New service lines to account for 40% of IT revenues by 2025: Nasscom

Fri, 2015-10-09 16:05 -- India Editor

Cloud Applications
(Image source: Microsoft)

The future growth of the IT industry lies in the new service lines which include – the Internet of Things, cybersecurity, social media, mobile systems, big data analytics and Cloud based applications, states the latest report released by Nasscom recently.

According to the report titled – Nasscom Prespective 2025: Shaping the Digital Revolution. The IT body believes that 80 per cent of the incremental expenditures will be driven by digital technology in the above mentioned new service lines.

Commenting on the same, Noshir Kaka, Managing Director, McKinsey & Company, India said, “Companies hoping to prosper in the new environment will have to closely watch six new service lines - including the Internet of Things, Cybersecurity, Social, Mobility, Analytics and Cloud.”

The report is compiled by McKinsey & Company after a year's extensive research.

The Future growth path... Driven by the adoption of digital technology, the total addressable market for global technology and business services will likely expand to about $ 4 trillion by 2025, growing at an average annual rate of about 3.6 per cent, the report stated.

The big implications for companies are:

  • Need to develop new service lines, as they will account for 40 per cent of all revenues by 2025
  • Shifting portfolios to advanced, disruptive technologies
  • Managing customer digitization at different speeds. Companies will need to cater to customers who are Digital leaders, Smart followers as well as the Digital laggards
  • Re-skilling of people as revenues decouple from headcount
  • Forging new capabilities through M&A, partnerships, incubators and open innovation

& the future expenditures... Overall, the share of digital technology investment in cumulative expenditures will rise from 10 per cent in 2014 to 35 per cent in 2020 and 60 per cent in 2025.

In value terms, technology and business services expenditures in India is projected to reach $ 120 billion to $ 130 billion by 2025, an average annual growth rate of 10 per cent.

Half of this incremental investment will be funded by a projected 20 to 25 per cent cut in legacy expenditures. These reductions will be largely in spends on infrastructure, traditional application development and packaged software.

This digital transformation that is impacting the global economy is also creating new imperatives for India’s growth, with many companies adopting digital technologies into their business models. For 2015 & beyond, the growth rate is likely to be ahead of many other leading economies such as China, Brazil and Russia, the report added.

On total market size... the Indian technology and services industry is on track to reach its goal of $ 200 billion to $ 225 billion in revenues by 2020 and furthermore, to reach revenues of $350 billion by 2025 – this implies into a 165 per cent growth when compared with FY15 size of $ 132 billion.

  • Almost half of the Fortune 500 companies will be based in an emerging market
  • About 260 million jobs will be replaced or augemented by technology
  • Capital, trade, and information flows will move across a multi-nodal global grid that supports the world's economy
  • Resource scarcity will drive innovation as companies are forced to do more with less
  • Interconnected global concerns, will have a noticeable impact on the industry

BVR Mohan Reddy, Chairman, Nasscom, said, "The technology and services industry in India has become a transformational partner for its customers. The report identifies innovative and disruptive technologies that will shape the enterprise of the future. It also provides insights for the industry to reinvent business models and identifies key steps needed to make India a global centre for innovation in digital technology. Our aspiration is to build cutting edge solutions and services from India that will shape the digital revolution globally."

Future Action Agenda... Outlining the steps needed to become a global centre for innovation in digital technology, R Chandrasekhar, President, Nasscom, said, “There has to be concerted action by the government, industry, academia and Nasscom to create the right conditions for the technology and services industry to sustain its momentum.”

The report outlines some key steps as follows -

Foster Innovation clusters: That will fund research in key emerging technologies and linked to technology institutes.

Build Capabilities: Design, develop and rollout a massive reskilling program to train and reskill 4-5 million people.

Entrepreneurship: Turbo-charge the startup economy and government’s ongoing Startup India program.

Branding: Undertake a branding and public relations exercise, media campaign to reposition India as a global Digital Innovation Hub, moving ahead from its current pole position of low cost and efficiency leader.

Regulatory: To support the development of India as a centre for digital innovation, new regulations should help create a domestic market, protect intellectual property, strengthen cyber-security laws and ease the creation of public-private partnerships in education.

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