The Indian IT industry has entered the post-adolescent stage now. Since its birth in late ‘70s and 80’s, it has seen birth of a sibling (BPO) in 90’s. It has seen two inflection points, Y2K and DotCom, which propelled its growth and then has seen atleast two economic shocks during DotCom bust and 2009 meltdown - making him a “man” out of adversity.
However, now it is facing major challenges and opportunities. The tax holiday has ended, MAT on SEZs have made them irrelevant, competition from other “offshore” countries is increasing and multinationals like IBM and Accenture have cracked the Indian model. The labor arbitrage can not sustain for more than 10-12 years.
The industry needs to reinvent itself. It needs to define a compelling new business model. The industry needs to dramatically change revenue per employee equation, thus bringing “non-linearity”. Can it do it? In order for it to succeed, many factors will have to fall in place. The ecosystem involving the government, trade bodies and academia is missing maturity and involvement of two critical components - (1) Consultants / Advisers (strategy, accountants, lawyers) and (2) VC/PE community. When they all work in tandem with the industry, the transformation will come.
The report prepared by KPMG in partnership with CII dwells on the same. The report was released at the 3rd India IT Summit organised by CII (SR) on 19-20 January 2012 in Thiruvananthapuram.