A new challenge encountered by the Indian IT Industry
Posted on: 18/Sep/2017 2:38:37 PM
Over the last decade or so, the Indian Information Technology industry flourished with roaring business largely due to the phenomenon of outsourcing policy adopted by several advanced countries when the entrusted the software-related projects to the 3rd world countries, especially India, in order to save substantial time and money.
Due to several factors including the economic setbacks, these countries have now developed the phenomenon of insourcing - getting the various tasks including software projects done within the country. This trend has posed a strong challenge to the Indian IT industry.
The statistical details received from the National Stock Market provide by NIFTI (Neuroimaging Information Technology Initiative). the index pertaining to IT field has come down by 22% as compared to the average expected level. As compared to this, the figure for the last year showed a reduction only by 10%.
Thus, there seems to be stagnation from the prior trend of growing business in the Indian IT industry. However, this is not a surprise as several factors – restrictions in VISA regulations, the increasing trend of digitalization and automation technology.
New challenge
The trend explained above has really affected the growth of the Indian IT industry and also curtailed the job prospects. Further, the present jobholders also stand the risk of losing their jobs. It is a well-known fact that the phenomenal growth of Indian IT industry was mainly due to outsourcing. However, since Trump had assumed as President of the USA, he has made some strong policy changes including the prospects of losing domestic job prospects due to outsourcing. Naturally, this has strongly affected the Indian IT industry which depends largely on the USA market.
In the above situation, a recent report by NOMURA warns that there is a serious challenge posed by the trend of ‘insourcing’. The report, released recently, informs that many major US companies, currently the main customers for Indian IT companies, have preferred to resort to insourcing. This report is titled insourcing: next big worry for India’.
The term ‘outsourcing’ refers to the companies entrusting certain projects to outside companies to execute them, Just as a reverse, the term ‘insourcing; refers to these companies getting the projects done within their companies.
These companies get the insourcing done through GIC – Global In-house Centres. This pertains to the concerned companies recruiting the new personnel in order to get the jobs given earlier to outsourcing to get it done within the company. As this trend is growing, there is the possibility of the Indian IT industry standing to lose the prospects of outsourcing business. Noura records that GIC poses the next big challenge to the Indian IT industry.
Presently, GIC takes 25% scope of the outsourcing projects. At the same time, it is to be noted that GIC is growing faster as compared to the Indian IT industry outsourcing business. Earlier, the Indian IT industry outperformed GIC.
The report observes that apart from the large US companies, even the US companies with annual turnover of less the US $ 5 billion have also started showing interest in insourcing. Apart from the industry segments of banks, finance and insurance, technology, and manufacturing, the insourcing trend is getting popular even in other segments.
Though it is quite expensive to set up GICs, as the companies seek better control and monitoring and also the interest in the latest technology, they have started incorporating this trend.
Though it is true that the Indian IT industry has to explore the new avenues in technology to overcome this challenge, the capital required to be invested in this attempt is likely to adverse the profit margin in a large way.
Though insourcing poses a challenge to the Indian IT industry, it also offers the scope for new jobs where Indians can compete.
Presently, GICs have taken 25% of the revenues from the outsourcing revenue. It is a strong possibility that many other major companies may switch over to insourcing in the next few years. GICs offer jobs to freshers as well.
