5Rs – Strategic refocus of the Indian IT Industry: Making hay in the fading sunshine

There appears to be fierce competition among know-all industry analysts and pompous commentators with their unusual clairvoyance as who can foretell the worst degree of impending misfortune for the Indian IT Industry. It curiously reminds Mark Twain's famous quote- "The reports of my death are greatly exaggerated” -after reading his own premature obituaries.

Uncertain path after an impressive growth journey

Amid the backdrop of a slowdown in global IT spending facing sluggish economic growth and continued uncertainties, the Indian IT industry too has grown at a slower pace of 3.8% and is estimated to touch $254 billion (Including hardware) in FY2024. Of course, the tightening of belt by IT companies to adopt a resilient posture led to the reduced number of fresh hires.

In a broad sense, the listless growth pattern is very much aligned with global IT spending growth of 3.3% recorded in the year 2023. The good thing is that - Generative AI-fueled hype has not only surcharged the business ecosystem but also broken inhibitions of business firms to start exploiting AI opportunities. Meanwhile, as per Gartner, global IT spending is expected to grow 6.8% and touch a total $5 trillion in 2024. Importantly, software spending expected to grow at 12.7% to reach 1.0 trillion and IT services expected to grow at 8.7% are bound to cross $1.5 trillion size. A healthy sign indeed!

For an industry with a $3 billion size in 1999 zooming at a CAGR of 20+% to become a $254 billion business with a 5.5 million strong workforce in 2024 is certainly an exhilarating journey. Even if sphere of technology-led solutions continues to grow in the coming years, the continued growth momentum at the same pace for the industry hardly appears realistic in the changing dynamics of the business ecosystem - influenced by new technological paradigms and strained by sudden shifts in geo-political structure and volatile groupings.

Strategic shift in the mindset and organizational capabilities

The changing times require a strategic shift in the mindset and organizational capabilities for the Indian IT industry to chart a new value path. It requires a more grounded approach anchored on the 5Rs to adopt a strategic and agile posture to resiliently navigate an uncertain business environment. ?

Refocus of market and service portfolio

Traditionally, developed economies – particularly the US, UK and Europe - contribute a lion’s share of revenue for the Indian IT industry. With the global economy experiencing a two-speed growth pattern, it is time for indican companies to strategically focus on emerging markets – growing at a relatively higher pace. Certainly, it requires complete rejigging of their service mix – better aligned to country-specific needs, in place of merely extending service model templates lifted from other geographies.

Rebadging as a growth momentum track

The rapid pace of global capability centres (GCCs) set-up in India in recent times is being reckoned as a big threat to the Indian IT industry – typically enjoying the comfort of the cost arbitrage model. Curiously, the seemingly appearing big risk too offers new opportunities embedded in it. With their vast expertise in inducting, grooming and managing talent in complex project scenarios, IT companies can exploit their expertise to create customized BOT (build-operate-transfer) set of services to different customers looking to have their GCC presence.

Reinvention of Robotic Process Automation (RPA): integrated and intelligent automation

Much has been talked about threat arising from Gen AI powered conversational and content centric virtual assistants, chatbot and copilots in narrow application areas– alleviating the need of large workforce in coding, testing and business process services activities. Realistically speaking, it is a tardy and cumbersome journey – given the current state of low accuracy /acceptability of outcomes from AI models, associated risks and bias requiring 'Human in the loop' as the must, besides enabling data foundation and integrated modelling tools.

While the concept of RPA had attracted a lot of attention in the past decade – with promised benefits of cost efficiency from streamlined and automated processes, it gradually faded down for its narrow task-centric approach. Likewise, the concept of Intelligent Process Automation (IPA) – combining RPA with AI power could not take off massively. In recent months, the concept of Large Action Models (LAM) and Agentic AI systems has reignited the interest in automated and more integrated business process automation across the enterprise landscape. It certainly opens new opportunities for the Indian IT industry to reinvent the construct of IPA to eliminate entrenched process-centric challenges of their customers.

Realignment of the enterprise capabilities?

Over the period, IT companies have amassed a diverse set of capabilities (both physical and intellectual), which remain largely scattered across siloed business groups and organization layers. With a common pattern of open-endedly hoarding of such resources by different influential groups, most of the time, it leads to a scenario of imbalance and scarcity to fulfill even the most strategic or urgent business requirements. It is the time for IT companies to take a holistic inventory-taking and reassessment of enterprise capabilities and resources in terms of their utilization level, productive yields and business benefits and make a more optimized allocation.

Reinvigorating the talent pool

Long attuned to the patterns of routine, operational rigor and self-adopted inhibition, the prevailing sense of cynicism and low trust mars the collective ambitions of the workforce in IT companies. Invariably, status-quoism has also created hidden pockets of flab – particularly around mid-layers – silently surviving under the humdrum of business flows. Besides ruthlessly reducing the undesirable flab, it requires deeper engagement with talent pool to rekindle their energy and ambition directed towards big-picture organizational vision and individual role-play. Going beyond fancy-sounding slogans, charting a more realistic career growth path and enhancing performance incentives for high performers can put wind in IT companies’ next phase of ambitious sails.