Indian IT Sector in 2016 and What the Future Holds For 2017
The year 2016 witnessed a series of high impact events including slump in oil prices, the impact of Brexit, the results from US elections to the effects of demonetization. Banks and financial institutions slowed down spending and in general, decision making worldwide was extremely slow. Slowdown in China led to a multiplier effect on an already slow growth in several emerging economies. Enterprise spending was circumspect as they watched over every spend very carefully. At the same time, enterprises also recognize the various possibilities to improve performance, reduce costs and increase governance by leveraging digital technologies. Their interest levels in general, only increased while spending itself was disproportionate.
Indian IT companies struggled for growth as the revenue growth in constant currency for enterprises in this sector witnessed new lows and disappointed investors. Digital business saw good growth albeit on a small base, as enterprises upped their ante on their digital agenda, coupled with greater government interest this space. There was increased interest amongst knowledge workers to invest in digital skills including Information Management, IoT, Social, Analytics, Cloud and Mobility. Digital M&A deals spiked, with interesting acquisitions of companies with new offerings. The start-up ecosystem in India increased significantly and saw several partnerships of Indian enterprises with companies in Israel, and EU to spur innovation. This year witnessed unprecedented levels of activity in the VC / PE ecosystem and several incubators and accelerator programs. Several large IT biggies set aside a separate corpus and announced initiatives to actively participate and contribute, in further fuelling the start-up activity.
In 2017, the domestic market is likely to be a bit choppy as businesses prepare for GST. Spends will still be a bit cautious with the impact from demonetization coupled with GST and lack of clarity in terms of overall outlook. We will likely see more clarity emerging from US within the first 100 days of the Trump administration. If OPEC and non-OPEC do what they are saying, we should see some support for oil prices. IT exports is likely to see some stability and perhaps growth, towards the second half of 2017 with over 80% of tech growth coming from digital. The Indian tech sector is positioned to reach USD 350 billion by 2020 with a CAGR of 11 percent. To be successful and increase market share, enterprises in this sector will need to fundamentally transform their business models, revamp their solution offerings and invest in the right skills to be more relevant to enterprises. Both domestic and export growth is expected to increase in the second half of 2017 as opportunities open-up for technologies such as robotics, Artificial Intelligence and Augmented Reality that can be delivered at lower costs and better cycle time. Applications will be embedded with cognitive technologies such as machine learning, speech and pattern recognition delivering superior capabilities for enterprises. The digitization of the enterprise will lead to showcasing of interesting business models. In various enterprises, board room conversations will be more tangible to include clear investment and returns expected from such initiatives. For companies in the tech sector, growth is largely going to be dependent on how well and how quickly they establish readiness to leverage this opportunity.