Industry 4.0 could put Indian IT cos under stress

Indian IT firms are focusing their attention on opening technology hubs in the US and Europe, hiring local talent, to bypass their dependency on visas.

Published: 20th June 2017 01:29 AM  |   Last Updated: 20th June 2017 02:48 AM   |  A+A-

Express News Service

BENGALURU: Indian IT firms are focusing their attention on opening technology hubs in the US and Europe, hiring local talent, to bypass their dependency on visas. However, a far bigger challenge awaits them — Industry 4.0, short for emergent technologies like cloud, AI and machine learning, which are rapidly changing the global market. These firms will likely have to face short term financial stresses during the transition.

A major reason for the rise in financial uncertainty is that new technologies put pricing pressure on traditional services, while manpower skilled enough for new technology work come at a premium.  With a majority of revenues coming from the US and European markets, companies have no choice but to get on board to sustain revenues. Companies like Infosys have already revealed that its new technology hubs will put pressure on the company’s profitability.

Client budgets, historically driven by the chief tech officer are now driven more by the chief marketing officer, who crafts the go-to-market framework for the company, observed Santosh Thangavelu, senior vice-president and head, IT Talent Supply Chain Solutions, TeamLease Services. “First, there will be pricing pressures on ‘Run-the-business’ projects... to release more budgets for ‘Change-the-business’ programs, typically referred to as digital business transformation programs.”

This is expected to naturally increase pricing of emergent technologies, pointed out Diwakar Chittora, CEO of Intellipaat, an IT training platform. “Even if you hire a fresher in the US, it is still costlier compared to hiring experienced people in India,” he said, adding that this would definitely affect margins.
While Indian firms focuses on Android tech, machine learning and data sciences have been becoming popular in the west. “Indian IT services firms which work with overseas clients, have to recognize the importance of training in these fields. Those who do not understand the importance of re-skilling will cede ground,” said Ishan Gupta, managing director, India, Udacity. But, while this transition involves increased costs, firms will eventually see better margins since automation will result in less investment on human resources. “But, this will take at least three years,” Ashok Pamidi, member of Nasscom said.

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