Indian IT Industry Has To Evolve To Consolidate Global Lead

Indian IT industry has emerged as a key technology partner for global enterprises. The $286 billion-strong industry is likely to cross the $300 billion mark in the current financial year according to industry body Nasscom. With the largest technology talent base, India has proved to be a reliable partner in technology transformation for enterprises across the globe. However, many new technologies, geopolitical situations and related factors demand that the Indian IT industry should maintain its agility to stay ahead. Firstly, faster adoption of AI (artificial intelligence) and generative AI (GenAI) are posing threats to traditional business models of Indian IT firms. The low-cost model of deploying tech talent at scale in offshore locations like India is likely to see disruption owing to AI adoption. More enterprises will demand outcome-based model, deploying GenAI applications. The fact is that this trend is already catching up. In the recent fourth quarter results conference, the management of many companies indicated that GenAI-led efficiency was at the top of clients’ agenda now.

That apart, clients are also asking that savings arising from GenAI deployment must be passed on. It implies that clients are demanding downward price revision of contracts through implementation of such applications. Such a phenomenon directly threatens the age-old model of billing depending on number of human resources deployed. Hearteningly, Indian IT firms are also pivoting to this model fast as per client’s requirement. Secondly, geopolitics is making industry watchers nervous. Especially, given that the Trump tariffs have the potential to create serious demand slowdown in the US and Europe. Notably, Indian IT firms draw more than half of their revenue from the US and around 30 per cent from Europe. The tariffs are likely to impact technology spending of companies based out of these key geographies. Therefore, Indian IT firms have to cope with this development by searching for other geographies. In recent years, GCCs (global capability centres) have emerged as one of the growth centres for Indian IT industry. As a result the engagement level of Indian IT firms with these GCCs is also rising over the years.

However, such insourcing by GCCs also poses a direct threat to Indian IT firms’ businesses. Some firms have already indicated that GCCs have been attracting good talent from Indian IT firms, leading to rising wage cost for the IT services firms. In this context, the business models of Indian IT firms have to cater to these new realities. Meanwhile, it has to be seen how rising regional tensions in South East Asia impacts foreign firms’ sentiment to set up more technology centres in India. Indian IT industry’s contribution to the country’s GDP hovers around eight per cent now and is likely to touch 10 per cent soon. It is, therefore, important to maintain the competitive edge of this crucial industry for new job creation. Moreover, Indian IT firms operate as the flag-bearers of the country. This enhances a lot of soft power of India as a nation state and creates several leverages over key global power. Hence, it is imperative that the country’s IT industry evolves to these new realities fast for maintaining its lead position in the IT services industry.