The $190 billion Indian information technology (IT) services industry is going through its worst phase in the 40 years of its existence after Covid-19 became a pandemic pushing the world economy into recession. As a consequence, the industry is possibly staring at the first ever year-over-year decline in overall revenues.
The IT services industry has long formed the backbone of sectors across the board from financial services, power and telecommunications to healthcare, pharmaceuticals and governments. In the current crisis, it has continued to play that role, enabling enterprises to run operations almost seamlessly by putting 93% of its 40 lakh strong workforce in work-from-home (WFH) mode in a matter of a fortnight. The industry is currently getting employees back to offices in a phased manner.
Industry lobby National Association of Software and Service Companies (Nasscom) is working with governments and member companies to ensure that the rules and regulations for a different way of working evolve according to the circumstances, both in India and abroad.
In an interview with TechCircle, Nasscom’s newly appointed chairman UB Pravin Rao, also COO of Bengaluru headquartered Infosys, spoke about the outlook for the industry while adjusting to the new normal.
What are the multiple challenges that have arisen from the Covid-19 crisis and how is Nasscom addressing those challenges?
There is no doubt that this is an unprecedented situation for countries, communities and organisations alike. Just like all industries, IT organisations too, are adapting to the new normal. We believe that the industry’s response and agility, to get a majority of its employees enabled to work remotely while ensuring business continuity for our clients, has been commendable. Over the past couple of months, NASSCOM has been working with its members as well as the governments and other bodies to help to adapt.
We believe the future of work will be a hybrid environment where businesses will be able to switch between WFH and WFO (work from office) seamlessly.
We are also working with various governments to help them in their fight against Covid-19. Nasscom has created a task force, which is identifying key areas in the field of containment, tracking, testing, recovery and working with members to develop solutions in these areas. The task force has already demonstrated some great work like developing an end-to-end Covid-19 platform for the government of Telangana. We are working on delivering a similar platform to other states across the country.
How is the industry itself preparing for an unpredictable future?
We believe that though this is indeed an unprecedented situation, the IT industry has been agile and efficient and even as we gradually get our critical employees back to work, the industry has been at the forefront of putting in place extensive measures to ensure employee safety.
Digital technologies will play an ever increasing role in not only helping us deal with the pandemic but to also evolve new models of working.
What does the industry expect from the government in terms of monetary as well as regulatory support?
As an industry, this is one of the most difficult times for organisations across. Hence, in this environment, it is important that the government looks at providing some stimulus package to the industry and at the same time relook at certain policy imperatives. This is to ensure that we have a conducive business environment and ensure stability for all stakeholders in the times ahead.
The government’s announcement that they will provide Rs 4,000 crore to the MSMEs through the ministry’s Credit Guarantee Fund Trust for Micro and Small Enterprises (CGFTMSE), which will provide partial credit guarantee support to banks, has been encouraging.
The industry is also looking for changes in labour laws, making permanent some of the temporary relaxations to enable remote working, improvement in telecom infrastructure, in particular the last mile connectivity, changes in IT laws to allow expenses incurred by employers to enable WFH models to be treated as business expenses, etc.
Do you see overall revenues stagnating at the previous financial year’s levels?
As an industry, we need to be ready to make some difficult decisions to deal with this situation. The impact of this outbreak and subsequent lockdown is being felt by organisations and industries globally. Although, companies across sectors are doing everything possible to maintain business continuity, there is likely to be a short term decline in some sectors, especially for mid and small-sized companies in the immediate term.
The Indian IT industry is also a part of the global industry and any disruptions or impact to the demand side will have an impact on India as well. However, In terms of arriving at an exact impact, we will have to assess this when we begin to get an idea of when this is likely to pass.
Is there a silver lining?
Every crisis comes with an opportunity. The Indian IT industry has shown resilience at many instances in the past and we believe that the foundation of the industry is strong and we will emerge stronger from this crisis as well.
When we have emerged from this crisis, we would have utilised technology in unimaginable ways. We will evolve new models of working and also new ways of innovating and delivering value to clients.
We also believe that this pandemic will accelerate the digital transformation journeys of enterprises across industries.
There might be a short term impact on spending, but in the medium to long term enterprises will look to strengthen their digital infrastructure with the adoption of cloud, invest in cybersecurity solutions and adopt virtual collaboration platforms to enable remote work at scale.
As such, we expect IT spends to bounce back stronger in the medium to long-term.
Most enterprises are talking about digitalisation and cloud adoption increasing in the near term? Will that compensate for the overall business loss?
Due to the WFH model we have seen a domino effect on companies accelerating investments for seamless remote work. With the need to access critical applications and ensure the scalability of the infrastructure, cloud computing emerges as an essential technology.
There is an opportunity for every industry and sector to reevaluate their digital transformation journey and take the necessary steps/investments to accelerate the pace.
In the new normal this role will only amplify. We believe that a collaborative, secure and resilient technology landscape will continue to be a priority for organisations worldwide.
Will the shuttering of a large number of businesses and large mergers and acquisitions arising out of economic stress across the world drag down the industry?
I believe that our industry, more than ever, needs a focused approach towards building resilience, reaffirming Indian technology industry as a trusted partner, expanding its market presence globally, skilling workforce and solving and contributing to our country’s growth. While there will be some short term impact as businesses across the world grapple with the slowing demand, technology will continue to be a big enabler for organisations as they come to terms with the new reality.
Do you see the BFSI vertical coming back this year as a major revenue contributor?
BFSI as a sector has been undergoing a digital transformation over the past few years. With the acceleration of digital payments triggered by this crisis, financial institutions will need to invest to enhance customer experience, security and digital infrastructure.
However, as of now, the vertical is likely to undergo stress due to several other factors like loan payment defaults, lower interest rate regimes, etc.
Most IT services companies don’t see more than 50% of their workforces going back to offices even in the long term. What are the long-term ramifications of such a situation?
The hybrid work model will need HR policies, business models and laws to evolve to accommodate this change. Businesses will need to give up the textbook approach as the situation currently is very dynamic and things that were relevant before may not be going forward.
Even though Nasscom has recommended to the industry a phased approach (10-15% workforce in phase 1) with stringent safety measures in place, it is yet too early to say what percentage of people will work remotely in the future.
However, it is clear that the models of work will see a shift. It is too early to predict on impact on various other things like real estate, etc.
Do you see customers getting comfortable with the idea of system integrators’ employees working from home? Will that increase outsourcing to India?
Ever since we have adapted to the blended working model for the industry, the clients for companies have been very supportive as they too are undergoing several changes in their structure.
The clients have defined the expectations they have from IT and BPM companies at present, with most concerns pertaining to data security and privacy. We have been communicating extensively and openly with our clients to make sure they are aware and comfortable with the measures we are putting in place.
Once WFH and remote ways of working becomes a reality, work will tend to gravitate to where talent resides and this could lead to increased outsourcing to India.
During this financial year, do you see the industry's cost-efficiency coming down because of the measures taken by the companies to enable remote work and safe office spaces for employees?
The industry has been shifting tech assets and configuring internal networks to make this possible since the first week of March. During the first and second lockdown phases, almost 90% of the industry’s workforce was working from home, which was the largest WFH scale project anywhere. While the immediate cost might have an impact, in the long run, the organisations would be equipped to handle processes remotely, which would lead to significant cost efficiency as well.