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Indian IT Giants Need ‘Disruptive’ Innovation To Stay Relevant, Says Vineet Nayar

You’ll see a change in the ranking of Indian IT firms similar to what happened to HP, CSC and IBM in the early 2000s, Nayar says.

Employees sit working at computers in the library of the Tata Consultancy Services Ltd. (TCS) campus in the State Industries Promotion Corporation of Tamil Nadu Ltd. (SIPCOT) IT Park in the Siruseri area of Chennai, India. (Photographer: Dhiraj Singh/Bloomberg)
Employees sit working at computers in the library of the Tata Consultancy Services Ltd. (TCS) campus in the State Industries Promotion Corporation of Tamil Nadu Ltd. (SIPCOT) IT Park in the Siruseri area of Chennai, India. (Photographer: Dhiraj Singh/Bloomberg)

Indian IT companies need to focus on disruptive innovation to take on new-age firms that are betting on data analytics and artificial intelligence. That’s the “wake up” call from Vineet Nayar, former chief executive officer of HCL Technologies Ltd.

“We [IT giants] need to re-orient our old legacy businesses which are shrinking due to automation,” Nayar, founder chairman at Sampark Foundation, told BloombergQuint in an interview. “You will see a change in the ranking [of Indian IT firms] similar to what happened to HP, CSC and IBM in the early 2000s which stagnated due to lack of innovation.”

Software exporters’ vendor consolidation—a move to focus on select few customers—will at best maintain their market share and not result in incremental gains, he said. “Smaller IT companies are now growing 20-25 percent year-on-year as they aim to increase the revenue of their clients through data analytics and insights than approaching them through a cost point of view.”

Why BFSI Vertical Is Facing Headwinds

Information technology firms are complaining about reduced spends by banking, financial services and insurance clients as they are doing business with the wrong clients, he said. “Slowly these [European banking and insurance] companies are becoming less and less for the customer and they are migrating to newer Scandinavian firms.”

Nayar said traditional banking clients such as Deutsche Bank AG and Barclays Plc are facing significant pressure at the moment on account of higher cost per transaction for customers and lack of customised offerings. “So this loss of customers, in turn, is affecting the Indian IT firms who have portfolios with these larger banks.”

The total financial services spend is only increasing globally. Therefore, when you say BFSI spends are reducing, you are with the wrong customer. You need to bring in new propositions to work with new-age companies. Find opportunities of serving to them through value-based and customised artificial intelligence and analytics services and not cost-based outsourcing  services.
Vineet Nayar, Founder And Chairman, Sampark Foundation

This comes as Infosys admitted witnessing a “fairly sluggish” sequential performance in the BFSI segment in the December quarter. “We’ve seen more than expected furlough impact and slowness in banking (segment) in Europe partly due to Brexit,” Infosys Chief Operating Officer Pravin Rao had said. Infosys also forecasts some degree of volatility for the upcoming one-two quarters in the vertical.

According to a Nasscom projection released this week, the Indian IT and business process management sector’s revenue is estimated to grow at 8.4 percent in FY20 on a constant-currency basis to $192 billion as the industry continues to remain “cautiously optimistic” about the future.