Indian IT To Reach $350 Bn Revenues By 2025

by CXOtoday News Desk    Oct 05, 2015

growth

Driven by digital technologies and practices, the Indian technology and services industry is on track to reach its goal of $225 billion in revenues by 2020 and further to reach revenues of $350 billion by 2025, says a recent Nasscom report, which projects the share of Digital technology investment to rise from 10% in 2014 to 35% in 2020 and 60% in 2025.

The report titled: Perspective 2025: Shaping the Digital Revolution, is based on extensive research conducted for over a year by McKinsey & Company, and outlines the roadmap for this new environment which presents the global and domestic market presents a huge opportunity for companies that can build expertise in these new technologies and deliver value through them. 

“The technology and services industry in India has become a transformational partner for its customers. The report identifies innovative and disruptive technologies that will shape the enterprise of the future. It also provides insights for the industry to reinvent business models and identifies key steps needed to make India a global centre for innovation in digital technology. Our aspiration is to build cutting edge solutions and services from India that will shape the digital revolution globally,” says BVR Mohan Reddy, Chairman.

The report states that technology is becoming a dominant factor in capex, making return on technology investment a key success factor for enterprises. With a $6 trillion cumulative technology capital investment globally, the economic landscape will be split among three types of enterprises: digital leaders and attackers, smart followers, and digital laggards. Each of these enterprises will operate a varied mix of disruptive, transformative, and traditional technology, mirrored in their investment choices. Driven by the adoption of digital technology, the total addressable market for global technology and business services will likely expand to about USD 4 trillion by 2025, growing at an average annual rate of about 3.6%.

 The big implications for companies are:

- The need to develop new service lines. New service lines will account for 40% of all revenues by 2025

- Shifting portfolios to advanced, disruptive technologies

-  Managing customer digitization at different speeds. Companies will need to cater to customers who are Digital leaders, Smart followers as well as the Digital laggards

-  Re-skilling of people as revenues decouple from headcount

- Forging new capabilities through M&A, partnerships, incubators and open innovation

Probably the most pressing need is for companies to develop offerings along new digital service lines, even as they re-invent their traditional service lines. Noshir Kaka, Managing Director, McKinsey & Company, India said, “Companies hoping to prosper in the new environment will have to closely watch six new service lines- including the Internet of Things, Cybersecurity, Social, Mobility, Analytics and Cloud.”

 

GLOBAL FORCES OF DISRUPTION - What Will Shape the Industry in 2025<br />
•	Almost half the Fortune 500 companies will be based in an emerging market<br />
•	About 260 million jobs will be replaced or augmented by technology<br />
•	Capital, trade, and information flows will move across a multi-nodal global grid that supports the world’s economy<br />
•	Resource scarcity will drive innovation as companies are forced to do more with less<br />
•	Interconnected global concerns, will  have a noticeable impact on the industry<br />

Industry Growth across segments

As the industry grows over the next decade, its mix of technologies and demands will change significantly. Over all, the share of digital technology investment in cumulative expenditures will rise from 10 per cent in 2014 to 35 per cent in 2020 and 60 per cent in 2025.

- About 80 per cent of incremental expenditures will be driven by digital technologies. These could be platforms, cloud-based applications, big data analytics, mobile systems, social media, and cybersecurity, as well as services needed to integrate these technologies with legacy tech.

- Half of this incremental investment will be funded by a projected 20 to 25 per cent cut in legacy expenditures. These reductions will be largely in spends on infrastructure, traditional application development and packaged software.

- The global addressable market for Business Process management (BPM) services will likely touch about $ 260 billion by 2025, for an annual average growth rate of 4 to 6 per cent. Expansion will be driven by business process-as-a-service offerings and big data analytics.

- The global total addressable market for engineering services will likely reach up to $ 480 billion by 2025, a compound average growth rate of 8 per cent. The share of embedded software will rise significantly and lines between investment in engineering services and information and communications technology will blur.

- Technology and business services expenditures in India is projected to reach $120 billion to $130 billion by 2025, an average annual growth rate of 10 per cent.

Over the next decade, five disruptive forces will shake the global economy and touch all aspects of society. These forces will create a world that is more interconnected, more interactive, and more aware, while at the same time one that is trying to harness and protect the same set of finite resources.

 This digital transformation that is impacting the global economy is also creating new imperatives for India’s growth, with many companies adopting digital technologies into their business models. For 2015 & beyond, the growth rate is likely to be ahead of many other leading economies such as China, Brazil and Russia.

Agenda for Action

Outlining the steps needed to become a global centre for innovation in digital technology, R Chandrasekhar, President, NASSCOM, said, “There has to be concerted action by the government, industry, academia and NASSCOM to create the right conditions for the technology and services industry to sustain its momentum. The development agenda should bring government, industry, and academia together,’’ he said.

The report outlines some key steps that need to be taken.

- Foster Innovation clusters: that will fund research in key emerging technologies and linked to technology institutes.

- Build Capabilities: Design, develop and rollout a massive reskilling program to train and reskill 4-5 million people.

- Entrepreneurship: Turbo-charge the startup economy and government’s ongoing Startup India program.

- Branding: Undertake a branding and public relations exercise, media campaign to reposition India as a global Digital Innovation Hub, moving ahead from its current pole position of low cost and efficiency leader.

- Regulatory: To support the development of India as a centre for digital innovation, new regulations should help create a domestic market, protect intellectual property, strengthen cyber-security laws and ease the creation of public-private partnerships in education.