Digital may drive over 80 pc incremental spend for enterprises in near-term: NASSCOM
Dec 03, 2020
New Delhi [India], December 3 : Extensive acceleration in digital adoption by enterprises and a potential increase in outsourcing intensity due to remote working are contributing to the faster than expected recovery for the technology services industry, the National Association of Software and Services Companies (NASSCOM) said on Thursday.
Top Indian technology service providers have performed better than analyst estimates in the second quarter of FY21, it said in the report titled 'Future of Technology Services -- Navigating the New Normal.'
Independent third-party research and analysis was conducted by McKinsey & Company as knowledge partners.
The report highlights that tech natives and digital reinventors with revenue over 3 billion dollars have driven 65 per cent of the 6 trillion dollar growth in market capitalisation between January to July, highlighting that technology is now core to future business recovery.
As COVID-19 has accelerated digital adoption across industries, technology service providers are witnessing a sharp growth in digital deals. Digital transformation deals have seen a 30 per cent jump, 80 per cent jump in cloud spending and 15 per cent in customer experience have been witnessed since the pandemic.
With an increasing focus on remote enablement, companies are also reporting an increase in the digital dexterity of their employees and are actively reviewing processes to identify opportunities for automation and digitisation.
Over the years, said NASSCOM President Debjani Ghosh, Indian technology services sector has had an unparalleled impact on the economy through a multiplier effect on job creation, balancing import bill through sustainable exports, powering start-ups and driving substantial contribution to GDP growth.
"The next 10 years will be fundamentally different from the past and require all stakeholders to develop strategies and insights to identify new opportunities and mitigate the risks. To ensure faster recovery, companies need to develop a two-part response to the evolving landscape: near term plan of action and long-term strategic re-thinking."
Noshir Kaka, Senior Partner and Global Leader for Analytics at McKinsey & Company, said investment in digital re-invention and resilient operations saw a dramatic acceleration since the start of the pandemic. The report suggests that the world has leapfrogged on digital adoption by three to five years in the last nine months.
"We are seeing an increased emphasis on digitisation across verticals and our analysis shows that 80 per cent plus of the near-term spending may be driven by COVID-19 resilient digital offerings," he said.
The report said enterprises and chief investment officers are rebalancing their technology spend to prioritise digitisation. Major technology services players have reported better results than analyst expectations in the second quarter of FY2021.
The technology service providers attributed the revenue growth to cloud and digital offerings, and benefits accruing from vendor consolidation by enterprises.
