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Indian IT-BPM Services Turn the Corner

In the current turbulent times, Nasscom, the Indian IT industry association keeps a close tab on the developments around the world and looks for opportunities for Indian IT to develop in many countries. In an article, Nasscom President, Som Mittal, outlines the vision for the current year and how India can hope to fare.

Uncertainty and moderation of economic activity across the world were the highlights of 2012. The degree of uncertainty left an indelible impact on the Indian IT-BPM industry. The sector has rapidly evolved, in terms of expanding its vertical and geographic markets, attracting new customers, transforming from a technology to strategic partner — thus cementing India’s position as the premier global sourcing destination, with a share of 52 per cent in 2012 (up from 50 per cent in 2011).

Future growth will come from a combination of higher value services, increasingly non-linear play and further extension of the sector’s cost proposition. The Indian IT-BPM industry has already begun moving from enterprise services to providing ‘enterprising solutions’ — incorporating SMAC (Social, Mobile, Analytics and the Cloud) to create client impact, not only on cost, but revenues, profit margins and cash flows.

 In the face of a volatile economic environment, global tech spend grew 4.8 per cent to reach $1.9 trillion (1479 bn euros) in 2012. Hardware grew by seven per cent (driven by demand from a rising lower/middle class); IT services and packaged software grew 3.3 per cent each (owing to the impact of SMAC technologies); BPM experienced the fastest growth at 4.9 per cent (in the areas of platform and analytics); ER&D grew at four per cent (with the industry adjusting to changed consumer preferences).

In line with this growth, the global sourcing market reached $124-130 billion (96.52-101 bn euros), exhibiting a growth of nine per cent — nearly twice the growth of the global IT spend. APAC spend grew six per cent, nearly 1.6 times faster than mature geographies including the Americas (at five per cent) and EMEA (at one per cent). Lingering concerns about the global economy also impacted contract volumes, which shrunk by 13 per cent. However, the Average Contract Value (AC V) remained fairly steady at $21 billion (16.3 bn euros), largely due to a number of mega deals in the BPM space.

ISP: Indian Service Provider, MNC: Multinational Company, GIC: Global In-house Centre Source: Nasscom Source: Nasscom Source: Nasscom

Transforming to Enterprising Solutions

The Indian IT-BPM industry has experienced growth— both organic and inorganic, resulting in the emergence of the first Indian MNCs — over 580 global centres in over 75 countries delivering IT-BPM services. At the same time, there has been no let down in focus on operational efficiencies. Global in-housecentres continue to evolve to higher value-added roles, further enhancing India’s premier position in the global sourcing market.

FY2012-13 has been a year of transition and transformation as the industry has continued on its growth trajectory, transitioning from enterprise services to ‘enterprising solutions’. These are not standard lift and shift solutions. Clients expect the industry to tell them what is best, suggest changes and improve and replace existing workflows. Today, the vendor has to be a lot more enterprising, display entrepreneurship to ensure a service delivery that is IP-driven and productised, involve global delivery and talent, served over multiple platforms, has the customer at the centre of every module and is transformative in nature. Customers want solutions that do not have capex involved and today vendors have to design them as a pay-as-you go model and recover their costs on a gain-share basis. The Indian IT-BPM industry is leading the drive to design solutions incorporating SMAC (Social, Mobile, Analytics and the Cloud) to offer innovative, enterprising answers. These enterprising solutions are able to create client impact on not only cost, but also revenues, profit margins and cash flows.

Future Outlook

The global economy is set to improve 2013 onwards. Simultaneously, the BRIC economies are emerging as sources of innovation. Technology changes are also opening new opportunities. These factors are expected to drive growth in global technology spend by six per cent in 2013. Global sourcing is expected to grow faster at about 9-11 per cent to $135-140 billion (105-109 bn euros). Indian IT-BPM revenues (domestic and exports; excluding hardware) are expected to grow by 13-15 per cent in FY2014 to $106-110 billion (82.5-85.6 bn euros). Of this, exports are likely to be about $84-87 billion, a growth of about 12-14 per cent. To achieve this next level of growth, industry stakeholders need to work on five core areas:

  • Establish world-class infrastructure, enhance corporate governance and the risk/security framework
  • Significantly improve the quality of education
  • Establish India as an innovations hub and foster entrepreneurship
  • Drive social change through tech enabled healthcare, education, financial and public services
  •  Exploit opportunities in new, emerging geographies, underpenetrated verticals and customers