View from India: Digital and cloud services lead the way ahead

Being valued at roughly $1tn, the technology services sector is now among the most significant contributors to economic growth worldwide. In India, the industry produces around 27 per cent of the nation’s exports and provides livelihood to approximately 4.4 million people. Yet, players across the sector are facing challenges. The most crucial issue is to drive growth in revenue per employee and provide them with digital skills.

This is slated to change. That’s because the government will play a more significant role in digital services. Investments will increase and the rise of regional power centres dominated by local players, businesses and the industry will see a massive transformation in the next decade. The government will play a pivotal role in encouraging and supporting digital literacy and skilling to ensure its talent, energy, imagination and knowledge unites to address the customers’ surging needs.

With all this falling into place, it’s understandable that India's technology services industry could accelerate the growth by 2-4 per cent over the next five years. The technology services are expected to reach $300-350bn in revenue by 2025. The growth rate can be spurred with the widespread adoption of the cloud, AI, cyber security and other emerging technologies. This will require closer collaboration among stakeholders across the private sector, academia and the government.

“The Indian Technology services sector can utilise the potential of deep technologies like cloud, artificial intelligence, machine learning and IoT through effective transformational practices. This will thereby contribute to the overall economy in the coming decade,” said Debjani Ghosh, President, Nasscom.

The technology services industry continues to be a prime driver of India’s digital dream. It fuels over 50 digital initiatives across sectors such as banking and finance, healthcare and governance and contributes 8 per cent to the overall economy.

Moving forward, digital and cloud services will be on the rise. With the ongoing pandemic and the pace at which almost every sector has accelerated its digital transformation journey, the increasing cloud consumption and other digital services like artificial intelligence (AI) and machine learning (ML) are making way for digital and cloud services. This opens out channels for growth and opportunities for India to reach $600-700bn by 2025.

The next decade will continue to witness growth in technology spend. It will be driven by the rise of technology natives and digital reinventors and new tech-enabled business models, such as ecosystems. Other factors include direct-to stakeholder channels and a rise in demand for Digital 2.0 accelerated by the industrialisation of cloud, AI and cyber security.

Competitive intensity is expected to rise further with hyper scalers, next-gen SaaS (Software as a Service) companies, players and specialists competing for technology.

Coming to the services value pool, there is an ever-increasing need to differentiate amongst the providers in this space. As the competition intensifies, scale and specialisation will be critical to succeed in the next decade of technology services. Providers will need to refresh their service lines and offerings. Consequently, they are relevant enough to cater to the more digitally adept enterprises that expect higher-quality services and have different buying patterns.

Another differentiating factor is talent. To pursue these opportunities and contribute to the overall development, there is a need for a complete shift in the operating model. Concerted action from the industry and the government is also needed to sustain India’s position as the hub for digital services growth and reorganise the industry with business model innovation. This is essential before the next big wave of disruption transforms the world again.