About the business, Shibulal is clearly bullish on the upward trek of Indian IT. As an astute analyst of global IT industry, the InfoTech wizard believes Indian IT Industry has all the reasons for a glittering growth. In an exclusive interview with Suresh Unnithan, Chief Editor APN News, Shibulal, MD& CEO of the global InfoTech giant, shares his observations on the future of Indian IT Industry. Excerpts:
The unprecedented and prolonged economic recession has inflicted severe injury to fiscal health of many industries across the globe. What is the impact of the global turmoil on the Indian IT industry?
Like every other industry, the IT industry in India too has been impacted by the prolonged economic recession. The tough macro-economic environment coupled with geo-political challenges has led to a reduction in the discretionary spending of the clients of the IT industry. Although the impact has not been critical, the high growth rates that the industry had gotten used to has taken a hit. The growth rate of the industry across the years reflects this. In 2009, the growth rate was 16.5 percent, and it dipped to 5.5 percent during recession. Although it picked up by FY ’11 to 18.7 percent, it dropped to 16.3 percent in FY ’12. FY ’13 was impacted further as growth rate across the industry dropped to around 10.4%.
How far is Indian IT industry dependent on Western and American economy?
An: Reports indicate that the global IT spends in 2013 is estimated to be around $2.7 trillion. Within this, the US and Europe continue to be the largest IT spenders with an estimated spend of about $ 947.76 billion and $753.1 billion respectively. Historically, the US and Europe have been the largest IT spenders globally and in the near future too, the trend is expected to continue. It is not surprising then that the Indian IT industry similar to most IT industries worldwide will have a huge dependency on these two economies.
This dependency is only heightened because a vast majority of the Fortune 500 and Global 2000 corporations source IT and ITES from India. The Indian IT industry is a leading destination for the global sourcing of IT and ITES accounting for 55 per cent of the global market in offshore IT services. India’s IT and BPO sector exports alone are expected to grow by around 12% to 14% to touch around US$ 87 billion, according to Masco.
In late 90’s and early 2000 IT industry in the country witnessed a tangential growth, but in the succeeding years the industry could not sustain the rate of growth. What could be the reason?
In the ‘90s, the growth of the Indian economy at large was catalyzed by the economic reforms in 1991. The IT industry in particular, a sunrise industry at the time, not only benefitted from these reforms but also from the telecom reforms of the late 90s which substantially reduced the cost of communication infrastructure. In the early 2000s, the global demand for IT and ITES was at an all-time high, in view of the rapidly globalizing world, the unprecedented penetration of technology and the rise of the internet age. Further, the Y2K bug challenge opened up a plethora of opportunities for the industry limited only by its ability to meet the exponential growth in demand for qualified workforce. Each of these factors was extremely conducive for the tangential growth of the industry.
The recent global economic crisis resulted in challenging times for all industries, including the IT industry which depends largely on the discretionary spending budget of its global clients. The crisis sent the growth rate of the industry from 16.5 % in 2008-2009 to 5.5% in 2009-2010. Today, that growth rate is expected to be anywhere between 12-15%. The global economy continues to reel under the impact of the recent crisis with several economies witnessing a jobless recovery. Although growth is back, there is only a sense of cautious optimism.
In 2011 the hiring of fresh graduates in the Information Technology sector had increased by 25 to 30%. But in the subsequent years the quantum of intake dropped drastically and this year according to reports there was hardly any campus recruitments for IT firms. Is the IT sector in any form of crisis?
Prima-facie, growth percentages can be extremely misleading. For instance, the IT industry and the key players within are growing in size and contribution every year. Therefore, even though the hiring percentages may have dropped, the absolute numbers may still have increased if not remained constant.
At the same time, the talent requirement of any industry is a direct reflection of its demand environment. As I mentioned earlier, the IT industry, similar to every other industry, has been impacted by the recent global economic crises leading to a deceleration in growth rates. The decreasing growth rate over the years has impacted the talent requirements, including fresher requirements.
