BackWhat chief executives think about digital transformation
Mint spoke to five chief executives on how digital transformation has disrupted the $146-billion Indian IT industry
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Mumbai: The theme of the Nasscom India Leadership Forum 2015 was truly digital. The event, which entered its 23rd year and hosted executives from around 30 countries, had a drone greeting people and an experience zone that showcased technologies such as augmented reality. On the first day of the three-day summit, Mint spoke to five chief executives on how digital transformation has disrupted the $146-billion Indian IT industry.
N. Chandrasekaran, chief executive officer and managing director, Tata Consultancy Services Ltd (TCS)
Is IT services growth slowing down?
The momentum is good. We believe growth will be broad based... From the industry perspective, we see head wind in insurance and energy sectors, all other sectors will be good. For FY15, last quarter we have said we are not going to fare better than the last fiscal; but, overall, it is a very good year for us. It is going to be a good year…for FY16 in general, we have come ahead of Nasscom estimates all through for the past few years…we will have to wait and see.
Businesses are getting increasingly digital and clients are spending more on digital technologies. Are India’s graduates and engineers equipped to deliver the goods?
We say default is digital. Digital is not only a bunch of technologies like social, cloud, mobile or Big Data analytics. It is also a business model...because a combination of these technologies is converging in new technologies. Each of these industries will adopt these technologies and not only simplify process but also build new business models. On Indian graduates and engineers being equipped to handle this, I say absolutely…any time there is a technology change, you need to invest in training. It’s not that every time new technology comes in, suddenly a set of people are available. Always, you have to invest in training, which we have been doing for years.
How effectively is your company taking advantage of the government’s push on digital India?
TCS has a very strong presence in India. We work with both central and state governments. We have been a partner in a lot of e-commerce and e-governance initiatives. So we have the relationships on the ground, we have the people on the ground, and the solutions. So as digital India gains momentum, as it will, TCS is well in place.
Any budget expectations?
I would say ease of doing business. There are always some issues, but they are not budget-related. There is a transfer-pricing issue as well, which is not budget-related, which will need to be taken care of in course of time. From the budget point of view, really, ease of doing business, implement things, make the policy changes and keep the economy going.
Pravin Rao U.B., chief operating officer and member of the board, Infosys Ltd
Is IT services growth slowing ?
We are still looking at our own internal data, so it is too early to say where we will land next year. In some of the sectors, we are still seeing challenges. Oil is a big thing. On the energy side, most of the energy companies are struggling, all their plans and investment are based on $100 oil. Now it has come down to $50 and less. Similarly, telecom sector is struggling for top line growth as well as bottom line. So we have all these dynamics. We have some positive elements, some negative elements. If you look at all these things and keeping in mind the currency thing, I think what Nasscom has said about growing 12-14% is a reasonable estimate. I don’t think we can conclude industry is slowing.
Businesses are getting increasingly digital and clients are spending more on digital technologies. Are India’s graduates and engineers equipped to deliver the goods?
From the large services company, we have to probably build more capability on the creative skills. On the technology side, we have enough expertise on digital side. We know what we need to do on the front end, but it is not only about front end, it is also about integrating the back end system, and giving a seamless experience to the client. So developing creative skill is our focus. If you look at start-ups, you see lot of creative things happening, but not on the services provider side.
How effectively is your company taking advantage of the government’s push on Digital India?
From the readiness perspective, we have the capability and we are interested in doing it. In the past, with the previous government, we have had challenges. Nasscom is actually working with the government to see how we can create an ecosystem and how we can participate. But at the end of the day, companies also have to be profitable. It is not something pro bono. Obviously, we would be interested in doing a part of it for free, but at the end of it, it has to be a viable model for the corporate. So Nasscom is in talks with the government; there are some irritants, which we have to remove to participate much more openly. I am sure all the companies are interested in the opportunities provided by both Digital India and Make in India.
Any budget expectations?
I think a high-level budget should address the consistency in policy framework so that there is no confusion on the investment it should create and, second, it should create ease of doing business and single clearance mechanism. So those are the two critical elements from the budget perspective. If you are able to address those, it will create an environment where there is consistency in policy and ease of doing business; I think it will go a long way in promoting more investment and generating growth opportunities.
Krishnakumar Natarajan, managing director and chief executive officer, Mindtree Ltd
Is IT services growth slowing?
