IT leaders to set tone for growth agenda as Nasscom summit

As the captains of the $108-billion IT services sector meet for the 24th edition of Nasscom Leadership Forum starting Wednesday, the question on everybody’s minds is — how to revive growth amid tough times?

The export-driven industry aims to generate $350 billion revenue by 2025. At a time when growth is waning, the targeted compounded annual growth rate of 11 per cent seems like a tough task.

In the last three years, the industry has been able to meet only the lower end of Nasscom’s guidance. In FY16, the industry’s export revenues grew at 12.3 per cent on constant currency basis, compared with the forecast of 12-14 per cent growth. Similarly, in FY15, export revenues grew at 13.1 per cent against guidance of 13-15 per cent. For FY17, Nasscom has projected export revenue growth of 10-12 per cent. For an industry that has been struggling with currency volatility and global economic crisis, many believe slower growth could be the new normal for the industry.

“I agree the growth numbers look mellowed down, but they seem realistic, assuming one or two years will see good growth. But there are reasons for this slow growth. Offshore as a percentage of work is either going down or is stagnant, that means those who have offshored are maintaining the level and those who have not, do not want to,” said Sudin Apte, chief executive and research director, Offshore Insights.

Newer and disruptive technology is also impacting the sector. “Clients are looking for business centricity capabilities or domain specialists where Indian players are still working on. Also, clients are no more buying in silos; many have actually preferred to opt for as-a-service offering,” Apte added.

Nasscom also predicts that by 2025 the share of traditional technology would come down to 62 per cent from 77 per cent at present. At the same time, digital technology will move from 23 per cent to 38 per cent. This could also mean that the existing top companies may be dethroned by smaller players who adopt newer technology faster. Thirdly, smaller players and start-ups are also contributing on the margin, the report added.

Apart from this, it seems that FY17 does look like a slow year than FY16. Cognizant's guidance of 9.9 -14.3 per cent growth in CY16 is reflective of this trend. Though the Nasdaq-listed IT services company has in the past upped its guidance, the fact remains that at present visibility of spends and slowdown in sectors is a reality.

National Association of Software & Service Companies (NASSCOM)