Outlook 2014: Emerging Opportunities For Indian IT

by CXOtoday News Desk    Dec 27, 2013

indian IT

Over the years, India has emerged as the key destination for global sourcing of IT and ITeS, accounting for around 52 percent share in the global sourcing market during FY13. Indian IT/ITes sector’s contribution to the domestic GDP has increased from just 1.2 percent in FY98 to around 8 percent in FY13. The IT services and BPO segment is estimated to provide direct employment to around 3 million people and indirect employment to nearly 9.5 million people as on FY13.

While, the growth of the IT and ITeS industry has moderated in the past couple of years due to global economic slowdown, there is still huge growth potential with opportunities imminent in both mature and emerging services and verticals, states a recent report by Dun & Bradstreet. Here are some highlights:

Big promises of Big data

Big data refers to rapidly increasing structured and unstructured datasets/information with huge volumes, which is difficult to process using traditional data processing applications. Majority of the data existing in any company is in unstructured form (i.e. in raw form such as audio, video and social messages) which if analyzed properly can offer a competitive advantage.

While, several companies are collecting, storing and analyzing this data, most of them fail to utilize the information in an optimum manner and make use of it for their business decision making. The failure of some companies to utilize it in an effective manner is because of huge volume of data, complex ways to access the data and lack of budget for securing big data.

Big data analytics will enable the companies to predict user trends on a real time basis and prepare customised promotional campaigns to boost revenue per user and quickly adjust as per changing user demands.

According to Nasscom, as on 2012, India’s big data industry size is estimated at around $200 million. It is expected to grow at a tremendous pace in the near future and reach $1,000 million by 2015, increasing at a CAGR of over 70 percent during 2012-2015. This is expected to be driven by India’s already well-established IT and ITes market, which offers significant cost advantage, increasing demand for big data implementation across industry verticals such as healthcare, retail, telecom and financial services.

Emerging business opportunity in healthcare Healthcare expenditure accounts for a major share in household’s total expenditure in developed nations. Governments across the world are focusing on using modern technology to offer cost-effective solutions to its citizens.

Healthcare opportunities across emerging and developed economies are expected to offer newer collaboration opportunities to Indian IT vendors in the areas of data management, claims processing and insurance sales. Further, provisions such as the mandate to maintain electronic health records, can act favorably for the industry by offering enormous digital conversion opportunities.

Domestically, over 50 percent of the citizens in India lack access to primary healthcare due to unaffordable cost. However, technology can offer access to affordable healthcare facilities at much cheaper price. Other factors that will drive growth, include increasing awareness about health insurance, rise in lifestyle related diseases and increasing thrust of government to make healthcare facilities more affordable among others.

As per D&B’s projection, the total government expenditure on health as a percentage of GDP is expected to increase from 1.4 percent (estimated) of GDP in FY14 to around 2 percent of GDP by FY20. This offers huge growth potential for Indian IT vendors going forward.

Business engagement and pricing models are changing

The Indian IT and ITes industry has adapted itself to the changing demand and business scenario and developed solutions, which are customised as per the client requirements. The transforming business scenario has led to a shift from initial FTE (Full-Time employee requirement) to fixed price or subscription based pricing models and now towards non-linear models such as hybrid based, gain-share, transaction based, outcome based and pay-per use models.

In the near future, the industry is expected to witness increased acceptance of these new-age pricing and business models that will help clients control cost and leverage the benefits of resource pooling.

Focus on cyber and data security

Cyber security is one of the core focus areas for the industry in the current business scenario. Presently, India faces several issues in addressing cyber security concerns due to multiple administrative bottlenecks and huge cost involved. Increasing penetration of internet and boom in e-commerce has led to exponential growth of cyber space. Further, the rapid growth of smart phone users and its usage for doing transactions has been adding to its expansion.

Given the rapid pace with which this sector has grown, it has been difficult to maintain the pace at which cyber infrastructure needs to be developed. However, several initiatives have been rolled out by the Indian government to keep India free from cyber threats and ensure data security.

NASSCOM, in alliance with DSCI (Data Security Council of India), has launched several initiatives to endorse data security and set privacy standards. Some of them include, ‘Cyber Labs Programme’, which is creating capacity of LEAs (Law Enforcement Agencies) by training police officers in cyber-crime investigations and cyber forensics, spread awareness about the issue through seminars and workshops and setting up alternate dispute resolution mechanism among others.

Several IT vendors have realized the need and are already offering solutions for enterprises to secure their data. In the near future, India is expected to increase its expenditure on cyber and data security to bring it at par with other developed nations and maintain its lead as a key destination for outsourcing.

Offshoring of engineering and R&D services to India

Gradually, India has emerged as one of the most attractive destinations for offshoring of engineering and research & development (ER&D) services, driven by India’s competence and vast availability of talent pool. The services offered have gradually moved up from offering low and medium complex work to highly skilled and complex work.

Globally, the spending on ER&D is estimated at around $1,150 billion as on 2011. India is estimated to account for nearly 22 percent share in the global ER&D offshoring revenues. As per NASSCOM, the market for ER&D and design is expected to reach between $40-45 billion by 2020.

Apart from the traditional verticals such as aerospace, automotive, construction and heavy machinery being served by India’s ER&D segment, some of the emerging verticals include energy, medical devices, telecom and industrial automation.

Indian companies are increasingly developing capabilities, reducing time taken to design and market a product and controlling client’s cost. Thus, the near-term outlook for ER&D services in India seems to be bright, as there is still huge potential to increase its share in the global ER&D offshoring revenues.