The 12-14% guidance by Nasscom is a very realistic and achievable guidance. It certainly factors in the macroeconomic uncertainties in Europe, the economic uncertainties also, and also the possibility of another round of currency volatility. Overall, the scenario from the Mindtree perspective, however, is that we clearly see a good growth momentum based on conversations with our top 30 clients. We clearly see a demand for services, especially digital very strong, uncertainty in Europe, but that can be managed through certain client interventions. So FY16 will be as good or marginally better than Nasscom’s guidance and we do anticipate beating the Nasscom guidance of 13% for FY15.
How effectively is Mindtree taking advantage of the government’s push on Digital India?
There is a lot of promise and opportunities but more details need to get spelled out, so we will wait and watch to see how it will pan out with more allocation and government support as it is not only the private sector that can keep investing towards Digital India.
What are your main budget expectations?
The industry has reached a stage of maturity where we need to expand to more tier II and III cities and create more employment opportunities there. Secondly, make doing business easier for smaller companies in India to deal with authorities and compliance. Thirdly, how do we innovate in India and make services for the world? Hope the finance minister will come out with more initiatives in this regard.
Sandip Sen, global chief executive officer, Aegis Ltd
Is IT services growth slowing?
Aegis is very bullish for the year. Going forward, in our key markets like India and Malaysia, we are expecting a growth of over 20% and an overall growth of close to 20% also. We see growth in India from e-commerce, which is growing by leaps and bounds, where we are one of the largest partners, thanks to our partnership with Flipkart.com. The second is the growth of data services in telecom, which has now become very large, and we are well-poised to capture this growth. Third is the growth of banking in the private and public sector, where we have key partnerships with banks and also recently with mutual fund and insurance companies. And last, but not the least, key government schemes that we are supporting like the Jan Dhan Yojana and Aadhaar scheme. Malaysia will continue to be the hub of our Asia-Pacific business for Asian and English languages as an alternative to the Philippines and will help us in our expansion to Japan and Korea where we are looking to start operations. So, in all, we see a very good year going ahead.
What are your budget expectations?
My overall expectation from the budget is that it provides much more incentive for the BPO (business process outsourcing) industry to make it more attractive, as it is a huge employment generator. These could be in terms of reducing costs for BPO companies in terms of inputs like power which is very expensive; it could be in terms of additional grants for skill training as we are one of the largest upskill agencies in India.
How effectively is Aegis taking advantage of the government’s push on Digital India?
Besides partnering with the government on schemes such as Jan Dhan Yojana and Aadhaar, we are also working on skill development by training more people to be better employable. We are also working with various state governments to build more delivery centres in tier II and III cities, and this year we are looking at opening seven to eight more delivery centres in India, some of which will be in small towns.
Sushma Rajagopalan, managing director, ITC Infotech
Is IT services growth slowing?
There are a lot of changes happening to call this a year of change and transformation. The customers are changing dramatically regardless of whether you are a retailer, from the pharmaceutical sector or a bank, everyone is in a rush to understand the customer than anybody else. Fundamentally what they are doing is that they are taking all of their existing systems and digitizing them and they are using it to extend themselves digitally. The second thing is that if we observe how services companies made money, they did it through maintaining software. Today software is being built with higher maintainability, hence there will be spend but in shorter spurts and that is what we are seeing. So as a niche firm, we will be looking at a growth rate higher than the market rate, because when a global firm is growing at 16% then you cannot compare the growth of the smaller firm to industry trends. We are looking at growing at a higher rate than the industry.
Businesses are getting increasingly digital and clients are spending more on digital technologies. Are India’s graduates and engineers equipped to deliver the goods?
Interestingly, it is not just about the technology anymore. In order to compete in the digital world understanding of the business is going to be extremely important. So, if you look at ITC Infotech’s mantra we have a 4D strategy—domain, data, digital and differentiated delivery.
So unless you string all four together, talent gap won’t come in from a technology standpoint, it will come from the understanding, the business and domain. So the key thing is that India’s technology and engineering talent is good, but how to train and make them the best data specialists is important.
How effectively is your company taking advantage of the government’s push on digital India?
There is a digital revolution across the globe; the US and India are going to be major adopters of this. We as a company are looking at how to use technology to be that competitor push for the parent company. This isn’t about India or the US but is about the global enterprise. If you want to survive as a business and an IT business company then we will have to embrace technology transformation.
What is the biggest challenge that you see this year?
People want to do a lot of things related to data, everybody understands that there is a lot of data, but they are not exactly clear about how to use it, where should it be used, what end of digital data should be tracked. Having a road map and deciding how data should be used is a big challenge, also the question to ask is which are the key business problems that data should be able to solve.
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