Experts feel Economic policies and slow pace in fiscal reforms are the impediments in the growth trajectory of IT industry. What is your observation?
In any economy, reforms and policies play a key role in enabling the sustained growth of industries. In India too, reforms have been the backbone of growth of several industries including the IT industry over the past several decades.
The first in the list of reforms was the education reforms of the early 1950s which began with the establishment of the first Indian Institute of Technology in Kharagpur in 1954. Later, in 1956, the Parliament of India set up the Indian Institute of Technology (Kharagpur) Act. This act declared that these institutes are Institutes of National Importance. Today, there are 16 such institutions.
In 1991 we witnessed the dawn of the economic reforms. This opened up the economy, which was until then under the licence raj, and paved the way for many industries to flourish. Foreign investment went from $131 million in 1991-1992 to $5.3 billion in under four years. Later in 1994, the National Telecommunications Policy (NTP) revolutionized the way India communicated. Telecom penetration went from 3% in 1999 to 70% as of October 2012. Today, we have over a billion mobile phone subscribers in India.
The IT industry has been a poster child of post-economic reform India. It merged the best of the reforms while paving the way for India’s future.
The growth trajectory of any industry, particularly IT depends on the availability of a large pool of talent, supporting infrastructure, investments and a conducive regulatory framework. The need of the hour is therefore for reforms in each of these aspects. Accelerated reforms in these aspects will help the industry surge ahead on its growth trajectory.
What could be the scope of growth of IT in the country, India being a fast growing economy?
India is one the fastest growing hubs of growth and talent. The unprecedented penetration of technology in the country and the availability of a large talent pool augur well for the growth of all industries, including the IT industry.
In the aftermath of the recent economic crisis, although the pace of growth of the industry has slowed from 9.3% in FY ‘08 to 5.4% in FY’13, we have been one of the most resilient economies in recent years. While everyone was worried about the impact of the 2008 crisis, it made business houses look at the thriving domestic market. In the heart of the crisis, we grew at an overall rate of 3 percent.
The domestic environment in India – both from the demand and supply perspective is extremely conducive for the growth of the IT industry. From the demand side, there is a huge scope for technology-led solutions to bridge the developmental gaps in areas such as Healthcare, Education and e-Governance. For instance, 70% of our population lives in rural areas whereas 70% of our entire healthcare eco-system is present in urban areas. Reforms such as the Right To Education act are a step in the right direction but fall short in the implementation phase. Only 56% of the secondary schools are RTE-ready. There is a shortage of 200,000 secondary schools and 1.2 million teachers. These gaps can be bridged using technology-based solutions and therefore the IT industry can lead from the front in conceiving and implementing them.
From the supply side, we produce over 3 million graduates every year including 700,000 engineers from our pool of 22,000 colleges and 480 universities.
Last but not the least; IT is dependent on technology adoption. In India, we currently have over a billion mobile subscribers, 67 million users have smartphones, and that is only set to increase. We have a broadband penetration level of 1.1% or almost 14 million users.
All these factors are conducive for the long-term and sustainable growth of all industries in general the IT industry in particular.
Prolonged working hours, work pressure and job insecurity are felt as major issues in IT sector. So there is little job satisfaction for those in the field and employees, mostly youngsters, are constantly under pressure. They slowly become introvert and victims of behavioural disorders. How to solve this?
Today, competition is global because we live in a globalized world. Opportunities are abundant, but so is competition. The nature of work is changing. Expectations are increasing, and this is not limited to youngsters. There is a need for work-life balance. Organizations and employees need to work hand-in-hand to strike the right work-life balance for mutual benefit.
Will India witness a boom in IT again?
Yes, India will witness a boom in IT again. Like every business, there is a cyclical nature to what we are experiencing as an industry. My reasons to believe so have already been mentioned in the answer to question 6.