The 2020 Roadmap for Indian IT and Business Service Industries

The NASSCOM report “Perspective 2020” identifies the industry’s long term certainties and opportunities arising from current economic environment. It also outlines specific measures that the industry, NASSCOM and the Government will need to undertake over the next 12 years for the industry to realize these opportunities.

“The Indian IT industry has grown from USD 2 billion in export revenues in 1998 to USD 47 billion today, employing over two million people. Its impact on the Indian economy and stakeholders, including customers and employees, remains unparalleled. Today, the industry recognizes that the next decade will be fundamentally different from the last one, owing to a radically restructured global economy; rapidly evolving customer needs, services and business models; and rising stakeholder aspirations. The NASSCOM ‘Perspective 2020’ defines the opportunities and the challenges for the industry to drive sustained growth in the domestic and global markets,” said Pramod Bhasin, Ex-Chairman, NASSCOM.

2020 Business Landscape Will be Different, Driven by Global Megatrends

Several global megatrends in economic, demographic, business, social and environmental will create new opportunities for the industry by 2020 in:

• New verticals: public sector, healthcare, media and utilities (which have adopted global sourcing only to a limited extent).
• New customer segments: small and medium businesses (SMBs).
• New geographies: greater outsourcing in BRIC, GCC, Japan and Rest of the World (ROW).

ICT Driven Solutions

• Healthcare: 50% of Indians do not have access to primary healthcare. Technology can deliver healthcare at half the cost.
• Financial Services: 80% of Indian households do not have bank accounts. Technology can enable access to 200 million families.
• Education: India faces a 3-fold shortage in teachers. Technology can address this through remote solutions.
• Public Services: 40-50% of public food distribution in India doesn’t reach targeted groups. Technology can ensure transparency.

These new opportunities will result in export revenues of USD 175 billion by 2020. On the back of these megatrends, the Indian domestic industry too will experience significant growth and record a four-fold increase in revenues from USD 12 billion in 2008 to USD 50 billion by 2020.

Opportunity for Industry to Transform Business and Transform India

The evolved landscape of 2020 will present transformational opportunities for the Indian technology and business services industry. India will emerge as a top three global innovation hub with a focus on clinical research, mobile applications and energy efficiency/climate change solutions. Through innovative business models, this sector will also redefine its customer value proposition and capture growth from currently untapped markets. In addition, harnessing ICT based solutions will help drive inclusive growth by uplifting 30 million citizens each year.

IMPACT ON INDIAN ECONOMY IN 2020

GDP: 6% of annual GDP; 28% of annual exports

Employment:

• 30 million urban employment (direct and indirect)
• Significant job creation in rural and non-metro areas
• 50% of workforce will be women
• Global career opportunities due to location independent models

Infrastructure: 8-10 satellite townships around Tier – 1 cities

Challenges That Exist Today

The four major challenges which exist today include employability, infrastructure, favourable policies and competition from other low cost countries. Low employability of existing talent with only 10-15% employable graduates in business services and 26% of employable engineers in technology services continues to be a major bottleneck. Infrastructure development is largely constrained to the nine cities, which contribute more than 95% of India’s exports and development of tier 2/3 cities has not taken off in a planned manner. The lack of a supportive fiscal environment with a long-term policy framework is also leading to competition from other low-cost countries including China, Philippines and from Eastern Europe with potential erosion of the India opportunity.

Outlining the challenges ahead for the Indian IT industry, Noshir Kaka, Director, McKinsey & Company said “While the industry has the potential to generate revenues of US$ 225 billion in 2020, a portion of this opportunity is at risk if continuing problems are not tackled soon. 40% of previous priority initiatives, especially structural changes e.g. tertiary education reform, have not been implemented yet and employability remains low as a result. Other areas of public infrastructure and business environment also need a concerted effort to ensure that India’s long-term opportunity isn’t lost to other competing global destinations.”

Call for Action

In the next 12 years, industry stakeholders need to act together in an unprecedented manner. ‘Perspective 2020’ details an action agenda for the industry, government and NASSCOM to realize the industry’s potential.

Ranjit Tinaikar, Partner, McKinsey & Company said, “Success for the industry requires an action plan anchored on a five-fold vision. It is imperative that all the stakeholders work in close collaboration and drive swift and sustained reforms in all critical areas.”

In conclusion, India’s technology and business services industry has flourished in the last decade. However, industry stakeholders will need to break out of the traditional mold that resulted in past successes and step up to the aspirations of 2020.