The Economist - UK (2022-04-02)

60 Business TheEconomistApril2nd 2022

InformationtechnologyinIndia

Outsourcing2.0

T

wodecadesagoIndia’sinformation­

technology(it) firmswerethestarsof

therisingcountry’scorporatefirmament.

Theindustry’sthreegiants,TataConsul­

tancyServices (tcs),Infosys andWipro,

becamehouseholdnamesathomeandfa­

miliartochiefexecutivesofbigbusinesses

abroad,whohadoutsourcedtheircompa­

nies’countermeasuresagainstthefeared

“millenniumbug”,expectedtowreakhav­

oconcomputersasthedatechangedfrom

1999 to2000,toIndiansoftwareengineers.

Bythemid­2000stheIndianittrio’srev­

enuesweregrowingbyaround40%a year,

asWesternceos realisedthatIndianpro­

grammerscoulddoasgooda jobasdomes­

ticonesorbetter,ata fractionoftheprice.

Then,followingtheglobalfinancialcrisis

of2007­09,revenuegrowthslowedtosin­

gledigits.Foryearsafterwardsthestars

seemedtobelosingsomeoftheirshine.

Nowtheyare backintheascendant.

Havingdeclinedasa shareofgdpbetween

2017 and2019,exportsofIndiansoftware

services ticked up again as the world’s

companiesturnedtothemforhelpamid

thedisruption tooperationsanditsys­

temswroughtbythepandemic.Inthelast

financial year they reached an all­time

highof$150bn,or5.6%ofIndiangdp(see

chart).nasscom, a tradebody,expectsthe

industry’soverallrevenuestogrowfrom

$227bnlastyearto$350bnby2026.

Inthe 12 monthstoMarchsalesattcs,

InfosysandWiproareonceagainforecast

togrowbydoubledigits—thistimefroma

muchhigherbasethan 20 yearsago.All

told,theycouldrakeinnearly$60bnnext

year,upfromjustover$40bnin 2019. In

thepasttwoyearstheyhaveaddedanas­

tonishing 200,000orsopeopleto their

combinedworkforce,whichnownumbers

nearly1.1m.AddtheIndianbusinessesof

bigWesternit­servicesfirmssuchasCog­

nizant(whichisbasedinNewJerseybut

India­focused), ibm and Capgemini, as

wellassmallerIndianrivalsandaround

1,600“captives”,asin­houseIndianopera­

tionsofforeignfirmsareknown,andthe

headcountrisesto5m.

BothrevenuesandranksofIndianit

lookpoisedtokeepgrowingbriskly.Lalit

Ahuja,whorunsa firmthathelpssetup

captives,saysa newoneopenseveryother

week. tcs, the industry’s brighteststar,

reckonsthatitssaleswillrisefromnearly

$30bn today to $50bn before2030. The

companyiseyeing1memployees.Infosys

and Wipro have comparable ambitions.

And investors arebuying it. The stock­

marketvalueofthebigthreehasdoubled

to $330bn since covid­19 first emerged.

WiththeadditionofCognizantandTech

Mahindra,anotherIndianfirm,thefigure

isaround$400bn.Thisrepresentsa huge

betonthefutureofwhite­collarjobs.

ThreeglobalforcesliebehindIndian

it’s sparklingoutlook.Allmannerofbusi­

nessesaredigitisingevermoreoftheirop­

erations.Theyaremovingmoreactivities

tothecomputingcloud.Andworkisbe­

coming more remote. India’s low­cost,

competentcoderscanhelpwithallthree.

Startwithdigitisation.Thepandemic

hasturbochargedeffortsbycompaniesof

allstripestomaketheirbusinessesmore

agile,efficient andclever.Retailershave

introducedkerbsidepickup.Clinicshave

launched digital doctor’s appointments.

Schoolshaverunonlineclasses.Factories

havebeenkittedoutwithsensorstoallow

remotemonitoringintheabsenceofwork­

ers,lockeddownathome.Datafromco­

vid­19vaccinetrialshavebeencrunched.

Alltheseinnovationsrequiredsophisticat­

edsoftware.Alotifithasbeendeveloped

inIndiasinceearly2020.Andthereismore

tocome.AmongInfosys’sprojectsaresev­

eralconnectedtoelectriccars(including

softwareforthevehiclesthemselvesand

forpetrolstationstooffercharging).

The corporate great migrationto the

cloudoffersfurtheropportunities.Accord­

ingtoAnujKadyanofMcKinsey,a consul­

tancy,bigonesincludesupervisingthemi­

grationitselfforclients,ensuringthatthe

newcloudoperationsarecyber­secureand

addingadvancedcloud­baseddataanalyt­

icsandartificialintelligence(ai) ontop.

EarlierthisyearJPMorganChase,anAmer­

icanbank,announceditwouldadd6,000

peopletoitssubstantialIndianbusinessto

workonthecloud,cyber­securityandai.

ibmhasopeneda cyber­securitycentrein

IndiatocatertoitsAsianclients.

Combined,digitisationandthecloud

M UMBAI

Ahalf-a-trillion-dollarbetonrevolutionisingwhite-collarwork

Software-withal

Sources:ReserveBankofIndia;HaverAnalytics;Bloomberg;RefinitivDatastream *Includesforeignaliates †Calendar years

180

150

120

90

60

30

0

6 5 4 3 2 1 0

2120191817161514132012

FiscalyearsendingMarch

India,software-servicesexports*

As%ofGDP Value,$bn

60

40

20

0

-20

2004 10 15 2320

FinancialyearsendingMarch

Revenues

%changeona yearearlier

Cognizant†

Wipro Infosys

Ta t a

Consultancy

Services

FORECAST

500

400

300

200

100

0

2017 2221201918

Market capitalisation

$bn

Tech Mahindra

Wipro

Cognizant

Infosys

Tata Consultancy Services

Their time has come