NASSCOM estimates 12-14% dollar revenue growth for the sector. I’m confident about the acceleration in growth for the industry due to improvement in demand scenario in US. Retail sales for this quarter has improved and employment data hints of lower unemployment which should translates into higher confidence for companies to invest. We are witnessing strong deal pipeline and shorter decision making cycles.
NASSCOM estimates are based on survey of industry participants ranging from Indian IT company, MNCs and captives. There is fair amount of data that is available for the publicly listed companies. NASSCOM also polls companies regarding their growth estimates for the next year. Left are GIC (Global In-house Centres) which might not reveal that data but there you also get some idea using their hiring numbers.
How is the overall demand environment looking, esp in US, and also Europe, which is now being touted as the next big outsourcing destination?
Demand is good for companies with good business models. Domains like SMAC are offering tremendous opportunities and so companies with presence in those fields will benefit from the demand environment – irrespective of the geographical presence.
US growth is stronger than Europe as economic revival in US is faster. Also the markets are more open to outsourcing than Europe. Insurance and Banking are showing signs of revival with increase in discretionary spends towards digital and stable budget for run the budget business. Manufacturing firms are investing in improving data collection from external sources as well as shop floors to increase efficiency and thus the throughput. Retail is investing in upgrading the supply chain of brick and mortar store as well as integrating it to online through click and collect model. Retail companies are also investing in creating e-commerce presence. Europe on the other hand is suffering from slower growth and also have varied cultural outlook across every country having different perspective to outsourcing.
The economic reality of European countries is quite different and you can’t paint the whole region with same brush. So unlike US, which one large homogeneous market, penetrating Europe is more difficult where the language and culture changes in every 30 min flight. UK and Switzerland are fairly mature markets, and have traditionally been awarding large outsourcing contracts. Germany, Netherland and France have large organisations that have already outsourced and few other large organisations are ready to outsourcing in retail and manufacturing industries. Spain, if you see, is trying to portray itself as outsourcing destination rather than outsourcing country. So pretty diverse region in terms of outsourcing potential, and hence it will have to be tackled accordingly.
Outsourcing has undergone radical changes. Adaptive outsourcing is replacing pure play advisors. Adaptive out sourcing has three important stakeholders – CIO: decision maker for Run the Business (RTB), Functional Head and CTO: Change the business (CTB) especially SMAC strategies and Chief Digital Officer (CDO) for digital transformation of legacy systems. Vendors are actively trying to explore all the three avenues to increase share of wallet.
Cannibalisation of IMS due to cloud isn’t big. It has impacted data centre project marginally. However even large organisation are yet to completely configure their digital IT strategies. Helping them to migrate to cloud can easily mitigate large part of the cannibalisation impact.
Well in consulting MNC do have a managerial advantage however Indian It companies strategy have to dual in nature. Agile for development of SMAC related projects and integrate with the old legacy systems and as well as help them move to cloud. The client’s comfort across incumbent is more important as deliver capabilities across companies remain same. Having said that, the MNCs do have better board room access, and are able to influence decisions more – but Indian companies are not far in terms of delivery capabilities.
Africa as a continent offers tremendous opportunity – Zensar is doing really well in South Africa and Kenya. Verticals like BFSI and retail, and mining (esp in South Africa) offer huge growth potential. Apart from that, Australia too appears to be attractive destination.
Zensar has partnered with BCG in the digital transformation practice, where BCG will general management and functional advisory part, and Zensar will be responsible for the technology part. Today Zensar operates in a 3x3x3 cube: Geographies of US, UK and Africa; Service lines of Application , Infrastructure and E-commerce; and verticals of Manufacturing,Retail and Insurance. So almost 95% of Zensar’s revenues come from within this cube and that is what we remain focussed on.
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