Indian IT in a funk

With concerns of a global recession, there is news also that the Indian IT sector is in slowdown mode. The IT industry has faced growth concerns earlier, but only gone from strength to strength. A few aspects stand out when we look at the pattern of growth and the causes.

1. It has found itself at the right place at the right time several times; so the growth is more due to emergent causes than deliberate ones.

A couple of situations come to mind: the industry saw a boom during Y2K and post Covid and responded to and executed on these events extremely well. However, the top industry players appear homogenous bunch, and the pitches are almost identical – all have the same verticals, the same service lines, the same partnerships and even the same client base. The need for differentiation and display of strategy in practice are few. For example, for growth, the industry players need to improve its the success rate of acquisition and integration (choosing the right targets with the objective of leapfrogging competition), or of establishing a consulting footprint, or even the right forms of exclusive collaborations.

2. The response of the industry to challenges is mostly supply and efficiency driven, rather than with a focus on the demand side.

The delays in hiring, the debate around moonlighting etc. are all supply side issues that are being controlled and have top management attention. While the need to align the workforce to the demand is legitimate, not enough is being done to boost the demand side. A few things that are needed to ensure not only the value of the deal pipeline, but also its quality:

Proactive demand generation. This demand is no longer coming from the CIO, but directly from the business. And insufficient or insignificant relationships with business is Indian IT’s Achilles heel. Cost takeout remains an important objective for most clients; however, for most clients, the idea with cost takeout is not simply to reduce IT intensity but to deploy the funds towards business transformation. Going after deals without this context may not be useful in developing the deal pipeline, as the deal conversation and the deal conversion would be lacking.

There is a need for (central / common core) large deal teams that support deal teams in the verticals. Many companies do not consolidate learning across large deals, and start work on each deal ground up. Moreover, large deal responses are just mostly collation of the responses from various service lines with no integration and no overarching architecture for the deal. (In terms of being proactive, Indian IT needs to be shaping large deals and not just getting invited to these large deals. This requires having a view on the future of IT and how the company is geared to support clients in this journey.)

The growth of GCCs is evidence that there is a strong need for IT to solve business problems, and that this gap remains unaddressed by Indian IT.

3. There is need for Indian IT to place some big bets. Indian IT is a quick follower, and needs to a leader in defining next gen IT.

Two examples from recent times are pertinent. Indian IT was a slow mover when the digital transformation revolution started taking shape, but it capitalized well on this trend and took market share from global IT companies for cloud migration. A similar trend is playing out in terms of next gen technologies and attendant use cases in industry from the metaverse. The leaders have placed their bets; Indian IT can invest now and be among the leaders.

4. Employee Engagement

Last, but not the least, the digital revolution started with the B2C segment with apps being made available to consumers which led to a paradigm shift in consumer engagement. This was later replicated at work post Covid with IT enabling millions to work from home. A similar digital revolution is needed in the B2E space – how the employee interacts with the corporation. Several employee policies are archaic, and legacy technologies hinder a good employee experience. With the anticipated slowdown, a smart company could pivot the talent base to transforming the house and making it more digital, thus preparing for the next stage of growth.

That’s just a general high-level telling on the state of Indian IT. The brand values of several of these firms is now increasing; their share of voice on the future of IT should increase too. Some industry leaders are asserting their views and that is leading to a healthy debate. I am sure Indian IT is up to these challenges and that we will see it emerge stronger from this phase too.

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