The coming year is expected to be challenging for the Indian IT services companies who might need to redesign their strategies to cope with the situation. Experts, with whom THE WEEK spoke to, feel that pricing pressures and increased automation along with other factors such as visa issues will continue to haunt Indian IT services companies.
Experts such as Alok Shende of Mumbai-based Ascentius Consulting feel that a demand contraction is expected in the coming year while the demand from clients is expected to come down. “The demand is growing at a lower rate, which means less business for the Indian IT services players. Although the poor demand scenario has already been prevailing, it will further aggravate in the coming year. Plus due to the continuous visa pressures from the US government, the uncertain visa issues will continue in the year to come and may even get worse. If there are ongoing projects and the visas are not issued in time, it will affect the productivity of the companies and will eventually challenge the revenue growth of the Indian IT services companies,” remarked Shende.
He further said that in 2019 huge volume of contracts are up for renewal in the market. In different scenarios the competitors may offer services to customers at much lower prices. “It would be noteworthy to see the performance of the big firms such as IBM and Accenture as to how they perform and if they are able to grab some contracts from the kitty of the Indian IT services companies. The lower prices being offered by Indian IT services companies will again affect their margins. Besides, there is a whole lot of demand in the digital space but the Indian IT services companies have been a little slow in offering services in that space when compared to the MNC players such as IBM and Accenture. The way the Indian IT services companies perform in the digital space will be the key to their success,” added Shende.
Another expert Kris Lakshmikanth, CEO of the executive search firm Head Hunters Indian Limited, feels that the margins of the Indian IT services companies will come down due to a challenging environment in 2019. “Many of the Indian IT services companies have been forced to set up on site centres in the US and elsewhere abroad due to government pressures to hire the local workforce. This will add to their costs as these people will come at a higher cost when compared to the Indian workforce. Also, the cost to set up on site centres will also increase the burden of the Indian IT services companies,” Lakshmikanth told THE WEEK.
He also added that though the Indian domestic market presents an opportunity for the Indian IT services players, it is a low price low margin market. “Of late, there has also been a low demand of work such as software testing and application maintenance as most of them are run through apps and are automated. Indian IT services companies have been largely doing such work. Moreover, for doing such work, one does not require highly skilled people whereas work such as analytics, robotics and IoT requires skilled people that are hard to scale and get. Large US financial institutions such as banks and other companies are setting up their own captive centres for better control of costs and security and have decreased outsourcing. This will also add to larger pressures in 2019 on Indian IT services companies,” Lakshmikanth said.
