In the last three months, every tech stock has registered growth to the extent that tech, and tech-enabled, companies closed june at a higher share price than January 2020 – India is a hub & centre of excellence for most of these companies
o India is among the top six markets that house the world’s largest tech companies (Source: 2019 Forbes Global 2000)
o India saw its largest tech FDI to date when Facebook injected Rs 43,574 crore into Jio Platforms, a subsidiary of Reliance Industries, for a 9.99 per cent stake in April 2020
o The Reliance Jio -Facebook deal was first of 11 that eventually saw Jio raise an unprecedented Rs 115,693.95 crore from 10 investors right in the middle of a global recession
o Daily digital users in rural India have surpassed urban not only in core age groups but on overall numbers
o According to the Economic Survey 2019, India is now the global leader in monthly data consumption, with average consumption per subscriber per month increasing 157 times from 62 MB in 2014 to 9.8 GB in June 2019.
On their own, some of these facts are headline-worthy. But in the backdrop of independent India’s worst recession, that is triggered by a pandemic and hence unique in its characteristics, they set the ground for a much bigger, and more compelling, story.
There is no denying the pandemic has acted as a change catalyst for the economy, society and businesses, on a hitherto unseen scale. As companies are faced with a once-in-a-generation shift, technology has accelerated digital transformation. Both tech and non-tech firms are investing heavily in enabling technologies simply due to the steep rise in demand for these services as phenomenon such as work from home (WFH) promise to become a norm.
The decade ahead will see digital disruption across the spectrum in India. India is already a global leader in monthly data consumption, continually growing its data universe. Economic Survey 2019 indicates the total broadband connections increased by about 10 times, from 610 lakh in 2014 to 5,946 lakh in June 2019. This has accelerated the growth in internet traffic, with data usage touching the highest ever level of terabytes consumption.
“There are three drivers to the growth that the technology sector has witnessed,” observes Sanjay Srivastava, Chief Digital Officer, Genpact, who leads Genpact’s digital and technology businesses globally. He explains that unlike many businesses have suffered due to physical supply chains, or requisites for servicing in person, tech moved to cloud and cloud based systems, and was able to offer solutions virtually. The second driver is the fact that the groundwork for this seamless transition was already in place, making it much easier to adopt technology-led solutions faster.
“Finally, the business need is unbelievable,” says Srivastava, adding, “Companies are changing business models, in some cases even seeking a complete shift to digital, almost overnight. And they need the products and services to enable this change.”
The tech sector has never been busier. The industry has shifted its focus away from traditional outsourcing to higher-value consulting and digital transformation projects, a move that has driven a bifurcation in terms of growth trajectories and margin profiles.
The power of data and terms such as predictive analytics, which was a must mention in business growth projections, have now become realities.
Two powerful trends, rising internet penetration and exponential growth in data, that are precipitated by Covid, are propelling digital transformation, pushing India well on its way to become a true tech economy.
When Tech Meets Economy
Simply defined, a ‘tech economy’ is the confluence of technology and economic forces. Statistics prove that India has all ingredients required to brew a potent mix which with it will not only bring disruptive power but also surge India forward in the tech race.
More importantly though, tech can be a bright light to help India out in times of a downturn. Technology enables companies to do more with less. Its efficiency gains improve likelihoods and boost profits. Companies able to rapidly implement tech may outperform the economy.
Senior business leaders believe that talent, including tech entrepreneurs, will play a critical role in advancing India on its tech journey. “We have a young population that is willing to learn and do things differently. In the last two years, we have seen nearly 35,000 startups coming in, and in the next two years, another 50,000 are expected. Most of these are tech-based. They are getting into differentiated products. They are the change agents. India’s work on digital first is mind boggling — more than 50 different applications are there in tech in agri alone,” informs Som Satsangi, Managing Director, Hewlett-Packard Enterprise India.
In India, the pandemic has not only necessitated increased access to digital tools but has also created discontinuity. History bears witness that some of the strongest companies were born in discontinuity. “This is the only reason to compete with the big companies. We are in the midst of intense discontinuity now. Five years from now, we would look back and say 2020 was the year when we spawned off so many successful startups,” adds Srivastava.
He explains that there is no dearth of ideas in fields like agritech and medtech, that hold the potential to transform India’s oldest industry sectors. The reason behind this is that increasingly, tech startups are looking at enabling existing vendors and businesses via technology and helping them digitise, which in turn is integrating them to the larger digitised marketplace. This is one of the reasons why the likes of Jio attracted international investments in the manner that it did. Digitising existing businesses through enabling platforms makes a broader impact.
