Despite headwinds, the outlook for India’s technology sector is optimistic, according to Nitin Bhatt, Managing Partner, Technology Sector, EY.
Bhatt, speaking at Microsoft’s Future Ready Industry week highlighted his bullish outlook on the sector stating that the Indian tech sector could achieve a $350 billion to $400 billion turnover by 2025-26.
“It’s a terrific time for the Indian tech sector,” said Bhatt, emphasising the progress the sector has made, especially over the last two years, amid the Covid-19 pandemic.
“The sector is over $225 billion today and continues to be a critical pillar of the Indian economy, with an 8 per cent contribution to GDP and the creation of over 5 million jobs. The tier-one tech sector companies are all playing in the big league today, winning multibillion-dollar deals, and winning more than a third of all the managed services deals awarded globally in 2021. Most of these companies are looking at solid double-digit growth, over the next 12 months. Sold work, pipeline, and utilizations are at all-time highs,” he said, adding that even the small and mid-caps were increasing deal sizes and growing rapidly.
Bhatt highlighted headwinds faced by the sector such as rising attrition, inflationary pressures, and supply chain disruptions.
“But overall, we do believe that the Indian tech companies are on a multi-year growth cycle, where perhaps we are seeing a significant rerating over the last two years when you look at least the top 5 top 10 companies. What is interesting is that management commentary, which is quite conservative in the sector has been unusually bullish. And while current valuations can be debated, overall, we’re seeing a lot more optimism than pessimism. And if the current momentum continues, the Indian tech sector could become a $350 billion to $400 billion industry by 2025-26. So, I’m quite bullish on the Indian tech story,” he said.
Key drivers of growth
According to Bhatt, the three key drivers of the growth in the sector include digital spending across sectors, evolution of pricing models and the coming of age of midcap IT companies.
In terms of digital spending, “the key themes are cloud and cost reduction, supply chain transformation, data, and AI customer experience, and lots of work around trusted technologies for building assets and platforms, with a huge focus on security, privacy, compliance, and ethical tech ecosystems. We’re also seeing lots of co-innovation that’s happening with customers in areas like digital twins, robotics, and now the metaverse,” said Bhatt.
Talking about attrition, Bhatt’s advise for companies was to take a relook at their traditional recruitment channels, their catchment areas, hiring velocity, and deployment velocity. He advises companies to make the entire hire to retire cycle future-ready for hybrid work.
“Second, we have to generate better real-time data on employee bots and use it to drive better engagement. Advanced AI techniques today can do a great job in assessing sentiment and giving us early warning signals,” he added.