India's tech sector has to learn to navigate the 'no normal': Debjani Ghosh

Our tech industry, comprising not only IT but also business process transformation services, is helping the world move to the digital era, and is projected to hit $500 billion by 2030, the president of NASSCOM writes

By Debjani Ghosh

Published: Apr 17, 2023 12:05:12 PM IST

Updated: Apr 17, 2023 12:23:15 PM IST

Amid all uncertainties, India, and within it the technology industry, has demonstrated an unsurprising story of resurgence and resilience. Illustration: Chaitanya Dinesh Surpur

The last three years have been marked by immense change and transformation. The world we knew, characterised by stability and predictability, has given way to an era of volatility and uncertainty. Emerging technologies, geopolitical tensions, and conflicts have created a “no normal” world, where rapid shifts and differentiated growth opportunities are the new norm. Amid such upheaval, we've been forced to reconsider what we mean by “normalcy”. From emerging out of a deadly virus and its devastating repercussions across all areas to being able to revive businesses and build momentum for growth in 2021, to a more subdued global GDP growth estimate in 2022, the statement that ‘we are living in a VUCA world’, has never been so evident. We are still in the first quarter of 2023 and concerns in the banking sector are making headlines.

`Amid all these, India, and within it the technology industry, has demonstrated an unsurprising story of resurgence and resilience. Being the only country with a GDP growth rate of 6.8 percent in 2022, India has emerged as a leader, a position that will be further strengthened by its G20 presidency this year. IMF also views India as one of the two countries that will be responsible for 50 percent of global growth in 2023. Leading from the front in this growth story is the technology industry. As per our current estimates, technology revenue from India is expected to cross $245 billion in FY2023, growing at 8.4 percent over FY2022, and we are on track to reach $500 billion by 2030. The industry is also set to add over 290,000 new jobs in FY2023E, taking the total industry workforce to over 5 million.

FY2023 has been the year of continued revenue growth with an addition of $19 billion over last year. There has been a sharp focus on strengthening industry fundamentals and building on trust and competencies. Driven by an increased focus on digital maturity and technology adoption across functions, all major markets are witnessing growth in exports, with the USA, Europe and the UK continuing to be the major growth markets at 10.4 percent, 7.3 percent and 7.5 percent, respectively in FY2023E.

Despite external headwinds, India continues to hold the growth baton driven by resilient domestic demand. The domestic technology market has continued to grow with service providers continuously building India-centric solutions and solving India-specific problems. In rupee terms, the segment is set to grow year-on-year at 13 percent (5 percent in dollar terms) in FY2023 to reach $50 billion in revenues. Additionally, several government initiatives are focussed on improving the ease of doing business; schemes such as PLI are also attracting foreign companies to India.

The challenge for most organisations is they operate in an entirely new digital arena but continue to rely on legacy systems. Over the years, India's BPM industry has shifted from back-end voice services to intelligent operations and data-driven services, adding value to customers. From reaching beyond the traditional focus of non-core and transactional services to offering transformation as a service that focuses on design thinking, and at-scale business-process automation to improving legacy tech and business process models.

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It’s also important to point out that India has fortified its position as a key GCC hub. The unabated growth of GCCs continued in 2022 as 66 units were set up this year across diverse cities, verticals, and segments. Today, over 40 percent of GCCs are present in India. Further, with the energy crises and inflationary pressures in Europe and the UK, and on the back of the Russia-Ukraine war, the GCC value proposition for India has become even more lucrative. This presents a unique opportunity for India with several global parent organisations progressively looking at their India centre as the hub for all GCCs in other countries.

While we're still navigating this uncertain landscape, certain tailwinds need to be looked at.

AI as Productivity Enabler

There is an increasing recognition that innovation and adoption of AI in the enterprise will be the biggest disruptor. As a simple use case, for the tech services sector, embedding AI as a productivity lever through usage of libraries, co-pilots, tools etc can accelerate the coding process. However, concerns around responsible use of AI and, more importantly, talent capabilities will need to be significantly reinvented. The industry has already started building use cases with generative AI but will require focussed effort on skilling and moving from use case to a systems approach.

The Talent Turmoil

An underlying theme that has emerged stronger is the focus on building quality talent. Though compared to its global counterparts the tech talent demand-supply gap in India remains the lowest, a constraint for the industry considering the rapid adoption of digital across sectors and industries. India is expected to have a total demand of over 1 million data science and AI professionals by 2026. Further, the technology industry in India is increasingly becoming multi-generational, with a rising share of Gen Z, accounting for nearly 20 percent of the technology industry workforce. Enterprises are reorganising workplaces and value systems to integrate them, strengthening capabilities in niche and pure tech areas like cloud, AI/ML/NLP through reskilling/upskilling, improved and increased thrust on employee engagement.

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The Black Swan Events of Geopolitical Crisis and Recessionary Fears

Our annual CXO outlook survey 2023 indicates that while digital transformation remains a core strategic priority for 2023, cost takeout and optimisation requirements are also in demand, given the macro environment. Cybersecurity, cloud, AI and analytics continue to be the focus but with more integrated use cases and higher value realisation. Enterprises in the near term are thinking beyond surviving to thriving. Companies are honing their organisational muscles with technology as the prime focus and are likely to spend robustly on digital transformation.

Security as Core

Rapid digitisation has led to increased regulatory attention from a data and privacy perspective. These trends combined with the growing awareness at board and CXO level around cyber threats is pushing the cybersecurity demand and spend. Driving trust and safety through implementation rigour to ensure data security and privacy on infrastructure, systems, people, and processes will be the key as we forge ahead in the digital world.

The Looming Climate Crisis

As per the Deloitte 2022 CXO Sustainability report, India ranks 5th in their concern for climate change. Over 94 percent of Indian executives agree that immediate action can limit the worst impacts of climate change. As a result, the push for sustainability is presenting a significant opportunity for service providers with leaders and innovators focusing on building their sustainability service lines. What is encouraging to see is that more deep-tech startups are emerging to address SDGs like clean tech, zero hunger, smart cities and climate action.

Finally, the industry’s value proposition will hinge on the core currencies of trust, governance, inclusion and sustainability. By adapting quickly and investing in the right opportunities, companies can thrive in this "no normal" world.