India's cost efficiency and high innovation are factors that continue to keep it ahead of other markets
While on the demand side, there have been budget constraints from clients amidst uncertainty; on the supply side, there are signs of increasing protectionism with visas becoming tight in countries like USA, parts of Europe, Middle East, China and even Africa. Unless the global economic situation improves, we will see sluggish industry growth 2-3 quarters down the line, because there is always a lag effect between global slowdown and IT industry slowdown. This is not a good sign for industry growth in 2012. There is a threat that large projects, which are discretionary in nature, may get postponed given the economy scenario.
The fact that clients will outsource to other destinations because of better cost arbitrage is not a threat to the Indian IT/ITeS industry at all because the industry no more works primarily on the cost advantage model. The industry has upgraded to quality innovation and business transformation as key pillars. China is not a threat at this point because India’s ability and competencies are far ahead. India’s cost efficiency and high innovation are factors that continue to keep it ahead of other markets. However, Indian companies should see China as a key collaborator in the area of Remote Infrastructure Management for global opportunities. In fact, a change that is happening is that Indian organizations are concentrating more on high-end jobs while call centers are fast moving away to places like the Philippines. The same kind of collaboration can happen with firms in China, Latin America and Eastern Europe.
In India, innovation has been inspired by adversity. ‘Impact Sourcing’ is one such innovation that has helped key customers improve revenue yields and/or reduce technology and process management costs by over 10 percent. Further, we operate on a unique global sourcing model to support customers, which leverages strengths in various economies. There has been a change from the traditional business model where the objective was to provide just high quality at low cost.
The next two years will be a period of consolidation where only companies with a distinct “point of view” and the ability to provide consulting-led vertical domain solutions to their customers will reserve the right to play for new business. As global economies come to terms with new realities, you will see the ever flexible industry taking new shapes in the next 5 years. I see some players continuing to be cost and ’value for money‘ leaders, others playing the customer intimacy game with chosen customer segments, while many more successful players will choose to redefine their business models.