Indian IT companies are struggling to find a footing in the Indonesian market, Southeast Asia’s largest economy, despite the fact that spending on information technology in the country is set to grow by 12.5 per cent in the coming year.
According to a new report by research firm International Data Corporation (IDC), Indonesia’s IT spending will hit $16.8 billion in 2014.
Indian companies however remain, at best, bit players. It is the big western firms such as IBM, Accenture and Capgemini that rule the roost here. The failure of Indian IT to make a splash in this part of the world is not for dearth of opportunity.
According to Pranab Roy Choudhury, Indonesia country manager for Tech Mahindra, , Indonesia’s IT capabilities are currently deficient, lagging behind India’s by 8-12 years, and thus there is considerable scope for growth.
Rajesh Bhaskar, Indonesia Director in charge of sales for HCL, also strongly believes that Indian companies can help local Indonesian firms to ramp up their IT skills. “We can offer a long-term skilling up of locals here, which will be of great benefit for Indonesia,” he says.
However, there are few takers. The reasons that most Indonesian companies pass on Indian IT vendors lies with a bad reputation that is proving difficult to shake. Without naming names, both Mr. Bhaskar and Mr. Choudhury talk of incidents in the past where Indian IT companies failed to deliver on-budget, on-time projects that they had been hired for, thus “spoiling the Indian brand today.”
Mr. Choudhury blames these misadventures on a mindset in which Indian companies were not looking at Indonesia from a long-term or strategic perspective. “They (Indian companies) were just here to grab a project and if didn’t work out, too bad,” he said.
But Indian firms also struggle in part because it is difficult for foreign corporations to bid directly for projects in Indonesia. They usually need to go through “agents” or local companies that act as fronts and go-betweens. This makes it easy for deals to go sour and misunderstandings to arise.
The IDC report has highlighted manufacturing and retail as sectors where IT spending in Indonesia will ramp up, and Mr. Bhaskar agrees it is time for Indian companies to look beyond the banking and financial services sectors, they have typically focused on. To this end, he is keeping a close eye on the progress that the ASEAN-India Free Trade Agreement on services is making.
The FTA could potentially be a much-needed game changer for Indian IT in the region.
