No stopping the Indian IT consultants to the worldDATAQUEST
Indian IT services and consultancy companies have flourished despite the pandemic and have re-invented themselves to become even more relevant in the years to come on the road to India2047. They will play an integral part in India becoming a tech superpower and a $10 trillion economy
From 1947-84, India was probably in the Dark Ages when it came to technology. Sure there were professionals and companies doing cutting edge work, but the common citizen and government offices didn’t have much to do with the “latest”. The low point was when the 1977 Janata Party government used FERA rules to practically throw out multinationals like IBM and Pepsi. This followed the Emergency of 1975-77.
It was only the 1984 National Computer Policy that kick started the computer business in India. Sure there were still a lot of regulatory and foreign exchange issues, but the early pioneers made the most of it and laid the foundations of tech India. That time tech entrepreneurship was much tougher than the startup entrepreneurship of today.
The tech boom post 1984
The computer flourished in India and entered the well-off homes and big company offices. It slowly and steadily started entering the banks and government offices also. But more importantly it set off the tech aspirations for everyone in India. The 1982 Asiad Games popularised the TV and a screen was already entering every urban household.
The private Internet came to India in 1988 and that was a boon for academia and government bodies. That is also when the hacking culture was born in India and in a few years we had the first primitive Internet chats called the Bulletin Board System (BBS).
More than that were the industries that flourished around it. Computers had to be connected in the offices and that led to the networking industry. The printer powered the DTP or Desktop Publishing revolution. While the printer shop is still alive and kicking today, at that time it revolutionised the entire media industry. Newspapers, magazines, films, TV, advertising, art… it all changed with DTP and computer graphics. India got its first software policy in 1986.
The private Internet came to India in 1988 and that was a boon for academia and government bodies. That is also when the hacking culture was born in India and in a few years we had the first primitive Internet chats called the Bulletin Board System (BBS).
The Liberalization Era
In 1991 following a severe economic crisis, India decided to liberalize and fully embrace capitalism. That led to tremendous growth and innovation. IT was just one of the areas that prospered. Now it was much easier to do business thanks to deregulation, government support, foreign tie-ups and the general opening up of most markets.
Both the hardware and software industry in India took off. After the National Telecom Policy of 1994, ICT became a thing. While initially phone booths for making local and long distance calls boomed, mobiles, even if they were expensive, became widespread. Satellite TV changed the way we consumed entertainment.
The coming of the Internet in 1995-96 connected the world together. Every Indian wanted to log in via a cybercafe and they mushroomed all over India. The dial-up modem was modest but key to getting Internet at home. Ecommerce was born, though it was nothing like what it is today.
The Y2K opportunity for India
While that was the general trajectory for India, something happened at the turn of the century that led to India taking a totally different track and becoming an IT services superpower. The Millennium Bug threatened to crash computer systems in the Year 2000 and Indian techies burnt midnight oil in great numbers to make sure that wouldn’t happen.
As a result of that, post-2000 we were left with a large talent pool and they were ready to offer their services to the whole world. That growth continues to this present day and the giants even braved through the 2008 financial crisis.
The coming of age of startups
While VCs gave India a miss in the late 1990s, they started showing interest in startups in the mid-2000s. The 2010s were a wonder decade for them. What began as a trickle ended up as a flood. The VCs came in great numbers as first we became the mobile broadband capital of the world and then the pandemic pushed ecommerce to the limit. There has been a lull recently, but the base has been set for exponential growth. The smartphone was also the device of the 2010s.
Govt as an IT service provider
Interestingly, the government is becoming a great IT service provider to the common citizen. Recently Bengaluru launched Namma Yatri, an Ola-Uber type service for autos after the city faced ride sharing problems. Within a very short time, tens of thousands of auto drivers jumped on to the bandwagon as did lakhs of users.
This comes from the stable of the ecommerce platform Open Network for Digital Commerce (ONDC), which will give a level playing field to India’s small-scale sellers. Amazon is also joining ONDC. It is based on the Beckn protocol.
We are coming out with the Account Aggregator Network (AAN) that will help share financial data. This will greatly help the credit industry. So, there’s the Open Credit Enablement Network (OCEN) too.
The biggest hit is UPI, which is probably India’s best tech product and in terms of transactions has claimed the top spot in the world. Not only is it a success in both urban and rural India, but it is being adopted in many countries in the world. The National Payments Corporation of India (NPCI) has come out with a slew of products like IMPS, Aadhaar payments, BHIM, FASTag (even our highway tolls have been seamlessly connected) etc.
The Indian government as a tech player seems to be competing with many private tech products and is actually doing a good job at it. It is also digitizing the basic functions of a government. That’s why the term JAM trinity has come into play: Jan Dhan-Aadhaar-Mobile. Arguably without the economical smartphone and cheap mobile broadband, this revolution may never have taken place. Financial inclusion is not just a noble concept in India but an actual ground reality.
