IT sector on recovery path as top firms go head hunting

Industry expanding at above global GDP growth rate; digital pilots gaining pace

May 12, 2019 10:10 pm | Updated 10:10 pm IST

Man looking for a employee with magnifying glass.

Man looking for a employee with magnifying glass.

After some years of a dry drive, Indian tech firms now seem to have turned the corner and established themselves firmly as digital transformation agents in the global market, international IT experts have affirmed.

Growth is picking up for the Indian IT sector and the good news is that most players have a strong hiring plan in place.

Clear upswing

Last fiscal’s performance numbers posted by the country’s leading players reflect a clear upswing in the market. All the digital pilot projects that were under way over the last couple of years are now going mainstream and are being scaled into enterprises. This means more work and sizeable contracts for vendors and systems integrators, global tech analysts told The Hindu .

Peter Bendor-Samuel, CEO of Dallas-based Everest Group said, “The Indian firms seem to have turned a corner and established themselves firmly as important players in the modernisation portion of the new digital market.”

The industry continues to expand above the rate of growth of global GDP. This is driven by digital transformation and increasingly the modernisation of IT movement which continues to gather steam. This otherwise promising outlook was somewhat clouded by a slowing global GDP for all areas outside the U.S. and the cannibalisation effect that modernisation is having on legacy IT and BPO, he added.

Phil Fersht, CEO and chief analyst of Cambridge-based HfS Research, said that last year had been ‘terrific’ for Indian providers — much better than anyone’s prediction. “TCS is fast becoming a monster of IT services and this company is capable of winning any large deal if it really wants. Infosys is clearly a fast-mover and Wipro has been steady and will get better.’’

Digital services are going mainstream which will propel growth for the next few years. Revenue from the digital business is getting close to 30% or more of total revenue and growing at a healthy pace, which is a good thing and bodes well for the vendors, said Hansa Iyengar, senior analyst (Advanced Digital Services) at London-based data research and consulting firm Ovum.

Indian IT vendors continue to rely heavily on the U.S. and U.K. markets for a large portion of revenues. Though this is changing, any protectionist measures in the U.S. (including due to the presidential election next year) and uncertainty around Brexit may impact revenues in the short term.

“Overall, the market seems to be going back to high single-digit growth, though we can’t really expect the 25%-plus growth rates common 5-6 years ago. Focus has to shift outside the U.S. and U.K., into growing/emerging markets, including India, to rebalance the portfolio,” she added.

People, job factor

The Indian IT sector is expected to create some 2.5 lakh fresh jobs in the current fiscal, as per a recent report by staffing services firm TeamLease. These numbers point to a positive outlook for the country’s $167 billion tech industry. The job recovery trend is already evident from the hiring by leading players. Tata Consultancy Services, Infosys and Wipro have added 29,287, 24,016 and 11,502 software professionals respectively in the fiscal ended March 31. 2019, or, 64,805 new jobs.

In FY18, TCS added only 7,775 and Infosys, 3,743. R. Ray Wang, principal analyst, founder and chairman of Silicon Valley-based Constellation Research, said the larger trend was that firms were doubling down to invest in digital transformation.

“Most are allocating an increase of 13-17% more for tech projects. They are hiring more services firms because they don’t have the skillsets required in artificial intelligence, machine learning, data sciences, Internet of Things, Blockchain etc.”

“This means IT providers have large opportunities to move forward. Overall, I expect hiring to go up, but the skill mixes will change. Digital transformation is hard to evaluate as what is considered a digital project varies by firm but overall the hiring numbers are all up. The big growth area for 2020 will be cloud migration, Microsoft practices, and AI,” he predicted.

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