2015 was further proof that volatility and turmoil is all pervasive, and perhaps the new normal. The global economy- and this time, both developed and emerging countries, experienced multiple headwinds. Economic growth stagnated, global terrorism spiked, inflationary pressures continued to build up, turbulence in currency and equity markets prevailed, commodity prices declined, and unemployment continued to haunt.
At the same time, it was heartening to see the world using technology as a panacea to address ongoing challenges. The role of technology has also undergone a significant change; technology is no longer exclusive to only the corporate sector. Consumers, leveraging mobile and 24*7 connectivity, are now the key influencing force shaping technology spend. Governments have also begun to use the technology as the platform to citizen outreach and G2C services. As a result, technology is emerging as the new unifying force, integral to all businesses, to all parts of businesses, to the government machinery and consumers. The importance of technology is borne by the fact that the technology component now has shifted from a cost center to a capital asset expected to deliver measurable returns. Globally, the cumulative capital investment in technology is estimated to have reached USD 6 trillion in 2014.
The global technology industry is also facing a tumultuous environment- Industrialized and commoditized services and products are as much a part of the technology industry now, as are multiple disruptive digital technologies. However, success in this competitive, dynamic world will be defined by strategies that take into account the fact that the shift towards digital is both inevitable, and inexorable. 80 per cent of incremental expenditures over the next decade may be driven by digital technologies, such as platforms, cloud-based applications, big data analytics, mobile systems, social media, and cybersecurity, as well as services needed to integrate these technologies with remaining legacy core technologies.
Global IT-BPM Spend
The turbulent economic environment, volatility in currency, and technological shifts impacted global IT spend, which grew by 0.4 per cent only in 2015, to reach USD 1.2 Billion. IT services spend declined by 0.2 percent, packaged software spend levels largely stayed flat, while BPM spend increased by 3 per cent, driven by verticalized analytics integrated offerings. Unlike the global spend market, global sourcing continued its growth journey – 8.5 per cent growth in 2015 – estimated at USD 162-166 billion in 2015.
India continued to grow it’s share in the global sourcing arena, accounting for 56 per cent in 2015.
Indian IT-BPM Industry FY2016 Highlights-
India’s IT-BPM industry is projected to grow 8.5 per cent in FY2016 – from USD 132 billion in FY2015 to USD 143 billion (excl. eCommerce), an addition of USD 11 billion. Share in the country’s total service exports is estimated at over 45 per cent and the industry’s contribution relative to India’s GDP is over 9.3 per cent. Overall, the industry is estimated to employ nearly 3.7 million people, an addition of ~200,000 people. The industry landscape comprises >16,000 firms. India is also maturing to become the Silicon Valley of the developing world with >4,000 start-ups – 3rd largest start-up community in the world.
Exports in FY2016 estimated at USD 108 billion, a 10.3 per cent annual growth. ER&D and product development continues to be the fastest growing segment at 12.6 per cent driven by trends around IoT/connected devices and customers’ demands for disruptive innovation. IT services are to grow at the same rate as overall exports. Demand for SMAC technologies is pushing the need to modernise legacy systems and cloud solutions. BPM exports, at ~9 per cent y-o-y growth, are being driven by BPaaS, mobility and advanced analytics.
Smart Enterprises leverage the best and latest technologies to optimize business practices, drive workforce engagement and create competitive advantages. Indian technology players are at the forefront of enabling SMART enterprises leveraging the confluence of current technologies such as big data, IoT, social media, robotics, mobility and cloud platforms. Indian tech firms are also scaling up their digital business/portfolio through collaborations with startups by setting up incubators and accelerators, creating independent digital business units, encouraging deign thinking and investing in automation platforms, driving M&As, and fostering partnerships.
In FY2016, the domestic market is set to grow around 10 per cent in INR terms (which translates to a little over 3 per cent in USD terms) to reach USD 35 billion (excl. eCommerce). Technology adoption in India is increasing rapidly driven by a large mobile-only population (wireless subscribers touching 1 billion), ubiquitous connectivity and increasing data consumption; by a corporate sector that is focused on improving efficiencies and productivity driven by connected devices, SMAC, etc. Another significant consumer is the Government of India which is looking at technology as the platform to deliver G2G, G2B and G2C services. eCommerce, is also spearheading technology consumption leveraging mobility and analytics, and is expected to grow at over 20 per cent, to touch USD 16.7 Billion.
India Value Proposition
India’s unique value proposition as the world’s No. 1 outsourcing destination rests on 5 strong pillars:
- Connected and digital ready market: An ever-burgeoning population of 1.2 billion people, a potential middle-class of 475 million people by 2030, always connected with nearly a billion mobile phone subscribers and over 300 million accessing mobile internet present a hard-to-ignore end user market for the world. The Government is expected to invest USD 19 billion in digital investments (Digital India, eGovernance, etc.) by 2020.
- Industry Maturity and Excellence in business delivery: Over the last 25 years, India’s IT-BPM industry has succeeded in creating a worldwide presence – onshore, offshore, nearshore – for its customers. Present in over 78 countries through about 840 offshore development centres, this industry boasts >75 per cent of Fortune 500 enterprises as its customers. The industry landscape consists of over 16,000 firms ranging from multi-billion dollar firms to start-ups that are emerging as the hotbed for innovation and disruptive services.
- Highest volume of diverse, employable talent: India currently has produces over 6 million graduates annually, including 1 million+ technical graduates.
- Digital Skills Hub- It is also emerging as the world’s fastest growing ‘digital hub’: Digitally skilled (cloud, mobile, analytics) employees number over 250,000, growing at 50 per cent.
- Global Innovation Center- India today is home to over 4200 tech startups, representing the fastest growing startup ecosystem in the world, 3rd largest globally. These startups, along with focused initiatives by large enterprises, are working together to create innovative products and solutions from India
Indian IT-BPM Industry Outlook
India’s IT-BPM sector total revenue is projected to reach USD 350 billion by 2025. Digital technologies will continue to define the sector and revenue from these is likely to have a 38 per cent by 2025. Indian service providers face a significant opportunity as digital technologies continue to be embedded in an ever widening range of products and services. Indian service providers are expected to develop following capabilities-
- Develop offerings along new digital service lines, while re-inventing traditional declining service lines
- Invest in a portfolio with fundamentally different economics, putting more resources towards transformational and disruptive technologies
- Create a three-in-one organization to effectively manage delivery of solutions along the three horizons of enterprise technology
- Re-examine staffing, capability and retraining needs, especially in light of the increased decoupling of revenue to head count
- Forge partnerships with niche players and platforms to develop an ecosystem to deliver digital solutions
To know more, download the full NASSCOM Strategic Review 2016- http://www.nasscom.in/itbpm-sector-india-strategic-review-2016 - It is a compendia of facts, figures and trends pertaining to the Indian IT-BPM industry, highlighting current state as well as predicting future directions.