Pandemic proves to be a boon for Indian IT

Subir Roy
Senior Economic Analyst

Senior Economic Analyst

The pandemic has led to a workplace transformation as companies have been forced to change their software systems to enable a large part of their staff to work from home. As now a company’s IT core and its workers will be at different locations, movement to the cloud is essential. Additionally, the pandemic has put enormous pressure on companies to improve their margins by cutting costs (raising prices is not an option) as their revenue has been badly hit by the pandemic. And moving to the cloud helps companies save on their IT costs.

The pandemic has turned out to be a boon for India’s information technology (IT) industry, even as the rest of the economy is in dire straits with the GDP set to shrink, according to the IMF’s forecast, by as much as 10.3 per cent in the current financial year. Indian IT leader Infosys, on the other hand, has projected a conservative but positive picture with a guidance of 0-2 per cent growth in revenue in the current financial year.

But aside of numbers, on which stock exchange-listed companies have to be cautious, a range of experts is looking at a game-changing scenario over the next few years which will transform the industry.

In fact, the parallel that is being drawn is that of Y2K. The feeling is that after a gap of two decades, the pandemic will do for the IT industry what Y2K did for it at the turn of the century when it was a fledgling sector.

When Y2K or ‘the year 2000’, marking the turn of the century, loomed ahead, the global software industry realised that its early vintage programmes could not accommodate dates in the new century. So, an enormous amount of re-programming had to be done across the world to overcome the hurdle. Indian software engineers did the job successfully and, thereby, opened the eyes of the industry in the developed economies, notably the US, to India’s software capabilities. It was a watershed and a game-changer which indicated that the industry had arrived. It has not looked back ever since.

The pandemic is turning out to be a similar game-changer. When it first hit the world, the software industry, like the rest of the economy, saw gloom ahead, expecting a cut in global IT spend as clients across the world were hit by the pandemic.

But companies the world over also realised they had to speed up their movement to the cloud — moving their enterprise software, data and its processing to remote servers — so as to cut down on costs. By doing so, companies do not have to pay for the entire IT systems that they have had to set up and maintain at their sites, but will use the remote servers through the internet for all their IT back office work following a pay-per-use or a yearly subscription model.

As luck or foresight would have it, Indian IT services firms are able to use this huge cloud movement opportunity by using the new skills that they have been acquiring over the last few years in trying to up their 'digital' capabilities and acquiring more and more digital work.

The digital space covers cloud, artificial intelligence, analytics, cyber security and client transformation businesses (helping clients go digital). This business is likely to account for as much as a third to half of the total Indian IT business going forward. The digital work has become so integrated with the rest of the operations that IT major TCS has stopped giving out separate digital business data.

How digital and movement to cloud have played into each other is something like this. The pandemic has led to a workplace transformation as companies have been forced to change their software systems to enable a large part of their staff to work from home. As now a company’s IT core and its workers will be at different locations, movement to the cloud is essential.

Additionally, the pandemic has put enormous pressure on companies to improve their margins by cutting costs (raising prices is not an option) as their revenue has been badly hit by the pandemic. And moving to the cloud helps companies save on their IT costs.

The move to digital has made it imperative to adopt the SaaS or ‘software as a service’ (it is something you buy according to use and is not proprietary, as the inhouse systems were earlier) model. Now, SaaS is a software tool that Indian IT firms have positioned themselves to offering at very competitive prices.

What is more, large deals are being struck by software companies at a fraction of the earlier cost. Then, to negotiate and strike a large deal, a software company had to make several visits to the client to conduct negotiations. Now, the entire negotiations are being conducted remotely by the software companies while sitting at their own offices.

Working remotely is an imperative not only for clients but also vendors (software firms). Earlier, armies of Indian software engineers had to be posted at client sites to do the installation and maintenance of the IT infrastructure. Then came the offshoring revolution, whereby a lot of the work could be done from development centres in India. Now, clients adopting digital capabilities and moving to the cloud are being enabled by Indian engineers remotely. It is like the wheel being invented a second time.

Now, sales, support, implementation and maintenance, the whole product lifecycle so to speak, can be and is beginning to be done from India itself. This is constantly reducing the need to post engineers on site or at near shore development centres. This is going some way in solving the visa problem created by President Trump by reducing the need for visas in the first place.

So, gains from going digital and moving to the cloud have been a great boon for Indian IT amid the pandemic.