Indian IT industry overview for year 2018. Indian IT industry has set an inspirational target to touch USD 350 Billion in revenue by 2025 from the present USD 150+Billion. Until recently India’s Information Technology and Business Process Management (IT & BPM) sector has continued to record double digit growth despite static growth in global tech spending.
An important growth driver, it contributed 7-8% to India’s GDP. Indian IT industry is known for its cost competitiveness and high quality services across the world and has been instrumental in transforming the perception of India in the global economy. This reflects in India’s high market share in the global services sourcing industry which stands at 56%, highest in the world.
Let’s understand Indian IT industry overview by looking at it’s past, present and finally it’s outlook for 2018.
Also visit Oil and Gas Industry outlook for 2018.
Indian IT Industry Overview for 2018
Golden Period it was:
If you look at the revenue growth for Indian IT companies, it is at lower single digit for most companies now. In the decade or so to about 2007, the US dollar revenues of Indian IT majors were growing by anywhere between 30% and 45% a year. The first big decline came in 2009 when growth dropped to single digits. After that, there was some recovery but the original pace was never achieved again.
Growth of TCS, largest IT company in India.
It shows the growth in last 10 years is more than last 5 years and much more than for last 3 years. This is the clear indication how IT companies growth used to earlier and how is it slowing down now.
Currently you are reading Indian IT industry overview, also visit Pharma industry in India, Outlook, overview 2018..
Current issues Indian IT industry is facing:
People are overly concerned about protectionism policy of US president Donald Trump. It is not really the trump government which is the biggest threat. Let’s discuss about all the major factors.
Unsustainable growth after a decade:
For over a period of a decade, there used to be 30-40% dollar revenue growth from US market, which is the largest export center for Indian IT companies. It is unsurprising that it had to slow down for growth to sustain.
Technology upgrade and automation:
The real threat for Indian IT industry is this. Technology changes at a very fast pace. To keep up with this change is not an easy task. Indian IT companies traditionally have focused on labor intensive work performed by Indian engineers using their traditional skills.
Then came the era of automation and cloud. For that machine learning, big data, data analytics and artificial intelligence are the key technology area. Indian engineers were not ready for the big change. So the slow down was inevitable.
Finally the Trump administration:
As promised during election campaign Donald trump started focusing on job creation in USA for their citizens. So he focused to increase the entry resistance for outside workforce and proposed to replace with local workforce.
Undoubtedly this has a huge impact on profit margins for Indian IT companies. US citizens pay scale is much more than pay scale for an Indian engineer working in USA.
Having said three major factors that impact Indian IT industry, let’s understand Indian IT industry overview outlook for 2018.
Indian IT industry outlook for 2018 and beyond:
In the last 3-5 years of period, most companies have shown lower single digit growth. The good news is recently there have been much upgrade on skill sets to equip themselves with current technology trends.
So finally it will boil down to companies how fast they are taking up automation and cloud into their mainstream.
If you look at bigger companies like Infosys, HCL, they are acquiring many small companies working in advanced technologies.
In September 2017, HCL acquired ETL Factory Limited (Datawave) which is into automation.
In 2015, Infosys acquired an Israel based company Panaya with US$200 million which is again into automation.
As part of Indian IT industry overview, we have also picked our favorite stocks.
Our stock Picks from IT industry:
We believe companies which can adopt the new technology faster and change their business model accordingly will be winner for next phase of growth.
Even if we don’t see any significant decline for large Indian IT companies, it is very difficult for them to sustain the same level of margins and revenue growth going ahead. It is not an easy task to train lakhs of their employees with new skills. Moreover due to change in onshore offshore landscape it will again put lot of pressure on their margins going forward.
Tata Elxsi (Mid cap): CMP Rs 1035
Cyient (Mid cap): CMP Rs 580
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