As 2014 draws to a close, now is a good time to take a look back at the year gone by for the Information Technology (IT) sector in India and explore the road ahead. But before we do that, let us step back for a minute and take a holistic view of the sector as it stands today.
There is no denying the fact that the Indian IT sector has had a tremendous run in the past two decades, growing from nowhere to a $100 billion+ revenue-grossing sector as of 2014. Once dubbed the “sunshine sector” of the Indian economy, the IT industry has certainly placed India on the global map where it is today regarded as a world-class technology solutions provider.
What has clearly contributed to this dream run has been the IT services delivery model, where some of the home-grown companies have made a name for themselves throughout the globe. While Indian IT companies have excelled in software services by delivering cost-effective and quality solutions, there is a strong case for the IT sector to look beyond this aging services model now and shift focus to the thriving software products ecosystem.
Now this begs the question: has the transformation already begun?
Well, the tell-tale signs are all here! The Indian IT Industry has been undergoing somewhat of a quiet transition from the services model it so successfully championed over the years to the software products platform business, the premise of which is to deliver innovative software-driven products to consumers.
The year 2014 was quite an exciting year for the Indian IT Industry as it looked to reinvent itself to sustain its dominance in the technology space. The following were some of the key factors and events from 2014 that did fuel India’s quest to emerge as a leading software products nation in the world:
Backing from the government - In the maiden finance budget of the Modi-led NDA government, the Indian Software Products industry did get recognized as a key growth industry by the Finance Minister in his budget speech. The government also earmarked a corpus of INR 10,000 crore as early-stage capital to encourage startups, clearly something that software product startups in the country can immensely benefit from.
The sector is en route to becoming less labour-driven - Retrenchment is the name of the game for the IT industry today as it looks to make a shift from the services model to the promising products platform ecosystem of the future. New opportunities are fast emerging and the agility with which the IT sector responds will determine its future. From volume-based hiring the focus has now shifted to the quality of hires where domain specialists are in huge demand in the IT industry. The incremental recruitment by the IT services sector will halve by fiscal 2018 despite a 13-15% growth forecast in the industry's revenues during this period, as per Crisil, a global analytical firm.
Here is an example of things to come: the net addition in headcount of Infosys has already dropped from an approximate 7,000 employees in fiscal year 2013 to just 3,717 employees in FY 2014.
Infosys signals a change - The products and platforms business, which until recently accounted for a little less than 6 percent of the overall revenues for Infosys, also drew special attention from the software giant. In the year 2014, the company managed to register EdgeVerve Systems to develop and license software products and cloud-hosted business platforms.
Providing the impetus is iSPIRT - The emergence of iSPIRT (Indian Software Product Industry Roundtable), a think tank comprising of product companies provided the much needed impetus for the sector to undergo this transformation. Their recent effort of launching the iSPIxB2B index, the country’s first ever index for tracking the size and growth of the Indian B2B Software Products Industry is one such example of things to come. iSPIxB2B index projects the current enterprise value of top 30 product companies in India to be $6.2 billion.
Consumers of today are no longer content with the status quo. They are constantly looking for newer products and solutions to meet their needs. The days of reinventing the wheel have to end for the Indian IT sector and it must see the writing on the wall so as to continue its position of dominance in the global IT circuit. Poised for a quantum leap? Yes they sure are, provided they are able to up the ante and make this shift from services to products sooner.
