Tech Services - Heady times ahead!

When I wrote this article in August ( https://bwcio.businessworld.in/article/IT-BPM-Industry-Story-Of-Resilience-/15-09-2020-320583/), and published this in September of 2020, the IT-BPM industry had come through the lows, just published their Q1 results and it looked like Covid was not a death knell for most. While challenges were evident, the bottom had been hit and industry survived well. The story in June 2020 was far stronger than in late Mar-April when immediately after lockdown things were far more uncertain. By Q1 end, service business were holding up well.

2020 ended and the tech services results have demonstrated the resilience. Growth is back (with gusto in some cases) and lower cost of operations from reduced travel, increased WFH, and many aggressive measures means margins have held well, and gone up in many situations 

So how much of this is supply side capabilities (resilience, flexibility and ability to adjust quickly) and how much is really an organic demand momentum.

When the pandemic hit, we had believed it to be the tailwind for the tech / tech enabled services industry. We were guiding to prepare to capture the market. Investing in future was key while there was opportunity to tighten the belt. Most of all suggestion was to continue investing with clients as we expected the demand in different shapes to come back.

Every organization had to respond and deal with needs of capability build out, leveraging the move to digital and cloud, figuring out how to use data better in this changing world, transform their business and operating model and importantly create headroom for investments by taking cost out. All of this needs to be done at speed and this is where the opportunity for the IT/BPM/engineering services players comes from. The squeeze of Covid was to nudge organizations to act with haste! There was just too much change going on and partnering for capability, cost, transformation and basically getting things done will be one way to accelerate the change and prepare for the future.

10-11 months out, we see signs of this playing out in a big way and believe that this will continue for some time.

What about supply side? Companies that have continued to direct investments to things that matter – clients, capabilities and front end will gain. Speed will be important, and I believe that experimentation vs. deliberating long for clarity will be key. Along with it will be a need for a different calibration for investments, risks and potentially margins. The services business has always been somewhat of "let us first sell and then we will figure out all the 100 things that matter". While not suggesting that role of capabilities, IP, assets, thoughtful decisions and risk management is going away, the 80-20 to move with speed will important. We are already seeing signs of boldness in proposition by many in the industry as they put together ambitious agenda in front of their clients and this is what enterprises are looking for – bold partnerships to help them deal with the post-Covid world.

I believe the coming years are going to be interesting. Much will change, but the market opportunity promises to be significant. Winners will leverage this momentum, act with speed to take disproportionate market share. This is a far cry from the last major crisis for this industry and many players in this industry should be looking at some heady times in the coming quarters and years!