The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

March - 2011 - issue > Cover Feature

The Fight to Survival Ensues

Hari Anil
Tuesday, March 1, 2011
Hari Anil
When being pulled down by a crisis and it is almost impossible to move forward, the easiest thing to do is to give up and surrender. It takes more than just courage to stand up and say we are not giving up that easily. This is exactly what Indian IT Services industry did, they stood up and said something similar to the famous dialogue in the movie Independence Day, “We will not go quietly into the night! We will not vanish without a fight! We’re going to live on! We’re going to survive!” and they did survive. One can say it is the fighting spirit in these companies that kept them going.

Indian IT Service industry, which depended mostly on U.S. and UK, is amongst the industries that suffered most during the recent financial recession. The recession is mostly over and the industry is in its rejigging phase now. There is no point in surviving a crisis if one has not learned something from it; this is true in terms of industries as well. As this stands, another peril in store for Indian IT services industry seems to be from Brazil and other Latin American counterparts, which are slowly and steadily eating into our market and the industry experts are predicting they might be in for a feast. For an industry just surviving from a major setback, losing market hold spells disaster. Learning and adapting is a very important part of survival. What the industry has learned from its ordeal, how it is equipping itself for a similar scenario and to cement its foot hold in the industry is what we are looking into here.

Aftermath of Recession
U.S. and UK are among the countries worst hit by the recession and the companies there immediately cut down their budget, including IT budget, in order to stay afloat. This had huge impact on the Indian IT services industry and the companies had to strip themselves to bare minimum to survive. In the wake of the crisis, the industry is all set to shift its target market from giants like U.S. and UK to newbie like Ireland, Mexico, and Netherlands.

A vertical that was almost victimized by the recession is BFSI. The recovery rate of BFSI sector is comparatively low, but this turned out to be a blessing in disguise to Indian IT services companies as in an attempt to cut the budget short, more and more U.S. banks have now begun outsourcing. Large U.S. banks including Citigroup, JP Morgan and Bank of America have decided to outsource IT and back office projects worth nearly $5 billion this year to India. Furthermore now the Indian IT Services companies are also looking into other less financial recession affected verticals like government, healthcare, retail and utilities. These verticals are comparatively smaller in terms of IT spending but patterns are showing that this is about to change.

Apart from this, state governments in the U.S. are now trying to lower their cost by outsourcing their noncore works. The Indian outsourcing Industry is eyeing for a major chunk of this $100 billion opportunity. ITeS majors like HCL have already tasted the fruit of this market with their contract with the State of Virginia, which recently got extended. According to Ovum’s ICT Opportunity Profiler, IT services contracts worth well over $150 billion are due for renewal in 2011 out of which over 60 percent of the contracts are in the private sector. This suggests the great opportunities the Indian IT services companies can look into in 2011. “The Indian IT Services providers including majors like Tata Consultancy Services, Infosys Technologies, Wipro and Tech Mahindra-Satyam are well established and poised to win some significant deals in the year 2011. Existing and new companies are increasingly looking at outsourcing their Information Technology functions to IT Services vendors to decrease costs and also improve their operational efficiencies,” says Siddharth Maheshwari, Research & Analysis (R&A) Director, Ovum India.

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