Some months ago, I wrote in this column that the investment analysts’ community, as also other interested observers of India’s information technology (IT) services industry, needed to start changing the usual signs that they look for while trying to gauge the future success of the industry.

Under the old model, the fact that IT services firms were resetting their workforces by shedding some of their employees was looked on with trepidation, and there was even talk of unionization among the IT workforce.

Headcount addition was always considered a good sign in an industry that was growing using a factory-based model, so the reduction in workforce (or at least the limited hiring) that we saw throughout 2017 was being taken as discouraging news—almost portending a major fiasco. I had suggested that we start to look at such factory-based figures dispassionately and realize that this sort of adjustment in employee levels is natural in businesses that are changing.

The ever-present question of the H1-B work visas issued by the US, where observers constantly used to watch the trend of the alternate tightening and loosening of the visa regime, is much less a factor than before. Indian IT is now much less dependent on these visas as Rishad Premji, the incoming chairman of Nasscom, has pointed out.

The other oft-repeated worry is that “in-house centres" set up in India by the customers of IT services firms are absorbing business from outsourcers. I have both built up as well as sold many of these in-house centres for clients for many years, some in deals worth several hundreds of millions of dollars—and so can safely attest that the build vs. buy equation keeps shifting and does not pose a structural threat to the outsourcing industry.

It is heartening to see that in the run-up to the earnings announcement season which started on Friday, 13 April, when Infosys announced its 4th quarter results, most analysts were no longer holding onto indicators meant for the Industrial Age when we have now moved to the Intelligent Age. The analysts have started to clear their long-term memory banks and are now focused on structural indicators that are more apt to today’s demand environment.

Most analysts expect IT firms to report an improvement in earnings before interest and taxes (Ebit) margins in Q4FY18, aided by currency, automation (which means lower hiring) and operational efficiency. Aiding these is the fact that the period covering late 2017 through early 2019 will witness a surge in the renegotiation cycle for large deals, according to outsourcing advisory Information Services Group. Their structural view of the market, which I had written on in detail some time ago, is bullish, given that in 8 of the past 9 quarters, large deals have exceeded $9 billion in Annual Contract Value.

These large deals now cluster at around the $40 million per annum mark, rather than the old $100 million benchmark, and there are over 120 such deals in the market. This new watermark has meant good foraging for the mid-tier IT players as well. They are no longer hampered by their size (a $40 million per annum increase for a billion-dollar firm is much easier to assimilate than $100 million). Interestingly, this is also now reflected in the market’s view of such firms. Many mid-tier IT firms have witnessed a significant run-up in their share prices over the last several months.

It appears that analysts and investors are turning “tactically" positive and expect to remain so for the next financial year as well. Most expect single digit growth over the one-year horizon, though some caution that there are potential speed breakers ahead.

One worry is that the scale of automation across enterprises has reached peak velocity and will continue to cannibalize traditional “people based" revenues from IT majors at a faster rate than the growth coming out of new “digital" work. Countering this is the view that there is a tremendous worldwide supply crunch for “full-stack" IT engineers who can manage the new methods of computer programming that are now de-rigueur at global enterprises. This supply-side paucity will continue to be filled by Indian programmers.

I’m rooting for Indian IT.

Siddharth Pai has led over $20 billion in technology outsourcing transactions. He is now founder of Siana Capital, a venture fund management company focused on deep science and tech in India.

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