Almost 55 per cent of India’s population depends on agriculture as its primary source of revenue. The sector contributes 18 per cent to the national GDP. As per the Department for Promotion of Industry and Internal Trade (DPIIT), a cumulative foreign direct investment (FDI) equity inflow of about US$ 9.08 billion was achieved between April 2000 to March 2019 in the agriculture sector alone. More interestingly, India accounts for more than 450+ startups in the agritech space. Startups in the agritech sector raised nearly US$ 248 million until June 2019, according to NASSCOM.
In this, internet of things (IoT) has been a big focus area for agritech companies. “The amount of innovation in IoT in agriculture is not funny,” states Satsangi. As part of the selection committee for IIT Kanpur, he is introduced to several startup ideas, which he believes are transforming India’s agriculture landscape. “We are seeing IoT based drones, sensors, devices to check moisture content, remote connectivity and images, analysing and bringing machine learning (ML) and artificial intelligence (AI) to the fore – the breath of work is impressive,” he comments.
HPE itself has a Centre of Excellence set up in Andhra Pradesh that offers access to advanced IT solutions to facilitate more efficient production in the agricultural sector. “We have implemented the entire feature set of what IoT can do in agritech, starting from increasing the crop yield, the nutrition value, looking at the granularity for best results and putting it all on dashboard, and creating analytics from Edge,” informs Satsangi.
Retail was hit hard in the pandemic, where losses in the first fortnight alone were pegged at $30 billion. It was estimated then that the industry would take at least six months to get back on track in terms of cash inflows. The sector was a mixed bag of sorts, as several players rapidly began donning the digital hat. Some trends however have now redefined this sector and will play an important role in post Covid world.
Perhaps the most expected is the massive shift from offline to online. Walmart has seen its sales triple online in the last three months. Tesco Bengaluru’s Director for Transformation Altaf Patel divulges that the retailer too has had the same experience. “And this shift will continue,” he states.
Predictive data, AI infused solutions, consumer behaviour analytics, personalisation would no longer be good to have but ‘must have’ in the face of these changes.
Technology will play an important role in insights towards the physical aspect of stores as well. For instance, social distancing in retail will have an implication in number of customers, store design, the shape of tills, how the retailer wants to design the consumers’ shopping patterns and so on. “Retailers will have all the lenses to make the best use of that space,” observes Patel.
The third change will be in the supply chain piece. The supply chain agility, and alignment to respond to customer needs will have an impact on category, product management, incentives with suppliers and other similar factors. Finally, being contactless in the last mile with curbside delivery or click and collect will also become mainstream, according to Patel.
Top Game Changing Trends
As work from home (WFH) became the norm, several companies have already moved to prepare for hybrid models, wherein even post the lockdown and opening up of the economy, they will continue to retain a certain portion of their staff towards WFH. A trend on its own, this would directly have several implications.
“This would bring a cultural change of flexible work hours but new mechanisms for monitoring work and productivity would have to be evolved,” notes Sanjay Karnatak, Chief Technology & Digital Officer, Star Union Dai-Ichi Life Insurance. He adds that faster adoption of digital tools by sales force as well as servicing functions to the last level would be required, and some amount of reskilling will become necessary.
At the same time, this will require mobilising infrastructure through availability on cloud and deploying software as a service in the long run, while investing in cybersecurity and protecting data confidentiality.
In line with this, technology expenditure is expected to shift from being capital expenditure (CapEx) to operating expenditure (OpEx). “Tech consumption pattern will change to the extent where any technology that brings return on investment after three years will be kept on hold, but those that have immediate impact will be spent on,” explained Tesco’s Patel.
This new way of working and thinking will require enhanced collaboration not only between partners and stakeholders but also with different ecosystems and in between industry sectors.
Accelerating their digital transformation will require CEOs to take a step back and reassess their road maps as well as the assumptions about value and feasibility underlying them. Those assumptions need to be based on emerging new customer behaviours, supplier dynamics, and regulation. CEOs will have a key role in making sure that the enterprise develops a business-building capability rather than simply launching a new business.
Headroom For Growth
Despite being a global leader in data consumption, India ranks among the lowest in data skills as per Coursera Skills Index. Other reports too indicate that India has a long way to go before being considered among technology advanced countries or to reap the benefits thereof. In many ways, herein lies the true opportunity.
Growth in data and digital users will boost technology penetration across industries. As Covid alters technology buying and consumption patterns, and sees a more pronounced approach from tech startups, the digital-led recovery story from India will become stronger.
The rise of digital and data in the last mile, the availability of strong technology talent, the increased attention from tech companies in transforming important sectors such as agriculture, education and healthcare in India, and a sizeable global investment have all come together, at the right time, to arm India better in the global tech race, and to propel it towards becoming a stronger tech economy.