Bengaluru: India’s technology and tech services industry is expected to conclude FY24 with net revenues of $253.9 billion, up by a modest 3.8% from a year earlier in a difficult year for bellwether information technology (IT) services companies.
In its Strategic Review released on Friday, industry body Nasscom said that the sector will have to navigate weak contracts and subdued hiring activity—factors that impacted Indian IT firms through 2023.
Despite spending by IT firms declining 50% and contracts falling by 6% compared to a year ago in 2023, Nasscom president Debjani Ghosh echoed the sentiments of chief executives of leading IT firms on the sector’s resilience in addressing the challenging environment.
According to Nasscom, IT exports were projected to grow at 3.3% to $199 billion by March, while domestic revenue for IT services companies were expected to grow at a faster pace of 5.9% to $54.4 billion on the back of continued government and enterprise investments in emerging technologies. According to Ghosh, revenue growth for IT firms in the domestic market was at an “all-time fastest”, led by robust contribution by global capability centres (GCC).
Domestic revenue growth received a boost from increasing government investments in emerging technologies, it added. “India continues to be a preferred hub for GCCs and this is getting even stronger as we see the GCC scope of work moving from just back-end work to more research and development (R&D) and innovation.”
Ghosh said India’s allure as a GCC hub “increases due to talent, political stability and ease of doing business”.
Nasscom’s review follows consecutive quarters of weak performance by India’s top four IT services firms, which typically serve as an indicator for the overall economy. While HCL Technologies stood out as the sole company poised to achieve significant annual revenue growth of over 5% Wipro is expected to see a decline. Additionally, the top firms collectively reduced their headcount by nearly 50,000 since last April,
“GCCs will continue to grow. We have seen a lot of continued interest from the GCC ecosystem and GCCs coming into India in just the first two months of 2024,” said Sangeeta Gupta, senior vice-president, Nasscom.
On 25 January, Mint reported that Gujarat is making a concerted effort to facilitate the establishment of additional GCCs at the Gujarat International Finance Tec-City (Gift City). Ghosh said GCCs were “clever at focussing on the fintech sector in GIFT city due to high levels of innovations and tremendous amount of investments flowing into Gujarat’s central business district”. Sindhu Gangadharan, vice-chairperson of Nasscom, said Indian GCCs account for 50- 70% of global tech and operations headcounts, with 1,500 GCCs and 1.66 million people, contributing to a market size of $46 billion. Rajesh Nambiar, chairperson, Nasscom, said the slowdown in hiring was not due to the advent of generative AI. “We love to say we are losing jobs to AI but it is not a fact. The problem is that the pace of technology change and the pace of change in job skills will happen at a much faster rate than our ability to skill people. We have to obsess about how to skill fast enough for these new jobs,” said Ghosh.
Upskilling emerged as another key talking point of the IT industry in FY23, as per the Nasscom strategic review. Skilling demand in the Indian IT industry, which is estimated to hire 60,000 employees by the end of March 2024, is buoyed by AI, cloud data, and cybersecurity. The industry is committing 60-100 hours per year per employee on upskilling, according to a Nasscom press release.
Complementing the GCC growth, Engineering Research and Development (ER&D) emerged as a growth hotspot for Indian IT. ER&D contributed 48% or $2.88 billion to the $6 billion export revenue addition in FY24 from the financial year ended March 2023. “The ER&D sector has been a tremendously positive sector for India and I think this is going to be one sector we should watch out for,” said Ghosh.
On companies’ deals and deal sizes, Ghosh said, “Total deals are actually growing and the deal size is also growing. The problem is that closure (of the deals) is taking longer because decision making is getting stretched out.” She further added hope for deal closures to pick up pace in 2024, which can significantly boost the industry.
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Published: 16 Feb 2024, 11:17 PM IST