Editorial

IT majors can teach India Inc a thing or two about navigating business challenges

| Updated on October 16, 2019 Published on October 16, 2019

Indian IT firms have proved skeptics wrong by sharply pivoting their business models to vanquish various challenges

Latest hiring numbers from India’s IT services sector offer glimmers of hope in a gloomy economy. A BusinessLine analysis based on the latest quarterly results shows that the Big Three of Indian IT services added 28,157 employees on a net basis in the latest July-September quarter. This represents a 59 per cent improvement over their new hires in the preceding April-June quarter, and an over threefold jump from the 8,000-odd employee additions they reported in January-March 2019. Even as other export-oriented sectors in India, from textiles to engineering, have been bemoaning the challenges posed by US-China trade wars, an uncertain Brexit and currency volatility, Indian IT majors have remained quite upbeat about their demand outlook on the back of recent deal wins, traction for their digital offerings and the opportunities opened up by their newly reskilled workforce.

Barely three years have elapsed since industry commentators were penning obituaries to the Indian IT services sector, citing looming disruptions to the offshore delivery model, the automation threat to its bread-and-butter application development services and the lack of skills in its legacy workforce to bag new-age digital projects that used cloud computing, artificial intelligence or machine learning. But three years on, it is quite clear that Indian IT firms have proved those naysayers wrong by sharply pivoting their business models to vanquish these challenges. Responding to the anti-outsourcing wave and pressure on billing rates, these companies embraced automation, squeezed out higher productivity from their existing workforce and tweaked their offshore-onsite mix, while bidding for lower-margin Digital India projects. They reinvested their savings from automation into reskilling of their mammoth workforce on a mission mode too. By FY19, the sector featured six lakh digitally-skilled employees with many firms managing to retrain well over half their workforce. Aided by tactical buyouts of niche innovator firms, the sector had managed to successfully pitch for and win digital deals totting up to $33 billion, a fourth of its export revenues, by FY19. All this is not to say that the sector faces smooth sailing from now on. With a high likelihood of a global recession and slowing BFSI spends, its revenue growth this year may fall short of the double digits which used to be the norm five years ago. But these are short-term hiccups and the ability of the sector to navigate a global recession is no longer in question.

The Indian IT sector’s ability to look inward to reinvent itself in line with the changing business environment is worthy of emulation by the rest of India Inc too. The captains of India Inc — who have been incessantly lobbying the government for GST rate cuts, personal income tax cuts, import protection et al — must take their cues from their software peers to cuts costs, eke out higher productivity and sacrifice some of their hefty profit margins to drum up flagging demand for their products and services, instead of constantly looking to external props to tackle the downturn.

Published on October 16, 2019

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