The Indian technology and business services industry has had a phenomenal run over the last 10 years, contributing massively to the country’s growth. The industry has grown from $4 billion in revenues in 1998 to a $59.6 billion giant today, employing over 2.3 million people, and has had an unparalleled impact on the Indian economy. As we look ahead, the industry recognises that the next 10-15 years will be fundamentally different from the past and driving the next wave of growth will require all the stakeholders to create an ambitious vision and focus on achieving that.
The beginning of the new decade heralds the slow, but steady end of the worst recession in the past 60 years. The advent of 2010 has signalled the revival of outsourcing within core markets, along with the emerging markets increasingly adopting outsourcing for enhanced competitiveness. Improving economic conditions signifying return of consumer confidence and renewal of business growth, is expected to drive IT spending going forward.
The addressable market opportunity for the global IT-BPO sector is likely to expand from the current $500 billion to $1.5 trillion by 2020.
With increased GDP growth of emerging markets, and shrinking working age populations, there are a new set of hitherto untapped opportunities that will include emergence of new verticals, service lines, geographic and customer segments. On the back of these trends, the addressable market opportunity for the IT-BPO sector is likely to expand from the current $500 billion to $1.5 trillion by 2020.
India is fundamentally advantaged and uniquely positioned to sustain its global leadership position, grow its offshore IT-BPO industries at an annual rate of 13-14 per cent, sustain nearly 10 million direct jobs, and generate export revenues of about $175 billion by 2020 and domestic revenues of $50 billion by 2020. Additionally, this growth can be further accelerated to $310 billion through deep and enduring innovation by industry participants, and focused initiatives by all stakeholders.
The sector can transform India through economic development and ICT-enabled solutions in healthcare, education, financial services and public services, which can drive the socio-economic inclusion of 30 million citizens each year.
Global Offshore IT-BPO Market Potential
While India holds a dominant share of the global offshore IT-BPO sector, yet, at $46.3 billion in 2008-09, Indian IT-BPO exports accounted for less than 2.8 per cent of the global spend on IT-BPO. Over the next decade, the industry will be influenced by several global macroeconomic, demographics, social, business and technological trends that will shape the face of global business. These trends include:
Macroeconomic and Demographic Trends
- Shifting centres of economic activity- GDP of Asia and Europe will converge
- Working age population shrinking in key developed countries (e.g., Japan, Italy, US)
Social and Environmental Trends
- Increased Internet and mobile connectivity transforming the way people live and interact
- Rapidly increasing consumption and associated supply gap in key natural resources (e.g., oil, water) creating need for resource efficiency and climate change solutions
Business and Technology Trends
- Global economic crisis leading to major shift in industry structures and higher regulatory control
- Corporate boundaries being redefined (e.g., open innovation, extended supply chains, web of partnerships)
- Technology radically transforming the way traditional corporations and governments function
Potential Indian IT-BPO Revenues of $175 Billion by 2020
Given the backdrop of large untapped demand potential and strong fundamentals, the Indian technology and business services industry can aspire to a new level of impact by 2020. The export market can expand nearly four-fold by 2020 from $47 billion in revenues today to $88 billion by 2014, and $175 billion by 2020, at an annual growth rate of 13 per cent. The Indian domestic outsourcing industry, which is fairly nascent today, is likely to reach $50 billion in revenues by 2020 (indicating a penetration of 50-55 per cent of the total addressable market of $90 billion to $100 billion and a CAGR of 14 per cent from 2008 until 2020).
Enabling Inclusive Growth
The Indian technology and business services industry has contributed significantly to the Indian economy and society. It can sustain and exceed this impact by 2020. Its contribution to Indian GDP can reach almost 10 per cent, if the industry achieves its full potential. Further, it can create 30 million jobs (10 million direct and 20 million indirect) by 2020, in the urban areas and significant job opportunities in rural and non-metro regions. This will lead to increased gender diversity (with women being 50 per cent of the new recruits) and a global playing field for its employees. The industry can also foster India’s overall regional development by encouraging improved infrastructure.
India is fundamentally advantaged and uniquely positioned to grow its offshore IT-BPO industries at an annual rate of 13-14 per cent, sustain nearly 10 million direct jobs, and generate export revenues of about $175 billion by 2020 and domestic revenues of $50 billion by 2020.
Office space and direct capital investment requirement for the industry is expected to quadruple by 2020, leading to developing of satellite townships around Tier-I cities, and overall upgradation of basic and business infrastructure of a sizeable number of Tier-II cities. ICT can further deliver technology enabled solutions that are cheaper and more efficient than traditional methods, thus reducing public spend in services delivery.
The Way Forward
Concerted action is required to capture the opportunities and mitigate the risks to achieve the vision for 2020. In doing so, stakeholders (industry, NASSCOM and the government) will need to act together in an unprecedented manner. Industry and NASSCOM have already started working on the key enablers:
1.Developing a High Calibre Talent Pool
- Providing higher level training to the recruits, focus on building specialisation and language skills
- Industry academia partnerships on curriculum, faculty development
- Introducing a common assessment programme to identify skill gaps and build programmes for the gaps in education system
2.Establishing India as a Trusted Global Hub for Professional Services
- Industry building business continuity/ disaster recovery implementation strategy
- India to become leader in setting standards in data security / data privacy
- NASSCOM working with government to enhance enactment and enforcement
3.Harnessing Technology for Inclusive Growth
- Industry leveraging PPP models and building applications for e-health, eeducation, efinancial services and e-skills
- Balanced regional growth through setting up businesses in tier 2/3 cities by the industry; rural BPOs to provide employment
4.Fostering a Sustainable Ecosystem for Innovation and R&D
- Carrying out research and IP development, both internal and sponsored
- Thrust on PhD programmes and research partnership with academic institutions
5.Catalysing Growth Beyond Today’s Core Markets
- Industry concentrating on developing new markets; building global viewpoint
- Industry leveraging global workforce through offshore delivery centres – hiring best talent and participating in local ecosystem development
- NASSCOM facilitating policy advocacy, building coalition partners at a global level
- NASSCOM acting as the brand ambassador for global services in global forums to champion globalisation of the industry and relevant imperatives (global labour flows).