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SaaS IoT AI and Cloud will continue


Source: Economic Times, January 2022


The IT sector accounted for 8% of India’s GDP in 2020, which is a substantial increase from its contribution of 1.2% in 1998.

Housing a global IT powerhouse, India’s economy witnessed a temporary stagflation last year. The consecutive waves of COVID-19 and the rising streaks of infections lead the economy into attrition, forcing companies to adopt cost-cutting measures, even in the IT sector. The sector witnessed a high attrition rate of 8.03% during April to June this year.

However, despite slowing down the financial ecosystem, the state wise lockdowns also had an upside, the pandemic drove companies worldwide to expand their investments in their respective digital infrastructure. The IT sector accounted for 8% of India’s GDP in 2020, which is a substantial increase from its contribution of 1.2% in 1998. In 2019-20, India held the position of the largest sourcing destination in the IT-BPM industry globally.

Growing Demand

As per Gartner’s predictions, IT spending in India will amount up to $98.5 billion by 2021. With the imposition of home isolation due to the pandemic, more and more people started accessing digital services from home. To make ends meet, the IT sector has been constantly keeping up with these demands by providing online services to businesses.

“India is at the cusp of creating massive employment opportunities in the IT/BPM sector, owing to tech like citizen development, AI and cloud”
— Ram Singampalli, COO, Hexaware Tech

The consequent demand and trust in the sector have facilitated companies like Cognizant, Infosys, and Wipro, Tanla Solutions, and HCL Tech with digital expansion as well as increased revenue. Moreover, Tech Mahindra experienced a growth of 39.2% with its net profit at Rs 1,353.2 crore for Q1 FY 2021-2022. Wipro witnessed revenue growth of 22.3% with Tata Consultancy Services at 18.5% growth.

As per the latest Naukri JobSpeak report, the Indian job market witnessed 57 per cent Y-o-Y growth as of September. The IT/software sector in particular grew by 138 per cent (Y-o-Y). Additionally, with thickening technological intervention and the gradual post-covid reopening, retail and hospitality industries also saw an increase in hiring by 82 per cent and 70 per cent, respectively. As digital innovation expands, the scope of job creation and acquisition will also balloon.

Global Augmentation

Equipped with one of the largest developer communities in the world and with expanding diversification across sectors like BFSI, retail, and telecom, India has also been able to receive major investments from other countries. According to the Software Technology Park of India (STPI), software exports also saw an increase of 7% from $ 62.82 billion in 2020 to$ 67.40 billion in 2021. The computer software and hardware sector underwent FDI inflows worth $ 71.05 billion in the last 20 years. On top of that, it made up 44% of the total FDI inflows of $ 81.72 billion in 2021. Major Indian companies have provided innovation hubs and research centres with blockchain and artificial intelligence as well.

Some noticeable international collaborations include Infosys’s recent partnership with Archrock, Inc, which is a US-based renowned provider of natural gas compression services. Infosys has planned to increase the efficiency of their field service technicians via the assimilation of digital tools. Apart from that, Tata Consultancy Services have also decided to hold forth their 17-year collaboration with the UK’s Virgin Atlantic, digitalizing the airline’s operations.

“For tech cos the key to success will continue to be their ability to respond to market needs in real-time”

— Niraj Hutheesing, Founder & Director, Cygnet Infotech

SaaS prospects

In addition to digital services and cloud computing spearheading IT innovation, it has been foretold that the growth of India’s software-as-a-service industry holds immense potential in furthering our economic progress. Reports by McKinsey and SaasBoomi have predicted that this industry will be worth $1 trillion by 2030. Indian SaaS companies like Freshworks and Salesforce are just two of the many such Indian SaaS companies, start-ups, and unicorns.

“SaaS start-ups should develop solutions for under-served segments. They should invest into a proper GTM strategy rather than focus only on technology elements.”

— Mathew Chacko, CEO, Precision Infomatic

Last year, SaaS companies received investments worth around $1.5 billion. The relatively low cost of hiring in India, the growing preference of software engineering, and the abundance of developers in this area may possibly cause India to dominate the sector in a few years’ time. However, commitment to build discipline is still wanting, considering how the start-up community of India has a long way to cover to be considered competitive enough when compared to foreign start-up ecosystems like Silicon Valley.  As per a report by Bain & Company, some Indian SaaS companies like Browserstack and Chargebee have been at par with US SaaS companies when it comes to capital efficiency. Evidently, Indian SaaS companies hold immense interest for diverse VCs.

Policy Support

The growth of the IT sector needs to be backed by encouraging government initiatives and policies. The government has already taken various steps in this direction with the introduction of industry-focused skill development. In 2020, it issued “Simplified Other Service Provider” (OSP) guidelines to ensure smooth operation of the IT Industry, as well as BPO and IT-enabled Services. In 2021, it launched innovation platforms to foster the growth of globally competitive manufacturing & AI building.

“India is a geography that will benefit from computing power. From farmers to pharma, SAAS-based models are the answer to a lot of India’s needs”

— Sumit Sood, GVP & MD – APAC, GlobalLogic

The Development of Advanced Computing (C-DAC) has also introduced technologies like Automatic Parallelizing Compiler, Cyber Security Operation Centre and Parallel Development Environment (ParaDE). Apart from these, the Indian government is planning to develop Biotech-PRIDE (Promotion of Research and Innovation through Data Exchange) as well as our MoU with the Government of Japan is also directed towards further development of 5G and telecom security.

Digital interventions in the telecom sector have already taken the plunge towards increased technological potential. Telecom organizations are working towards the operational integration of business intelligence and analytics, automation of customer experience and relationship management, the employment of IoT, ML, and Big Data for enabling smart infrastructure, and the migration to Cloud. As seen during the Covidian waves, tech interventions in health infrastructure and fintech have also been immense. At the backdrop of such providential developments, IT enterprises can only accelerate this move to digitalism.

Looking Ahead

As stated by McKinsey, the Indian information technology industry has the potential to acquire a revenue of $300-350 billion by 2025. On top of that, we can also envision BPM accounting for $ 50-55 billion of this aggregate revenue. As the pace of vaccination rises up and the economy follows its swift path to recovery, the IT sector is bound to sustain this progress and innovation. The IT industry exemplified its commitment and preparedness despite the perturbation brought about by the two consecutive COVID-19 waves. Even though a possible third wave could slow down this momentum, a higher reliance on digitalization could persist, helping the sector to protract its growth and help with further job creation.

“The third wave, if it comes, will have an even minimal effect as we have implemented learnings from the past eighteen months. The IT industry is well equipped to retain and accelerate our growth.” Dr. Harsh Vinayak, Senior Vice President, Intelligent Automation & Data Services, NTT DATA