For most tech firms in India, return to double digit growth unlikely

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The cyber-physical opportunities in Industry 4.0 manufacturing and logistics, new financial and insurance services models will scale.

By Ganesh Natrajan

The trials and tribulations of the IT industry in India in 2017 has been a story that played out on expected lines as the industry faced the buffeting of external protectionism and economic slowdown storms on one hand and the inexorable move towards automation and less manpower dependent work needed by global clients on the other. As the new year dawns and an era of positivism begins to pervade the Indian economy, there is no clear positivism yet in the global context and it seems inevitable that a return to double-digit growth will evade most India tech firms in 2018 as well.

At the turn of the year, the tightening of the visa regime in the US and the likely legislations that may make it more and more complex for the manpower dependent model to continue are raising alarm bells everywhere. Having said that, it is automation more than visas which presents the bigger challenge to continuing high employment in the IT and business process management industry. The large-scale deployment of engineers in programming, application and infrastructure support and testing services can certainly slow down and some jobs may be lost as many of these processes can be taken over by robotic process automation, smart bots and Artificial Intelligence (AI).

Automation will also replace client jobs in manufacturing, banking, insurance claim processing and healthcare administration to name just a few, which may actually present an opportunity for visionary business process management firms to lead the charge towards process optimisation using technology and garner higher market share with more intelligence and less people.

The surge in customers embracing digital transformation will be a growing opportunity for smart companies who are able to embrace the new agile development methodologies and partner clients in the transition. Deeper understanding of the domain, the ability to sell to operations and marketing heads rather than just IT and the capability to simultaneously address Business Model Innovation, Business Process Reengineering and Digital Culture building will be the characteristics of the new age IT services firm. These will bring with them an ecosystem of partners and start-up firms and deliver the value that future clients will seek, which should hopefully create more than two lakh jobs in the industry in the next few years for the highly skilled and see a reversal of the negative employment trends of recent times.

The opportunities for the industry in 2018 will be in two areas. The first is the obvious one—to continue to strengthen digital transformation capabilities and invest in toolsets, products and platforms which enhance the ability to provide solutions and software, infrastructure, platforms and business process management as a service. The second is the more challenging, and yet in the long term, the more rewarding opportunity—to serve the emerging digital ecosystems and digital models of all industries and government services, right here in our country.
Charting the future of Digital India, McKinsey Global Institute has pointed out that in the next few years, while core industry revenues can scale as predicted earlier from over a 100 million last year to a 250-million level by 2025, a three times larger opportunity will exist by then in electronics manufacturing, e-commerce and digital payments and new and emerging digital ecosystems including enabling the shared economy to grow and thrive.

The cyber-physical opportunities in Industry 4.0 manufacturing and logistics, new financial and insurance services models, healthcare, agriculture and energy, mobility and transportation systems in urban areas and e-governance and education will all scale in India. Today, because of suboptimal procurement and payment processes, only the large multinationals and major Indian IT services companies are playing in this area but a $700 billion opportunity is too substantial to ignore and 2018 should see many firms putting a stake in the ground.

Finally, the rumours of mass layoffs and the formation of unions to protect jobs in the industry have died down in the last few months but all it will take is one careless statement or one act of commission or omission to set the cat among the pigeons again. The need for re-skilling and up-skilling is becoming urgent and many visionary start-ups are embracing AI and deep learning tools to create self-managed learning platforms, a case of AI becoming the hero rather than the villain in the new IT industry story that is unfolding before our eyes. The success stories of the future will be firms that build a sustained environment of learning and skills tuned to the needs of tomorrow and the responsibility is shared equally between employers and employees to ensure that such an environment prevails across the industry.

Having been part of the industry since 1985 and on the executive council of Nasscom since the times of Dewang Mehta in 1994, I can confidently say that the industry has weathered many storms before and will continue to innovate and find ways to succeed even if the odds seem stacked against us in the short term.

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