Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Infotech/  Tech start-ups move away from conventional IT services
BackBack

Tech start-ups move away from conventional IT services

Nasscom says tech start-ups have started focusing on the online space rather than traditional IT services

According to statistics compiled by Nasscom, 34% of all venture capital-funded technology start-ups in 2011 were in the online services space and only 3% in the conventional IT services domain. Photo: Mint (Mint)Premium
According to statistics compiled by Nasscom, 34% of all venture capital-funded technology start-ups in 2011 were in the online services space and only 3% in the conventional IT services domain. Photo: Mint
(Mint)

Tech start-ups are bypassing the traditional information technology (IT) services market and heading towards the potentially lucrative online space, indicating that India’s $70 billion software services export industry may have lost some of its sheen.

According to statistics compiled by the industry body National Association of Software and Service Companies (Nasscom), 34% of all venture capital-funded technology start-ups in 2011 were in the online services space and only 3% in the conventional IT services domain.

“Traditional information technology services market may not be as exciting for new-age entrepreneurs as areas such as the Internet where the traction time is much faster and the opportunity to make big bucks quickly higher," said Ganesh Natarajan, vice-chairman and chief executive officer (CEO) of Zensar Technologies Ltd.

Natarajan said tech entrepreneurs may have deemed gaining scale in the traditional information technology services market to be a “long haul" although scope still remains for platform- and solutions-driven information technology services.

The data also underlined a trend in which more and more start-ups are focusing on specific industries or industry segments.

While 9% of all start-ups were focused on enterprise software and products, 8% launched into the healthcare and life science domain and 7% were into mobile-value added services, energy and the BFSI, or banking, financial services and insurance, sectors. Six per cent targeted the education space.

The fact that large Indian IT companies may have already cornered a majority of the work from Fortune 500 and Fortune 1000 companies may be another reason why new companies are trying to create their own niches, said Pradeep Udhas, head of the IT and IT-enabled services practice at audit and consultancy firm KPMG India.

“Global multinationals also want to work with established companies which have the scale, have the appetite for risk taking and can meet their stringent compliance norms," Udhas said.

Around 10 years ago, there was no big differentiation between the work done by Indian IT companies, but the industry has moved since then from being mainly about cost arbitrage to client transformation, said Krishnakumar Natarajan, vice-chairman of Nasscom.

“The industry’s demand now requires to be very sharply focused and deliver key value to the customer, which is helping small companies specialize," Natarajan said.

In 2001-02, small and medium IT companies were contributing only 2% of the overall revenue of the industry, but the figure rose to 9% in 2011-2012, showing that small companies are doing better and contributing more, said Natarajan, who is also the chief executive and co-founder of Mindtree Ltd, a traditional software services provider formed relatively recently and which has made a mark in the industry.

Sangeeta Gupta, vice president of Nasscom, said it is unlikely that there will be a new company which will be set up in the traditional information technology services space which will gain the same scale as a Tata Consultancy Service Ltd or an Infosys Ltd.

Some companies could grow to the same revenue level, but by operating in a different domain. Udhas of KPMG said the drive towards non-linear growth or intellectual property creation could be one way of closing the huge gap in terms of revenue between the top IT companies and the next rung.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 13 Feb 2013, 10:33 PM IST
Next Story footLogo
Recommended For You
Infotech Stocks
₹1,547.25-0.26%
₹1,484.10.99%
₹4,928.750.15%
₹3,837.51.2%
₹472.21.66%
Switch to the Mint app for fast and personalized news - Get App