Even as IT-BPO companies are facing pricing pressures, delays in tech investments and project deferrals, the sector may see more outsourcing work coming its way in the near term.

The $191-billion IT-BPO industry is putting on a brave face during the pandemic. “On April 2, we got an e-mail from the NHS in the UK asking for support and for continuing to aid (through tech) in patient data analytics to planning of resources for the organisation. It gave us an assurance that Indian IT continues to be relevant,” said a C-suite executive with an outsourcing company.

On the other hand, companies have had to extend themselves — from putting in place business continuity plans to ensuring that services (like NHS), which form the lifeblood of people outside India, continue to be ‘on’. “Do not underestimate the importance of keeping the ‘lights on’ part of any business now, especially from 13,595 km away,” said Monesh Dange, Partner & National Leader - Advisory Markets, EY India. The IT-BPO sector grew 7.7 per cent in FY20.

This optimism, however, needs to be tempered with the situation on the ground — which is that businesses globally are facing uncertainty.

“We believe most enterprises will delay allocation of budgets to new programmes due to severe business disruptions,” according to a Sharekhan BNP Paribas report. Others like outsourcing advisory company ISG are of the view that there will be 15-25 per cent cut in discretionary spending, in areas like digital transformation.

Further, clients of industries such as travel, hospitality, airlines, retail, hi-tech, oil & gas, financial services and manufacturing are also getting hit. With travel restrictions and cancellation of conferences, IT companies may potentially face delays in closing deals and in adding new ones.

Cut in revenue guidance

Companies like Accenture have already cut revenue guidance for this year and Cognizant CEO Brian Humphries said the pandemic stemmed demand from travel and hospitality clients in addition to affecting deliveries and delaying projects. TCS, Infosys and others are set to report Q4 numbers this month.

However, in the long-term, the industry is convinced that behavioural shifts, as a result if Covid-19, will help the sector. “Human interface will reduce and technology will be supplemented in many ‘basic’ human-centric touch points,” according to New York-based Nitin Kumar, CEO of Appnomic.

The behavioural change can also accelerate adoption of technology in the US, Europe and Japanese companies which would open up an opportunity (for Indian outsourcing companies) to move up the value chain doing more consulting-led work, which commands better margins. Many of the conversations on whether to bring technology into business processes will result in action and not mere ‘talk’, according to Ashank Desai, founder of Mastek.

But not everybody in the industry is convinced about the Indian companies turning into tech-led consulting space. “Globally it is dominated by the likes of Accenture, Deloitte, Mckinsey and others. Indian outsourcing companies are looked upon as good in tech but clueless when it comes to business transformation, which will happen after Covid-19,” pointed out Kumar.

Also, business transformation requires a mindset which goes beyond retrofitting tech into business processes. “When a company requires rethinking of business processes, will it be comfortable with a tech outsourcer or a consultant with tech expertise?, asks Kumar.

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