry has had a profound impact on the Indian economy, percolating down to the lower echelons of the Indian society and influencing the life of the common man. From disproportionate increase in real estate prices to the continuously increasing workforce affected by the bad ergonomics to the huge demand for Software engineers in the matrimonial market, the Indian IT industry has altered the country’s social and economic pattern. The avalanche effect of the recent recession had spared none but we are on road to recovery, say the experts. Higher sales forecast by an industry leader seem to be signaling the resurgence of the US $60 billion Indian outsourcing sector. Companies have started hiring again and are giving hikes and perks to retain skilled resources. The recession also forced many from the younger generation to consider entrepreneurship leading to mushrooming of start ups. Inspite of President Obama’s policies, US companies continue to offshore IT/ITES services.

The Rise of the SMB’s Worldwide

For Companies that want to reduce costs, outsourcing seems to be the best alternative. In fact, it is expected that the small and medium sized businesses will be forced to find a way to collaborate and work with domestic IT services companies with offshore ties. So far it was only the IT biggies who were hogging the limelight, by signing multi -million dollar, multi- year deals. But the future will see smaller, eager and agile companies bagging significant overseas contracts. SMB’s in the US and Europe are looking to outsource and want to work with SMB’s in the IT sector who can give them the time and attention which cannot be expected from the IT behemoths. This isn’t a mere prediction as more and more mid- sized Indian IT companies are inking deals with clients from US and Europe. So the next phase of growth in Indian IT market will not just see the growth of the ‘Goliaths’, but it will witness the emergence of a new generation of ‘Davids’. This breed of SMB’s will have the technical competence and agility to meet the needs of another SMB and provide the required attention, solution and cost effectiveness.

Bucking the trend- Domestic SMB’s

Another new trend that is emerging is that much of the growth will be fueled by demand from the Indian small and medium business (SMB) segment. Indian SMBs are expected to emerge as a significant opportunity. This is an indication that building enterprise IT infrastructures and applications, networking and communication have become key priorities for India Inc. The NASSCOM-Zinnov study anticipates that, in line with Indian companies’ increased technology spending, revenue from the domestic market will grow to US$4 billion - US$5 billion by 2015. SMBs’ requirements and buying patterns open a door for domestic providers. Working closely with Indian SMB customers will also help Indian companies make their products both "enterprise-ready" and suitable for other markets, especially emerging markets.

Reverse Brain Drain

A third interesting factor is the returning Indian expatriates, who have been very successful in the USA and Europe. These NRI’s are realizing the potential that the growing Indian economy offers and are returning to their home country with international exposure, experience and capital to set up businesses or fund ventures. This reverse brain drain will play a crucial role in upping the standards in these SMB providers and also in the entrepreneurial world of Software Industry.

Spreading the Joy

This shift in buying pattern, leaning towards the SMB’s, will lead to a substantial increase in revenue of the mid -sized IT companies which will have a trickle-down effect. Currently 7 Indian cities account for 95 per cent of IT export revenues, but the focus is now on developing 43 new locations to emerge as IT-BPO hubs. Most of the mid-sized companies are situated in the Tier II cities and employ local workforce. The growth of SME’s can help replicate the economic & technological development of the metropolitan cities in the Tier II towns and cities. The Indian domestic IT Services market is at par with international levels in terms of average gross margin and provides immense opportunity to the vendors. However, vendors need to strategize around services delivery by implementing efficient processes, reusable tools and templates and customize according to local needs. Recovery from recession is not mere rhetoric. SMBs who have survived the turbulence of recession have emerged nimbler and more productive. The end of 2009 saw new deals being signed and relationships extended. Enterprise mobile phone applications domain and enterprise social media monitoring space show immense potential to grow. With India having 500 million handsets and usage growing at a robust rate, viral mobile marketing and advertising domain is very hard to ignore. Other technology trends that are hard to ignore are intermediate sized devices like tablet PCs, growing computing capacity of small devices and the functionality it is able to offer to a mobile workforce, shift towards server based computing in centralized data centers through cloud computing, and a growing consciousness of energy use and efficient management of its consumption. Futuristic companies need to be armed with the knowledge of current trends not only in technology but its evolving applications as in Social Media, Cloud computing and small form factor channels on mobile and PDAs, the capability to relate to the Gen Y culture, and ability to innovate solutions for its customers in complex applications of IT.