As we all know that IT companies are under danger, because there are less chances of their existence in the coming years as IT sector is not growing very well in terms of financial as well as technical growth. As per the advisory firm Zinnov, to save the Indian IT Companies, they all will go under some transformation or will make some drastic changes during the next year 2014 which will determine their existence or survival in 2020. This transformation will take minimum 5 years to show its full impact.
In context of the current market conditions, Indian IT service companies are facing various kinds of challenges and their response to them is an important factor in determining their existence in future, advisory firm Zinnov said in its outlook for the Indian IT landscape in 2014 just released.
If we see the situation of Indian IT Service providers around 13 years back, then we found that they also faced the same challenges like today’s IT service providers. According to the Zinnov, earlier more efforts are done than today which will serve Indian IT Service providers badly. There are multiple dimensions such as scale, talent, market, models and capabilities on which Indian service providers need to urgently initiate a series of transformational initiatives. It is very important to work on these factors as soon as possible, so that situation will not become very worse. If we want to see IT Industry in 2020, then for their survival a resurgent and proactive IT industry in 2014 is a must.
We have seen above the few factors, now regarding other things as per the Zinnov, IT companies are required to reorganise possibly around region-wise P&L structures, so that these companies can tap local sourcing opportunities and help themselves in overcome any protectionist policies in overseas markets. These companies are also required to hire young, ambitions and aggressive staff, especially in the Sales Deptt. as leaders with sales orientation, can produce good changes or rein their business in a positive direction.
This will result in inevitable exits at the top level. When new staff or fresher’s are hired, then companies need to train them by providing them training as per their need which incurs cost on them as the largest component of acquisition and they need to work very hard to upgrade their existing skills. It will all do on the part of employees, not on the part of employer, Zinnov said. There are some changes in the roles of the people also like existing account-mining becomes a bigger priority, project managers will be transform from being people-and-schedule managers alone to consultative sales leads as well.
According to the Zinnov, acquisitions in the IT sector would have to move from capability augmentation and be focused on building scale. This approach would also result in consolidation among tier II companies.
Zinnov also said that the Indian IT services companies, who are lagging behind in identifying and investing in new spaces both in terms of markets and technology, will need to develop new markets in 2014.
Indian IT companies are likely to see that their margins will be reduced to a greater extent and over the next years 15-18% would be the “new normal” because there is a growth in commoditisation of services. This is also said by Zinnov. If we talk about the current scenario, then some of the big Indian IT Service Companies such as Infosys and Tata Consultancy Services enjoy the margins of more than 20 percent.
Zinnov, an advisory firm also said that IT industry will continue to rise or see growth in volumes during 2014, as you will see that there will be a change or transformation in the way of consumption of Information technology and provisioned as emerging technologies take center stage.