Modern tech like AI, robotics and machine learning to create disruption: experts
Indian IT services companies continue to blame macro economic issues such as currency fluctuations, hike in US work visa fee or the Brexit, for the slow revenue growth. However, the reality is far from it and the sunshine industry of the past continues to live in denial.
According to industry body Nasscom, Indian IT services industry added over $11 billion in revenue in 2016-17, which translates into a growth of about 7.6 per cent. That’s a far cry from a minimum of double digital growth until a few years ago. For the current financial year, Nasscom forecasts growth at 7-8 per cent, showing no signs of revival.
For several years, Indian IT companies have been staring at the ice berg of modern technologies such as AI, machine learning and robotics which would hit their revenues hard but they have been more than reluctant to steer their ship and get rid of their baggage of traditional IT services.
“Reality is that the dream run is going to be over for Indian IT,” said DD Mishra, Research Director at Gartner. “Situation will remain for 3-4 years as we expect more turbulent times ahead.”
According to Gartner, Indian players are still locked into traditional revenue sources which are shrinking. “There will a lot of challenges in terms of business and they need to create disruption and look at new ways of generating revenues,” Mishra said. Digital revenues which are the only growth drivers for IT services companies today are still less than 25 per cent of the revenues for all large players and more worrying no one really knows what is included in these digital revenues.
“There is lack of transparency and ambiguity on what they really consider as digital. They need to be clear about this. Traditional service revenue in declining in mature markets. There would be further decline in these services,” Mishra said.
Analysts feel the way Infosys CEO Vishal Sikka was forced to quit the company on Friday highlights the mindset of the Indian companies who are unwilling to accept modern thinking.
“People like Vishal who were trying to make a difference weren’t allowed to. He was too modern for Infosys,” said Sanchit Gogia, CEO at Greyhound Research. “The question to ask here is, do HCL, TCS and Wipro have the ability to lose current revenue for 21 straight quarters like IBM to invest in future and innovation?”
The fact remains that even while the traditional IT services pie is getting smaller, newer digital services are not growing fast enough. “IT companies are more or less in denial. Acquisitions are a way out to accelerate growth in digital as Accenture is doing but Indian IT service providers are cautious in this,” said Pareekh Jain, Senior Vice-President, Research and India Operations at HfS Research.