“Automation has added more jobs for the Indian IT-BPM sector”
Keshav Murugesh, Group CEO, WNS & Chairman, NASSCOM, interacts with Trade Promotion Council of India on the current scenario of the Indian IT-BPM industry, and why it has performed better than even what the cautious optimists expected. He also opines that contrary to expectations, automation has added more jobs and provides the opportunity to add even more.
TPCI: According to a recent estimate by NASSCOM, Indian IT sector exports are projected to grow by 7.7% in FY20. What are the factors responsible for this optimistic outlook?
Keshav Murugesh (KM): With a 7.7% y-o-y growth, total revenue of US$ 191 billion and creation of 205,000 net new jobs in FY 2020, the Indian IT-BPM industry performed better than what our cautious optimism expected it to.
Our technology exports registered an 8.1 percent growth over FY 2018 to touch US$ 147 billion. Digital transformation of businesses played a significant role in our performance, with 26-28% of the total revenues coming from digital-driven services for clients across the globe. Engineering and Research and Development (ER&D) and software product development was the fastest-growing segment with 11% improved performance over last year. We also saw a surge in domestic demand, driven by an increase in the government’s technology adoption for its citizen programs, smart city projects and financial inclusion initiatives.
Amidst a global slowdown, we remain cautiously optimistic in our outlook. Overall, however, we see a growing demand as the market shifts from traditional IT services to digital technologies, DevOps and ‘as-a -service’ models. With organizations across the ecosystem rapidly adopting new-age technologies, we hope to maintain the highest relative share in the national GDP that currently stands at more than 8%.
TPCI: How exactly has the H1B visa put pressure on global tech giant hiring Indian employees? How is the IT industry tackling this challenge?
KM: In the current digitally disrupted ecosystem, the right narrative is to focus on global talent mobility rather than looking at it as a ‘boundary or VISA issue.’
The H1B program has been an integral part of the US’ strategy to attract the best-skilled workers. The US faces a deficit of 7.5 million Science, Technology, Engineering and Maths (STEM)-skilled talent, and 67% of this number require tech skills. The H-1B program allows them to fill just 85,000 of that number, and it is a testimony to Indian talent that Indian nationals account for the majority of approved H-1Bs.
In the IT domain, this has contributed significantly to the US’ global leadership in technology. With digital transformation ruling the new business landscape, every company needs access to the right talent. India-based and India-centric global IT companies that avail of this program are world leaders in digital transformation and enable US companies to maintain their global competitiveness. They thus form an important part of the US economy. Interestingly, only a small share of Indian H-1B professionals are employed by Indian companies – the majority of them are sponsored by global and US multinationals
NASSCOM is working closely with the US administration to help them understand the vital importance of technology in the new world order. This will enable Indian technology companies to have a level playing field without being discriminated against by administrative action.
Indian government is also conscious of the need to focus on talent mobility. During the recent visit of the US President, the request to consider signing a totalization agreement to avoid double deductions from the incomes of professionals working in each other’s countries was actively brought up. We are hopeful that such initiatives will set the right perspective from a talent point-of-view.
TPCI: What implication has the global economic slowdown had on Indian IT sector? What is the likely impact of Brexit on the industry?
KM: We have seen the global economy go through a slowdown over the past few years. 2020 appears to show initial signs of recovery, and the worldwide growth for this year is expected at 3.3%. The IT industry, specifically, is likely to grow by 4.5% in 2020 to reach US$ 2.5 trillion. Enterprise software is the fastest-growing segment at 10.5%, and an additional impetus will come from digital technologies, especially analytics and legacy system modernization.
The new post-Brexit UK-EU trade deal will come into force from January 1, 2021, after negotiations are finalized. Till such time, the business continues as usual. For Indian IT, the UK continues to be a highly valued market, and we see considerable scope for collaboration and innovation. The IT industry offers the right expertise that is optimal for enhancing and capturing opportunities that are beneficial to both countries.
