Downfall of Indian IT Service Industry – Is this the end?

The other day while sipping on my morning coffee, I was reading this article published on “The Economic Times” on Oct 14th, 2016. The article woke me up better than my coffee did. Simply put, the article highlights declining revenue in the Indian IT service industry. It discuses how the Q2-2016 earnings of Tata Consultancy Services (TCS) and Infosys led to financial pundits and analysts forecasting a negative growth graph for the once booming Indian IT sector. The article describes the second quarter as “unusual” – something that will soon become “usual”, if we all don’t see the reality for what it is and take initiatives at least now.

Revenue Source:  

For more than two decades, the Indian IT industry was seen as the main source of skilled resources. The foremost source of revenue was through outsourcing resources to the global market. Other sources of revenue were through services like infrastructure management, back office support etc., and software development shared diminutive revenue.

Analysis from the online newspaper “Livemint” shows that the “big three” of the Indian IT sector - Tata Consultancy Services, Infosys and Wipro had 1.5 times more man power split between them last year than Accenture did. But interestingly, the revenue they earned was 40 per cent less than what Accenture chalked up.

The Indian IT sector could survive and come this far - Thanks to the multi-linguistic skills we’ve acquired through British rule and the massive talent pool we have - Thanks to people graduating from established schools of educations. But now, the IT scene is changing and it is not in our favor. India has competition from neighboring countries like China, which has implemented multiple initiatives in in improving the quality of education and communication skills of its manpower. In contrast, in India, while the number of educational institutions has doubled in the last few years, the overall quality of education is going down. In my opinion, talent shortage is the main reason for the declining IT industry in India. In addition, the global market looks at the Indian IT industry as hard working skilled coders but not as innovators of technology even though we have greatly contributed to the IT innovation space in the past.

In short, these are what I think are the reasons for the diminishing IT revenue:

1. Shortage of talented resources
2. Competition from global resource market
3. Stringent visa process
4. No initiative in branding the Indian IT industry
5. IT service organization attitude (Belief in Cheap-talent-fueled growth, legacy business model like maintaining enterprise applications etc.,)
6. No focus in emerging/disruptive technology

How to bail out Indian IT industry? What IT organizations should do? How Modi Government can help?

Industry Responsibility:

1. The industry needs to stop looking at innovation as an expense and instead look at it as an investment for the future. It must budget to build innovation centers and R&D labs in emerging technology such as Bigdata, Mobile, Cloud, Augmented Reality, IoT, Wearable, Artificial Intelligence (AI), Robotics and Neural Networks.
2. Innovation should happen not only in Technology space but also reinvent in vertical domains. Industry should slightly change their business model from only offering services, to build a vertical specific technology platform/framework that helps in offering cost-effective and quick-to-market solutions to customers. Here is the pic that some of the reinvention happening in Healthcare space:
   
3. The industry will need to focus and build more on cloud based vertical solutions tailored for small to medium to large scale businesses.
4. Every IT organization should implement new guidelines, policies and process to the IT Eco system in ensuring privacy, protection and security of customer data, research, innovation and IP. It should be continuously monitored, improved and improved.
5. The industry should start offering new avenues of service focusing more on emerging/disruptive technologies in addition to the existing legacy business model solution.
6. IT organizations should allocate a decent budget in improving the quality of resources by continuous periodic training.

Government Contribution:

1. The government has to invest in better infrastructure and construct premium grade satellite cities that can help fuel the IT industry growth. (but not at the cost of destroying or minimizing the cultivation land and compensate with GM crops)
2. Take initiatives in Branding and building different outlook to Indian IT industry.
   
3. The government has to put in additional effort in creating more Ivy League schools like IITs and IIMs throughout the country.
4. Continuously monitor and scrutinize all existing schools to improve the quality of education offered and adopt necessary steps to ensure all graduates from these schools are “industry-fit”.
5. The education system needs to be revamped and redesigned to move away from our conventional “grading system” and implement a more unique “individual” based assessment system that will stimulate innovation and creativity.
6. IT organizations will need to be continuously monitored by the Government for the quality of service that they offer to their clientele.
7. Government should setup a platform for the IT Industry, Universities and other Industries to come together in Innovating and Patterning new algorithms that would help in next generation computing.

The Indian IT industry has been serving the global market for more than three decades now. The industry has very rich experience with knowledge of all verticals and complexity of technologies.  If everybody collaborated, I am sure that India would once again become the leader in the global IT market.

One of the main reasons behind India’s economy growth is IT industry. IT industry paved the way for growth in all the other industries. It is frightening to even think of having the IT industry in India to fail. I am certain, if the IT industry fails in India, this will affect not just the Indian economy but will also lead to the collapse of global economy.

This is not just about my future or your future. Rather, it’s the future of the global economy at stake. It’s no longer a question of ‘If’ but ‘When’.

Cheers,