| From $4 billion in 1998 to its worth of over $60 billion today, the information technology (IT) and IT-enabled Services (ITeS) industry has become a major driver of India's economic growth story. A National Association of Software and Services Companies (Nasscom) study done by McKinsey suggests that the industry has quadrupled its GDP contribution to four per cent, contributed to 45 per cent of all incremental urban employment created in the last 10 years, employed over two million people and gave impetus to new entrepreneurs, and increased the number of tertiary education institutions in the country. The industry has also enhanced India's credibility as a business destination, forging relationships with most of the world's biggest companies. However, the next decade will see the industry at an inflection point: About 80 per cent of new growth opportunities will come from markets that are not currently core to the IT industry. In fact, we predict that India's total revenue potential in 2020 – including exporting traditional IT/ITeS, IT for domestic market and exporting IT-enabled innovations – could be as high as $300 billion.In order for the IT services industry to grow its exports, it will need to develop differentiated business models to serve new markets with entirely different needs from core markets such as Fortune 500 companies in banking, financial services and insurance (BFSI), telco, and manufacturing in developed economies. Small and medium enterprises (SMEs), BRIC countries (Brazil, Russia, India and China), and several new sectors like public services, healthcare, media and utilities will emerge as the growth engines of the future. Each of these will require new business models to capture the opportunity. For example, BRIC countries will require distinctive value propositions beyond mere labour arbitrage. Similarly, targeting SMEs will require moving from account-centric service delivery to productised service platforms. Here, exports alone can contribute $175 billion. Similarly, in 2020, the domestic IT/ITes business opportunity could be as high as $50 billion — the equivalent of our total exports today. A recent McKinsey survey of Indian banking's top CEOs and CIOs suggested IT was among their top three priorities, and almost 75 per cent were planning to increase their future IT spend. The IT industry will need to reorient itself to prepare rapidly globalising Indian banks and corporations as they scale up to international competition. ICT-enabled innovations in healthcare, education, financial services, and public services can drive the socio-economic inclusion of 30 million citizens each year— faster, cheaper and more effectively than traditional models. For example, around 40 to 50 per cent of India's population is out of range of primary healthcare centres. Innovative solutions such as remote diagnostics and mobile healthcare can overcome the limitations of traditional models and give us a real opportunity to achieve inclusive growth. India can also become a laboratory for innovation for the world in at least three areas—energy efficiency and climate change, mobile applications, and clinical research outsourcing—which could contribute an additional $50-75 billion of the total opportunity. Challenges But at the current pace of reform, infrastructure development and corporate innovation, we expect nearly half ($150 billion) of the opportunity to be at risk. Whether India's public and private stakeholders can act and deliver on the full potential—that is the 300 billion dollar question. |
Thursday, December 30, 2010
Infotech in 2020: The $300 billion question
Monday, November 29, 2010
Up on bargain buying!
| Positive momentum was carried into the closing stages and while the benchmark indices did slip up a bit towards the fag end, they managed to close comfortably in the positive. The BSE Sensex edged higher by around 260 points whereas NSE Nifty witnessed an 80 point gain (both up 1.4% each). BSE Midcap and small cap indices did not perform as well as their large cap counterparts but still edged higher by 0.7% and 0.5% respectively. More than three stocks on the Sensex had a positive closing today for every stock that closed in the red. Majority of the Asian indices closed strong today whereas Europe is trading mixed currently. The rupee was trading at Rs 45.8 to the dollar at the time of writing. Today's gains were a welcome break from the drubbing the markets received last week, whereby it lost more than 2%. It must have been driven by bargain hunting by investors as markets have corrected around 10% in recent weeks, retreating from its all time highs. With individual stocks correcting even more, the opportunity to buy into the long term India growth story was there for the taking and investors seemed to have capitalised on the same. Besides, what also helped the indices was Europe's decision to bailout Ireland, which further buoyed sentiments. State run power equipment manufacturer, BHEL, can easily be termed as one of the fastest growing PSUs in recent years. However, it looks like the company is in a mood to exceed even its current rate of growth. This, it aims to do by diversifying into other segments like finance. As per a leading daily, the company has appointed Crisil as the consultant for undertaking a study for floating an NBFC (Non Banking Finance Company). As per the company's management, the NBFC would be the company's arm for financing of power projects. BHEL would get other strategic investor on board and will itself assume the role of a minority stake holder. The stock closed 3% higher on the bourses today. News of misdoings in the telecom and realty spaces has taken its toll on the companies belonging to these two sectors. As per a leading daily, companies like RCom and DB Realty are amongst the 25 companies that have hit their lifetime lows today. The 2G scam seems to have pulled RCom to a new low as the stock closed nearly 3% lower today. Realty major DB Realty also bore the brunt, emerging as one of the biggest losers since the unearthing of the housing scam. As per reports, the stock is currently a whopping 59% lower than the price at which the stock was issued in its recently concluded IPO. Clearly there seems to be no place to hide currently for the companies believed to be involved in scams. |
Saturday, November 27, 2010
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