In 2020, we will see several negotiations about developments around trade. Services account for about 80% of the UK economy and this will be an important focus for Indian investments in the UK. We must safeguard services companies so that we obtain the maximum potential from this deal. With the protection of free-flowing data, intra-company transfers and sustaining regulatory alignment between the UK and EU, we see business costs being reduced – and this, in turn, will be favorable to all stakeholders.
TPCI: How have new digital technologies like social media, mobility, analytics, and cloud computing (SMAC) changed the competitive landscape for Indian IT firms? How are they coping?
KM: The line between core and digital services has been consistently blurring, leading to an increased transition to new digital technologies. This has given rise to the emergence of new focus areas – cybersecurity, digitization and industry-specific applications. The share of digital revenue has progressed swiftly, and today it accounts for an average of 40 percent of the topline of listed players. Most Indian IT service providers and early digital adopters are winning core transformation deals, large in scale, scope and complexity.
Into the future, ecosystems built on a strong core of digital technologies and connectedness will be the ones to leverage some of the big opportunities. We estimate that incumbent enterprises alone, apart from digital-native start-ups, will generate technology products and services worth half the global GDP of US$ 100 trillion by 2025.
Our research identifies nine technologies that will have the combined potential to deliver one-third of this US$ 100 trillion global GDP by 2025. They include three foundational technologies (Big Data and Analytics, Cloud Computing and Cybersecurity), and six advanced ones (AI, IoT, 3D printing, Robotics, Blockchain and Immersive Media). Organizations are preparing themselves to remain competitive in this technology landscape through skilling investments to ensure future-ready talent, and restructured business models based on shifting priorities.
TPCI: How is the Indian IT segment tackling the challenge of new data protection & privacy rules enforced by other countries (e. g. General Data Protection Regulation in EU) Are there any suggestions for the Indian government to resolve such transnational issues?
KM: Today, change is the only constant and the Indian IT-BPM industry has been awake to the spectrum of challenges and opportunities – not only in the global marketplace but also in the area of data protection, with new regulations such as the GDPR. India has effectively entered the data privacy arena with the Personal Data Protection (PDP) Bill to govern the collection, storage, and processing of data by public and private entities.
We are seeing several Indian IT-BPM organizations adopt a proactive approach to being compliant with these new regulations and bring in the necessary strategic, cultural and technological changes. Not only are they successfully addressing their internal requirements, but they are even guiding their global clients to plan and action a holistic roadmap.
Nasscom has been at the forefront of this change, helping companies take a pragmatic approach to build the right capabilities in response to the changing requirements. Working closely with the Government of India, we look to ensuring responsible policies and frameworks around data privacy and protection. This includes developing a national-level data strategy that encompasses data protection and safe data sharing through open data exchanges, driving Interoperability and standards, and creating viable business models across the data value chain.
TPCI: What are the operational obstacles (eg talent acquisition & obsoletion of skills due to automation) to the growth of the IT industry in India?
KM: NASSCOM research shows a promising outlook in terms of customer spends on technology. In our recent survey, 83% of respondents expected spend to grow between 4-6% in 2020. Amidst the apprehension of a global slowdown, this is good news for the Indian IT industry.
Contrary to fears that digitization may lead to job losses across industries, automation has added more jobs and provides the opportunity to add even more. The industry should address this opportunity with a mix of cost and operational efficiencies, and investment in skilling and capability building.
From a talent development perspective, we are looking to transform key universities to build the digital talent pipeline (through curriculum, interactive learning, and faculty development programs on digital technologies) and develop specialized research initiatives as catalysts. Cross-skilling, re-skilling and up-skilling the existing four million-strong workforce by 2025 is vigorously pursued, both at organizational and at the NASSCOM levels.
The Indian IT-BPM industry has had a substantial economic impact on India over the last decade. Going forward, it is expected to play a critical role in enabling India to become a US$ 1 trillion digital economy.
Keshav Murugesh is the Group Chief Executive Officer of WNS Global Services, a NYSE listed company in the Business Process Management business. He is also the Chairman of NASSCOM.