Indian IT: the road ahead; the changing industry landscape and initiatives for the future

Abstract

In the past decade, no other industry was more relevant in India than the Indian IT industry. Its contribution to the nation s GDP and exports, the role it has played to globalize the India brand, the confidence it instilled in its investors and the employment opportunities it has created all are proof of the industry s prominence. The Indian IT industry has touched over USD 71 billion in revenues in 2009 with exports of USD 47billion. The sector contributes to 5.8% of India s GDP and 16% of the total exports. In rupee terms, the industry growth is at around 27%, with an export growth at 32%. It is expected that by 2020, the industry is estimated to grow to USD 225 billion. But, currently, there is enough debate on the future of the industry. Is the Indian competitive advantage sustainable, or should it make a shift even while the industry has enjoys one of the most competitive profit margins? What are the global trends and competitive landscape changes that may force a change? This research focuses on the possible industry level strategies given the current state of the industry, the future market potential and emerging trends in the industry. Based on our preliminary research, we came up with the following hypothesis on potential strategies for the industry: Entry into the software product space From services to end-to-end play Playing the current game better Going global We performed primary and secondary analysis and worked with industry experts to validate our views. We interviewed people from five distinct domains Software Products, Education and Research, Corporate Strategy and Planning, Platforms and Non-Linear Growth, and Sustainability and Green IT. Based on the interview findings and our secondary research, we formed our views. Some of our findings are listed below: The total IT spend globally is USD 1.6 trillion, and India s contribution is only a fraction of this. This means the opportunities continue to exist. It is also a priority for the industry to maintain its leadership position and capitalize on the causal ambiguity of its current model. This sector will function as a competitive cash cow for the industry, still maintaining its profit margins. The Indian players will increase their presence in the current value chain, and play in high value domains like consulting. The world does not have the appetite for another SAP or Oracle from India. While many services organizations have products in their portfolio, it will be a challenge to manage both services and products from within the same umbrella. Some of leaders in the services space have started separate companies to pursue product strategies. So, while product companies will continue to emerge from India, the main players will still be IT services organizations. For their non-linear strategies, the services companies will adopt a platform based, shared services model along with a deepening of domain skills. The Indian firms will not get into the Infrastructure hosting business due to the size of their balance sheets, risk involved and thin margins. They will get into partnerships with larger cloud players like Google or Amazon and play in the platform/applications space. Newer business ecosystems will be formed. The macroeconomic factors such as exchange rate fluctuations along with protectionist measures by developed nations will force the industry to adopt a global strategy. This will also help address the protectionist and anti-outsourcing agendas of various governments.