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McKinsey says Indian IT industry to touch $300-350 billion in five years


The Indian IT industry is expected to touch the $300-$350 billion revenue mark over the next five years growing 10% a year. This will mean that the $194 billion Indian tech industry will be growing at a much faster clip than the 7.5% growth rate registered over the last five years, according to a soon-to-be-released report by McKinsey & Company.

This growth of the Indian IT industry will come primarily on the back of digital services, which currently accounts for 30% of the industry’s revenue, but its share is expected to go up to 50% over the five years totalling to around $170 to $200 billion of revenue for the industry, said the report the highlights of which were presented on Thursday at the Nasscom annual Technology and Leadership Forum.

UB Pravin Rao, chairman of Nasscom said, “One thing is very clear, we are pivoting into a hyper digital world and it has implications for technology service providers…” Rao who is also chief operating officer of Infosys added, “Today around 20 to 30% of our revenue is coming from digital. Obviously we have seen quite a bit of acceleration and this will only go further given the current pandemic situation.”

The report said that to achieve the expected growth, there will have to be “multiple concerted actions” by the industry which will include investment by the Indian service providers in building and scaling digital technologies to create differentiated and scalable offerings at a global level. It will also include accelerating investments in reskilling the talent in new growth areas such as enterprise SAS ecosystem, Cybersecurity, data, artificial intelligence, 5G, IoT, product engineering etc.

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Noshir Kaka, senior partner at McKinsey & Company said that clients are of the view that technology is leading their recovery from the COVID pandemic. “We believe that technology spending is going to bounce back far faster than it has ever done from previous crises, and as a result we’re seeing again that acceleration and spending.” He added that the bounce back was visible in the order book of the actual work coming to all the industry participants lately.

The report highlights also said that one of the biggest trends that will shape the future of technology will be that tech intensity will increase from 3% of revenue to 5% of revenue. This means that digital natives or reinventors will account for 75% of enterprise tech spending in the next five years. To capture this growth, service providers will have to consider changing their focus to new opportunity sets. Also, tech is accelerating fundamental shifts and business models worldwide. First is direct to consumer or direct to stakeholders and the second is ecosystems. These new business models are expected to account for about $150 billion opportunity for service providers going forward. Also, cloud, AI, and cybersecurity will accelerate the pivot to digital.





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