Agree with @basumallick’s views. Have shared views on this subject earlier as well in the Persistent thread. To add to what Abhishek has said-
Indian IT firms are going through transition phase and the client spending is low because the client’s themselves are going through a major transtioning phase due to digital, cloud, automation and whole lot of other fintech related stuff and disruptions. Clients are in a wait and watch mode before committing further spends and this is impacting not only IT but also capital investments in various sectors.
Business models of clients themselves are being challenged and client’s wait and watch mode in various industries is also evident from things like say capital investments are down but relatively speaking R&D spends are not. Once these R&D spends start bearing results in future then who would benefit is also another question?
Clients are in wait and watch mode also because the new age technologies are also changing the way in which products and services are being acquired and consumed.
Exact impact of newer technologies and fintech etc. on Indian IT is a bit difficult to gauge, but from where I see it things don’t look rosy. For e.g. Biggest components of Fintech globally are payments, loans and P2P and in India in similar segment we have somebody like PayTM. The number of people required to maintain these modern day fintech disruptions is very less as compared to number of people that were required to maintain whole lot of legacy systems of clients.
Standardisation is another enemy for a business model like that of Indian IT. Technologies like Blockchain can standardize the whole landscape for all the stakeholders operating in the areas in which such technologies would be implemented and if legacy backoffice & settlement systems start getting replaced and things start getting so standardized then you wouldn’t require anywhere close to the number of people that are required today to maintain such new fintech based systems.
Another thing is a lot of industry players themselves globally are surprised by the pace of adoption of these new age technologies. For e.g. Industry analysts believe that blockchain led solutions in financial services will see mature implementations in another 2-3 years, down from 5-10 years just one year ago. Within financial services too segments Capital Markets may see slower developments as infrastructure that is likely to be disrupted is very complex and too some extent resistant to change. But as solutions develop and mature the adoption at later stages would be very swift.
All such high end new tech work and fintech is being carried out from locations like London, NY, Singapore, etc., and not in India. Cities like London have a thriving fintech start-up ecosystem and a lot of support. For e.g. regulator support as regulators are not intervening at present as they want fintech to evolve and grow and only once it attains a critical mass that they would intervene. Infact they are playing a constructive role at present by giving inputs. For e.g. Corporate Accelerators (CAs) - CAs are like traditional start-ups that are financed by VCs, but their objectives are mostly defined by sponsoring organisations. And who are these Sponsoring Organisations (SOs)??? These SOs are none other then the end clients for Indian IT firms. Clients like Credit-Suisse, Barclays, Lloyds, JPMC of the worlds. SOs go to the extent of providing mentorship, finance, office space and SME support to these start-ups. Corporates are realising that SAs are strategic decisions that allow these large firms to stay relevant in this competitive and rapidly changing modern day economy. I don’t need to state the benefits of such a strategy for these corporations as most of we would be able to deduce that. Still to make an understanding clear would be an analogy with Gillette acquiring Dollar Shave Club. This is a global phenomenon in most industries now a days due to business models of established corporations being challenged by new age start-ups. It is a bit different in this case though as these corporations are incubating their service providers/tech providers itself. Another e.g. of benefit would be - Post 2008 financial crisis global IBs have had to provide for a lot of regulatory capital in already challenging environment. Technologies like Blockchain if can achieve instantaneous settlement can release a lot of regulatory capital kept aside as counterparty risk would get reduced substantially. So another incentive for these corporations to sponsor and support these start-ups.
Even if companies like Infosys are able to make some headway in newer technologies/fintech/cloud etc., still the question will be that would it move the needle for them? I belong to the camp which would say looks difficult and even if it does then it would take a very very long time.
It has never been a better time for these big Indian IT companies to utilise their Cash; If they can do so judiciously by making sensible acquisitions which would fast forward the journey for them to an extent and would keep them more relevant.
I am a well wisher for Indian IT industry as it is good for India and sincerely hope that things turn out to be for the better.
Note: Although a bit negative but these are just my views in general. I share the above on the basis of my experience and what I see around me. I also had an exposure to London Fintech week in July this year which is Europe’s largest event showcasing start-ups and capabilities of existing firms. I am not a technology guy but have an experience working with some of the global IBs in various consulting roles since last 7 years. Also probable that I am biased due to my experiences.
Discl: Not invested in Infosys.