Opinion | Despite of global slowdown and tumultuous happenings around the world India has become a bright spot for information technology sourcing, and this makes a perfect business sense for Fortune 500 clients around the world to rely upon India’s IT prowess
While the major economies of the world are stung by economic slowdown, India is poised for a higher growth trajectory. The International Monetary Fund (IMF) while retains India’s overall GDP growth projection of 7.2% for 2017- 18, it marks subdued GDP growth for China, US, and EU with 6.6%, 2.3% and 1.7% respectively. The IMF further buttresses the fact that India’s economy has grown at a fast pace because of implementation of critical structural reforms, favorable trade policies and lower external vulnerabilities.
Fundamentally, when global IT-BPM spend hovers around USD 1.2 trillion and global sourcing racks at USD 173-178 billion, India’s IT-BPM exports stand high at USD 117 billion – a whopping 65% of the global outsource. With USD 154 billion revenue, IT-BPM industry in India is poised to grow at 8%. The industry comprising 16,000-plus firms is estimated to employ over 3.9 million professionals directly and over 10 million people indirectly. With 5200-plus startups, India ranks third in the global startup ecosystem. India’s software product revenue stands at USD 7 billion in FY2017, with 9.5% YoY growth rate.
Indian domestic market witnessed higher growth for software products consumption driven by new customers in government, SMBs and eCommerce. Apart from IT-BPM, India is striving to be the leading eCommerce market with estimated revenue of USD 33 billion in FY2017, a 19% growth from FY2016. In FY2017, 8000- plus digital firms, 2000-plus digital startups and 300,000+ employees with digital skills contributed 14% of IT-BPM revenue. Globally, the demand for digital solutions is going to be the mainstay for growth.
With tectonic evolution in SMAC (Social, Mobility, Analytics, and Cloud), Indian IT companies are rapidly scaling up their business to deliver digital solutions to global clients. Disruptive technologies, impending business exigencies, and customer demands in combination derive a rational business strategy to deliver digital solutions along with traditional IT services. According to industry estimates, the export of digital solutions which was pegged at 4% in FY2014 of the total IT-BPM exports has spiked to 14% in FY2017. The key drivers for this massive jump include increasing demand for enriching customer experience, innovation in client business models, personalized customer services and improved operational efficiency.
The most exciting part is India’s digital economy is expected to grow exponentially to USD 1 trillion in the coming 5-7 years from the current USD 400 billion. In order to create universal digital natives in India, the Government of India has already connected 1,03,736 gram panchayats by laying 2,40,222 kilometres optical fibre under the National Optical Fibre Programme, which aims to connect all the 2.5 lakh gram panchayats by March 2019. To fuel the digital economy, the role of blockchain can be paramount. As Aadhaar card is becoming universal in India, adoption of blockchain can transform India into a true digital economy by bringing in accountability and efficiency in the system.
Let’s delve deeper into the India’s value proposition for global IT business. Within quarter of a century, Indian IT and Software industry sprinted from USD 382 million in 1992-93 to USD 154 billion in FY 2017, making India the No. 1 preferred destination for setting up technology business. This didn’t happen in silos. Software Technology Parks of India (STPI), as the nodal agency for promoting the development and export of software and software services, has played a cardinal role in transforming India into the IT hub of the world. STPI acted as a catalyst to develop a favorable ecosystem for the IT industry in India. The relentless efforts of STPI in ensuring business-friendly environment attracted global MNCs to establish their offshore development centres in metros.
Consequently, FDI in IT industry poured in to further boost the operations of Indian IT companies and exports in this sector. STPI’s focus on startups and software products development will now fuel the growth of IT industry and will make India the most preferred country for partnering technology business with the right skill with right pricing and supportive government policies.
India is not stopping there. By 2020 the IT-BPM industry revenue would rise to USD 200-225 billion and by 2025, it would touch USD 350-400 billion. The growth of digital technology and adoption by customers would help this sector to scout for 38% of the pie by 2025. In FY2025, the ratio of digital to traditional IT solutions would be in 60:40 of total global IT-BPM revenue expanding to USD 4 trillion.
Given the mature ecosystem created by Indian IT industry in last 25 years, emphasis on innovative software products development and IP creation would further drive India’s growth in IT/ITES/ESDM sector. The increasing adoption of disruptive technologies including AI, IoT, VR, AR, Cloud, Robotics and Machine Learning by global companies for rapid automation would undoubtedly bring humongous opportunities for India to become the most preferred IT destination of the world in the coming time.
The Author is Director General, Software Technology Park of India (STPI)