India's IT sector is poised for "tremendous growth" and is full of opportunities that can rewrite the history of the entire software industry, said Nasscom president Debjani Ghosh, the first female head of the country's $167 billion software services industry.
“The most exciting thing about this industry right now and the sector right now is that we have, ahead of us, opportunities that we have never seen before," Ghosh told CNBC-TV18 on Wednesday.
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Edited Excerpt:
Q: Let me start by asking you about the outlook as far as the sector is concerned. The NASSCOM guidance for FY19 at about 7-9 percent, this is higher than the 7-8 percent that you had guided for FY18. Do you continue to feel that the sector will be able to deliver on this given what you are seeing today?
A: The most exciting thing about this industry right now and the sector right now is that we have, ahead of us, opportunities that we have never seen before. Technology is today pervasive.
It touches everything, it touches every single industry, it touches every single country, it is shaping not just the future and destiny of companies, but it is shaping the destiny of countries, of nations. The need for technology services, technology solutions, and the need for IT to get integrated into your business strategy is tremendously high. We have never seen anything like this.
I am a strong believer that the opportunities ahead of this industry are tremendous, it is game changing, and it can rewrite the entire industry. In order for us to leverage these opportunities, we have to transform. Status quo is not going to cut it, we have to transform, we have to reinvent, and we have to disrupt ourselves.
So the industry is going to go through a process of transformation, it is going to go through a tough time in terms of transforming itself. I think this industry is going to come out of it even stronger than what it had before.
Q: What do you anticipate, you said that it is going to continue to be tough times for Indian IT as they try and pivot themselves into much more digital services. How long do you expect that transition to take place and what kind of investments are we talking about? When we talk about rescaling for instance which is going to be the number one challenge as Indian IT moves towards this digital service model, what is the sort of spends that we are expecting?
A: First all I do not think I can predict when the transformation is going to end, but this is a mega transformation and we are seeing the changes happening as we speak.
We are seeing companies change their business models today. I will go back to 2016, I think the digital revenue which is coming from the new business was around 14 percent. Today the additional revenue has crossed 20 percent and we expect it to go to 38-40 percent in 2025.
So it is going to happen and the challenge is going to be the balance between legacy and new because it is an ant story for at least the next few years. So how do you balance that and how do you ensure the legacy does not come in the way of the new.
So I think that is a huge challenge. Every single IT company today is going through it, global IT companies, not just the Indian IT companies, everyone is going through it and everyone is figuring out for themselves what is the right balance.
If you look at it, there are three things that is going to pretty much shape success. First is talent. Talent is going to define your competitive advantage in the future and there is no doubt about it. So talent is going to become critical.
You talked about the investment in scaling; I do not have an official number to quote here, but I do know that every single company pretty much has made it job one, it is one of their biggest priorities. The second thing that you will see is capabilities in new technology.
Interestingly if you look at some of the data that NASSCOM talks about in its strategic review, the growth in IT services now is being driven by growth in bundled software where you bring in a mix of different solutions to create an end-to-end platform and the demand for that is growing tremendously.
The third part of it is going to be the strategic partnerships, the mergers, the acquisitions.
Q: You see consolidation of domestic companies or do you believe that MNCs – for the lack of a better word, global large IT giants coming and making a play here in India, picking up assets here in India, or collaborating in India?
A: What I see right now, if you look at all our companies, the Indian MNCs, and they are Indian MNCs with footprint in more than 80 countries, we cannot keep calling them Indian companies, they are global MNCs and we should be very proud that their origin is India, they are out on a shopping spree.
They have different strategies, but then if you look at it, all of them are making some fantastic acquisitions; bringing in the talent that they need to bring in. I think that is what is going to happen, every company wherever it is in the world, is going to figure out the right companies for it to buy or for it to form strategic partnerships with – IP led partnerships that we are seeing happen.
Q: Speaking of the state of play today, whether it is the Gartner report which basically says that global IT spending is up in FY19 versus FY18, we are not seeing that match with the revenue performance here in India. There is in a sense of decoupling. Do you expect this decoupling to continue till the time that this transformation that we spoke of is complete?
A: The problem today is we keep applying the old lenses to the new industry and this industry is completely changing. So we keep using the old criteria that we used to determine success and it does not work, it is not going to work.
The industry in the next few years is going to invest heavily in rescaling, is going to invest heavily in skilling and building talent pipeline which they are all doing, is going to invest heavily in building the right partnership strategy, and is going to invest heavily in building innovation capabilities. So you will see these investments go up.
It is a tremendously mature industry. I think expecting the same kind of growth rate that we saw in the last two or three decades is not fair on the industry.
Q: So double digit growth that we have gotten used to and we are now down to the 7-8 percent kind of number, you are saying that this is now a realistic expectation to have. Forget the days of the double digit growth.
A: I think for the period of the transition, this is a very good growth rate, it is a very healthy growth rate. However, in the future, who knows, with the opportunities that we see, maybe we will go back to double digit. However, I really cannot predict that.
For the present and given the task that is ahead of us, the task of completely disrupting the business, business model – I am not just talking about the way we market or the way we sell, it is basic business model transformation, I think the kind of growth that we are seeing and the kind of performance we are seeing, feels healthy.
Q: There has been a decoupling as companies have started to grow, you are hiring less and as we move towards more artificial intelligence (AI), that trend is perhaps going to continue. So what is a realistic expectation then in terms of the way that this industry which has been a big hirer is going to operate?
A: I think we have done a fabulous job creating jobs. However, I think going forward because of the way technology is advancing and because it is bringing with it new ways of doing business, it is bringing with it disruptions in the business model.
It is not going to be about how many people you hire, but it is going to be about the kind of people that you have, the kind of talent that you have, what the talent is capable of.
I think what we will be looking at in terms of figuring out strength of companies is again the innovation quotient rather than how many people do they have, their ability to innovate is going to be critical. Honestly I do not think anyone has figured out what the new lens is going to be and what are the new criteria, but we know that the old criteria is not going to apply.
Q: What is the kind of attrition that we should expect? Is it going to be in the 1-5 percent kind of range, which is what we have seen - most companies doing between 2-3 percent? What is the kind of attrition that you expect?
A: Immediately I don't see that change much. This year we have said that we are still going to hire around 100000 people which is what we hired last year, so that is not going to change.
Going forward again it depends on, the reason I can't give you a number right away is because it depends on our ability to create new jobs. It depends on our ability to reskill people for the new jobs. NASSCOM has been working with BCG to look at what are the technologies that will have the most immediate impact on job creation.
So, we have identified 9 technologies and Internet of Things is the lead technology that is going to create new jobs. 55 new jobs roles that are getting created by just these 9 technologies and we haven't even got block chain in the list, we are going to add it. So, this is huge.
If you just look at the last 10 years Uber drivers did not exists, social media managers did not exists. So, with every industrial revolution you do have displacement of jobs and you get new jobs created. The question is are we putting enough time, money, effort not just as an industry but as a country on creating these new jobs?
Are we obsessing too much about job losses and keep bringing up that story or are we talking about what does the government have to do, what does the industry have to do, what does academia have to do, they have a huge role to play in this, how fast are they transforming to ensure that we have not just created the new jobs but we have the people to take these jobs. We have to seriously change the mindset.
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