The original success was Aadhaar. It has been seamlessly integrated into other services like e-Sign, DigiLocker, eKYC, PAN, GSTN and CoWIN. CoWIN is being transformed with the Ayushman Bharat Digital Mission (ABDM). As you can see, it has a multiplier effect.
All these are “Digital Public Goods”, and one could say that India has emerged as a world leader in that. Interestingly most of this comes from India Stack, the largest open API in the world. That’s something which even the West can’t boast of.
Indian IT consulting rules
Which brings us to the IT services industry which is in fact the IT consultancy industry to the globe. It has come a long way since 2000 and nothing seems to be stopping its march. It innovated itself during the pandemic era and continued to flourish.
When Indian IT started taking off in the early 1980s, it was a modest `100 crore industry. Today market leader TCS itself is in the range of an annual revenue of `2 lakh crore. It started as Tata Computer Services in 1968. The Tata Research Development and Design Centre, set up in 1980-81, was the first of its kind in software. TCS overall has gone through many iterations and transformations but remains the gorilla in the IT room. In terms of market capitalization, TCS is second only to Reliance industries. In the global IT services market TCS and Accenture keep fighting for the top spot. Interestingly Accenture India is in 6th place in the rankings.
Ratings agency ICRA, which looks at a clutch of select services companies, said that in the first nine months of FY2023, they saw a YoY growth of 18.4% in Rupee terms and 9.9% in dollar terms. Commerce Minister Piyush Goyal declared that overall Indian goods and services exports will cross $760 billion this fiscal, a record.
While TCS was No. 1 in the DQ Top 20 rankings in 2022, Infosys was second, crossing `1 lakh crore in revenue. It was formed in 1982 in Pune. It came out with an IPO in 1993 and in 1999 became the first Indian company to be listed on Nasdaq. While it had fallen to 3rd and 4th place some time back, it is a strong No. 2 now. At No. 3 was HCLTech, founded in 1976 as HCL Enterprise. That has also seen many ups and downs but is back with a bang and is also targeting `1 lakh crore plus in the years to come.
The late seventies saw Western India Vegetable Products (started in 1945) incorporate an infotech division and in 2022 it was No. 4 in the rankings. Redington India started off as a distributor, but today it is a Top 20 No. 5 company, strong on consulting. Most of the DQ Top 20 companies have shown robust growth despite the economic disruption we have seen in the last couple of years.
Ratings agency ICRA, which looks at a clutch of select services companies, said that in the first nine months of FY2023, they saw a YoY growth of 18.4% in Rupee terms and 9.9% in dollar terms. Commerce Minister Piyush Goyal declared that overall Indian goods and services exports will cross $760 billion this fiscal, a record.
The pandemic disruption
Before the pandemic collaboration was in name only and now it is showing results and there are certain industries, sectors and job profiles where online collaboration can be implemented 24X7. There has been a succession of investments in both solutions and infrastructure. Our IT firms scrambled to give business continuity with this and then handed over that expertise to their clients.
Thanks to that, the Hybrid work environment is the way forward. Employees are looking at the best of both worlds. Pick and choose. This could be also for a single job profile or an industry at large. Others still want to totally return to the old world. How else will you service the client and track real-time progress? How else will you justify your real estate investments and ensure that disparate teams collaborate with each other?
All this has led to the problem of moonlighting, a pressing issue for Indian IT services giants. They were wracked by both high and unprecedented attrition and moonlighting. On the face of it working for two or more companies simultaneously appears to be very wrong and that was the initial reaction of the Indian IT industry, with Wipro leading the way. But with each passing day it is gaining acceptance and now many companies are coming out with a moonlighting policy.
Remote work. Hybrid work. Moonlighting. Right now, the employee seems spoiled for choice and a corporate paradigm shift has occurred. But still if you look at the rest of the world, this is a much better problem to have rather than crashing stock prices, low growth, shrinking profits and the necessity to retrench in large numbers.
All this was possible due to cloud adoption early on, which stitches it all together. We are already living in a cloud world. Each and every day, millions of data centres cater to billions of devices sending trillions of GBs of data all across the world.
And it’s not just data, but cloud services. The entire offline infrastructure is being transferred to the cloud. If the Internet meant that we all lived in an online world, now businesses live in a virtual world.
Automation and overall increased IT adoption has resulted in changes at the smallest level of SMBs right up to a global behemoth like, say Amazon. Remote operations, robots and bots could pave the way forward.
One interesting change in the industry will be the effect of AI on overall business in the era of ChatGPT, GPT-4, Bard and all the tools that are being launched. While AI has already caught the imagination of the populace. It will be quite interesting to see when it gets fully embedded into the global manufacturing, financial and trade structure.
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