Zinnov has released its outlook for the Indian IT landscape in 2014. With the industry at an inflection point - similar to the situation 13 years ago, service providers are facing existential challenges and their response will be a key determinant of the industry’s future. Margins are expected to go south, with the new normal pegged at 15-18% over the next few years with growing commoditization of services.
While volume growth will continue, disruption and consumerization caused by emerging technologies are changing the way IT is consumed and provisioned. In such a scenario, doing more of what they are doing currently will ill-serve the Indian service providers. To overcome these challenges and emerge as winners in the long term, the Indian IT will need to make some drastic changes in 2014, as it will take at least five years for the full impact.
Sundararaman Viswanathan, Manager - Consulting, Zinnov, said, "The Indian service providers need to urgently initiate a series of transformational initiatives across multiple dimensions - Scale, Talent, Market, Models and Capabilities. It is critical to embark on these sooner rather than later, although this can be like walking on water while attempting to still deliver quarter-on-quarter numbers. For survival and growth into 2020, a resurgent and proactive IT industry in 2014 is a must."
Today, the Indian IT service providers seem to have hit a ceiling in capacity for sales and delivery beyond US$1 billion/year. In the area of inorganic growth, acquisitions will have to move from capability augmentation to building scale. This will also result in consolidation among tier-II service providers.
