Share Of Digital In Indian IT Revenue Will Jump To 15%: NASSCOM Chairman
The IT industry will grow at 8-9 percent in FY18, says NASSCOM.
The digital business will be the biggest contributor to growth in the Indian information technology sector, said NASSCOM Chairman Raman Roy told BloombergQuint as the industry body released its guidance for the financial year 2017-18.
The segment, which earlier contributed only 5 percent of the total industry revenue, will now account for 15 percent going forward, Roy said.
While NASSCOM did not give forecasts for the overall industry growth, Roy told BloombergQuint that it works out to around 8-9 percent. That compares with an 8.6 percent rise in the previous financial year.
Here are edited excerpts from the conversation.
NASSCOM has estimated IT exports at about 7-8 percent and 10-11 percent for domestic markets. This needs an overall growth of 8-9 percent, which is not very different from what we have seen in FY17 at around 8.6 percent. Am I correct with these numbers?
Yes, that is correct. The domestic market growth is higher in percentage terms but the base is smaller. If you take 7-8 percent exports, in dollar terms this is higher than what we have ever accomplished.
In February, NASSCOM had suggested that because of a few uncertainties which were playing out, the guidance for FY18 will be delayed. What has changed since February in terms of clarity, what are the other data points that have emerged that have provided better visibility?
In February, Brexit had just happened, the U.S. elections were impending and policies that the new administration would adopt was unknown. It must be understood that the uncertainty was not just within the Indian IT sector, it prevailed among our customers. The work that our $150-billion industry does, it does for our customers who had uncertainty linked to the economy, political environment, their strategies, their game plans and what they were going to do. Between February and now, certain positions have been taken by the political side, certain aspects of the economy – the good and the not so good – have come forth. Customers have sat down and made forecasts of what they are going to spend on IT and what is appealing is that the global IT spend is going to grow by 4-5 percent. Whether it’s the Gartner, Forester etc., they are looking at 4-5 percent growth. When we say Indian IT exports are set to grow at 7-8 percent, it means our share in the global pie is going to increase.
In terms of IT spends, a lot of businesses out there are changing their business models from ‘run the business’ to ‘change the business’. Based on that what kind of differences are you looking at?
You are already seeing that our growth is now non-linear and that’s the manifestation of the change in business models that you referred to. From a per hour basis, per man-month basis or per person-month basis, the industry is moving towards outcome-based pricing where we are sharing risks with our customers. Within that presentation you will see a 2 percentage point increase in fixed-price projects where we quote a price and we take the risk if the effort is more than the effort than we anticipated it to be. That is the new reality that is emerging where from vendors we are moving to become partners for our customers. In that partnership there is a risk sharing, information sharing and knowledge sharing, where we sit on the table as equals with a common objective of meeting the needs of our customers. That is the backbone of what digitisation is all about.
Digitisation has grown many fold over the past few years, specifically, in the Indian IT industry. What are the areas that will drive growth for the industry in the coming years?
We were 4-5 percent in digitisation and we are saying that going forward we will grow and 14-15 percent of our revenues will come from digitisation. It takes various shapes and forms. It is a term that encompasses a lot. Whether you do things on cloud, whether you use big data, whether you use artificial intelligence, whether you use analytics, the world marketplace is changing. Let me take the example of Uber. Is Uber a tech company or is it a taxi company? All they have is a technology that links people. The Indian IT industry is the provider of that technology. And that is the fundamental change that is happening. We are participating in that risk. Because that is where the revenues are going up and because of profitability.
