Digital Tech investment to rise from 10% in 2014 to 60% in 2025: NASSCOM

India’s technology and business service providers are at the cusp of a significant opportunity as digital technologies get embedded in a widening range of products and services. The global and domestic market presents a huge opportunity for companies that can build expertise in these new technologies and deliver value through them. Moving to capture this digital opportunity, the Indian technology and services industry is on track to reach its goal of $200 billion to $225 billion in revenues by 2020 and furthermore, to reach revenues of $350 billion by 2025.

The latest report released today by NASSCOM (National Association of Software and Services Companies), Perspective 2025: Shaping the Digital Revolution, outlines the roadmap for this new environment. The report is based on extensive research conducted for over a year by McKinsey & Company. The report was released in the presence of Mr. JS Deepak, Secretary, Department of Electronics and IT, Mr. Dominic Barton, Managing Director, McKinsey & Co, Mr. Noshir Kaka, Managing Director, McKinsey & Co. India, Mr. BVR Mohan Reddy, Chairman, NASSCOM, and Mr. R. Chandrashekhar, President, NASSCOM.

Speaking on the occasion, BVR Mohan Reddy, Chairman, NASSCOM, said, “The technology and services industry in India hasbecome a transformational partner for its customers. The report identifies innovative and disruptive technologies that will shape the enterprise of the future. It also provides insights for the industry to reinvent business models and identifies key steps needed to make India a global centre for innovation in digital technology. Our aspiration is to build cutting edge solutions and services from India that will shape the digital revolution globally”.

The report states that technology is becoming a dominant factor in capex, making return on technology investment a key success factor for enterprises. With a $6 trillion cumulative technology capital investment globally, the economic landscape will be split among three types of enterprises: digital leaders and attackers, smart followers, and digital laggards. Each of these enterprises will operate a varied mix of disruptive, transformative, and traditional technology, mirrored in their investment choices. Driven by the adoption of digital technology, the total addressable market for global technology and business services will likely expand to about USD 4 trillion by 2025, growing at an average annual rate of about 3.6%.

The big implications for companies are:

• The need to develop new service lines. New service lines will account for 40% of all revenues by 2025
• Shifting portfolios to advanced, disruptive technologies
• Managing customer digitization at different speeds. Companies will need to cater to customers who are Digital leaders, Smart followers as well as the Digital laggards
• Re-skilling of people as revenues decouple from headcount
• Forging new capabilities through M&A, partnerships, incubators and open innovation

Probably the most pressing need is for companies to develop offerings along new digital service lines, even as they re-invent their traditional service lines. Noshir Kaka, Managing Director, McKinsey & Company, India said, “Companies hoping to prosper in the new environment will have to closely watch six new service lines- including the Internet of Things, Cybersecurity, Social, Mobility, Analytics and Cloud.”

CP Gurnani, Vice-Chairman, NASSCOM, said, “Organisations will need to operate in a way that they can cater to customers entering the digital environment at different speeds. Digital leaders and attackers will make significant investments to convert their entire system into digital architecture. Smart followers will deploy digital technologies into their front end services, while retaining the legacy technologies for the moment. Digital laggards will keep most of their legacy systems, making only incremental investments in digital tech.’’ Providers serving these customers will have to adjust their value propositions for each segment turn into a `3-in-1 organisation’ the report says.