New service lines will drive India's tech sector dream of $350 billion: Nasscom

Report says industry to grow between 10-11% in the next 10 years

New service lines will drive India's tech sector dream of $ 350 billion
Bibhu Ranjan MishraKaran Choudhury Bengaluru/New Delhi
Last Updated : Oct 06 2015 | 10:39 AM IST
Much of India's export-driven information technology (IT) services industry would change by 2025 when the sector would touch $350 billion in revenues, industry body Nasscom said on Monday, as a whopping 40% of the revenues would come from new service lines that mostly do not exist today.

While the growth of the sector, albeit on a larger base, would come down by almost half to 10-11% from 19% reported in the previous 10-year period, it would come with fewer headcount additions. 

In the report titled 'Perspective 2025: Shaping the digital revolution' jointly carried out with consulting firm McKinsey, Nasscom said the next $100 billion revenues could be achieved by addition of between 1.2 to 2 million people.

Besides, the growth would also require retraining and re-skilling almost half of the existing talents in new digital technologies which are expected to spur new opportunities going forward. 

"There is a continued progression of double-digit growth, despite expansion of base. But, below the calm waters, there is a lot of churn happening as well and companies will have to do a lot of things to address the challenges," said R Chandrashekhar, President, Nasscom.

The sector today employs around 3 million people directly, on a revenue base of $132 billion as on FY15.

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The report said the sector was well on track to grow to $225 billion in revenues by 2020, and $350 billion by 2025 of which $280 billion would come from exports. But this growth would depend on a number of actions by the companies operating in this space including making a significant investment in building the digital business and creating new service catalogue, pursuing an active merger and acquisition (M&A) strategy, hiring of digital-capable talents among others. 

"The success would also require concerted effort between industry, academia, government and Nasscom," the report added.

IT companies trying to prosper in this day and age would have to work in six new areas -- the internet of things, cyber security, social, mobility, analytics and cloud, said Noshir Kaka, managing director in India of McKinsey. 

"Probably the most pressing need is for companies to develop offerings, along with new digital service lines, even as they re-invent their traditional ones," he said.

Interestingly, the report said, much of the growth for the sector in the next 10 years would come from the domestic Indian market, primarily backed by 'Digital India' initiative, which would spur renewed investments by the corporates and the government. This would help more than doubling the domestic market revenues from around $34 billion in FY15 to between $70-90 billion by 2025, it said. 

"The focus on Digital India, Skills India and other such initiatives will drive consumption in India," added Kaka of McKinsey.

According to the report, the total addressable market for global technology and business services is likely to expand to about $4 trillion by 2025. The global and domestic market presents a huge opportunity for companies that can build expertise in these new technologies and deliver value through these.

"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," said B V R Mohan Reddy, chairman of Nasscom.

Talking about the challenges, Reddy said the taxation issues and difficulties around starting and exiting of businesses are major problems the sector is facing. 

"We are engaging with the government to suggest how it can be made easy for entrepreneurs to start a business. We are looking at rebranding Nasscom and the role we play to reflect the changes in the environment," he said.

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First Published: Oct 06 2015 | 10:04 AM IST

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