After facing multiple headwinds due to the COVID-19 pandemic and sluggish economic recovery, the growth of Indian IT sector seems to be on the path of retrieval.
A recent study by Fitch, a global credit rating agency, says that due to the enormous demand for digital transformation solutions, the IT Services industry revenue will start upward by a high single-digit percentage in 2021-22. The sector, however, will continue to see minimal revenue growth in FY20, says the report titled Spotlight: Indian IT Services Sector.
The IT industry has grown at a CAGR of 8% during 2014-2019, based on Fitch’s estimate.
The report comes as no surprise as most technology leaders have been extremely cautious about IT spending and exploring several ways to transform their businesses digitally in the wake of the current crisis.
New normal leading the growth of Indian IT sector
The new normal, where most of the employees work from home, has been a compelling force for businesses to transform every aspect of their operations and move from legacy systems.
The focus has been growing steadily on automation, artificial intelligence, and data science to swiftly increase employee efficiency and productivity. The industry expects that technologies like Analytics and AI would continue to play a more significant role in the growth of the Indian IT sector along with driving enriching experience for employees and customers. Moreover, the next twelve months will see faster adoption of transformative technologies such as the internet of things (IoT), Blockchain, and robotic process automation (RPA). These technologies will be used to build contactless solutions and strengthen process efficiencies. Customer Organizations will be seen ramping-up their research and development initiatives to kick-start the economy. (See: How is digital transformation shaping the new future?)
Most enterprises across sectors have realized the benefits of these technologies for the growth of their IT industry and putting a strong emphasis on improving their internal IT budget scope. (See: Anshuman Tiwari, Global Head of Delivery Excellence, DXC Technology; and CIOs to focus on network transformation for business continuity).
Digital transformation tailwinds favor India’s IT sector
To meet the growing demand, IT Services companies are rapidly increasing their competencies and will continue to enter into incredible collaborations and acquisitions that will further beef up their digital transformation capabilities and revenue prospects in 2021, despite the current decline. (See: Tech Cos take M&A route for digital transformation supremacy).
In addition, there is also a cost advantage, i.e., the salaries in India are much lower as compared to the countries like the U.S. This is expected to create a massive growth opportunity for the U.S. and European firms to expand their base in India.
Top recent partnerships
|
Company |
Partner |
Initiative |
|---|---|---|
|
TCS |
IBM |
Develop a new unit to help clients achieve a greater level of digital and cognitive enterprise transformation using IBM’s cloud service |
|
Infosys |
Genesys |
AI solution to augment query management and scale helpdesk operations to enhance productivity and customer satisfaction.
|
|
Wipro |
Intel |
Provide remote work solutions with enhanced cybersecurity measures to customers
|
|
Tech Mahindra |
Microsoft |
Develop enterprise cloud solutions leveraging Microsoft platforms and technologies to meet customer needs and pursue growth
|
|
Mphasis |
Amazon Web Services (AWS) |
Provide an end-to-end cloud and cognitive portfolio of services leveraging its partnership with AWS, with its new status of premier consulting partner
|
|
Hexaware |
Freshworks |
Offer customer and employee-engagement software for digitally native business
|
Source: Fitch.
Quote:
“We expect the Indian IT services industry to continue to take advantage of its low-cost operations and maintain its strong foothold in the global IT sector”
-Keith Poon, Fitch Ratings
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