ARC Advisory Group's recent India Forum in Bangalore focused on the latest trends and innovative technologies in IT, automation, and enterprise solutions, including the related opportunities and challenges facing various industries.
This Insight focuses on presentations by Achyuta Ghosh, Head of Research, NASSCOM (National Association of Software and Services Companies), and P.V. Sivaram, Vice President, AIA (Automation Industry Association). NASSCOM, with its 2,500+ members, facilitates business and trade for companies operating in the IT-BPM (information technology-business process management) industry in India. AIA, with its more than 40 high-tech automation member companies, works to enhance the knowledge and awareness levels of automation technologies in the country.
Innovation Imperative – The India Growth Story
In his speech, Mr. Ghosh provided an overview of India's IT-BPM industry, digital disruptions reformulating technology requirements, and the innovation imperative.
India's IT-BPM Industry
Mr. Ghosh stated that in 2015 India's IT-BPM industry registered a meteoric growth in terms of revenues with an overall market share of $143 billion, up from $100 million 20 years ago. Though there was a decline in growth rate as the industry began to expand, it is still India's best performing industry with a significant contribution of about 9.3 percent to the country's overall economic growth.
In 2015, the country ranked number one in the world in both IT and BPO (business process outsourcing) services with estimated revenues of $75 billion and $28 billion, respectively. He further mentioned that India has one of the fastest-growing e-commerce industries, helping accelerate the growth of IT business.
Startups – Empowering New India
According to Mr. Ghosh, startups play an important role in driving India's next wave of technological and economic growth. India ranks third among global startup ecosystems and is evolving as an innovation powerhouse.
He added that currently there are 9,700 startups operating in India's IT industry. With four new startups initiated each day, the country's tech startup numbers are expected to grow from 4,400 to 12,000 by 2020. India's startup firms offer disruptive solutions across different platforms, such as gaming, artificial intelligence, IoT, agriculture, health care, Big Data, education, clean energy, and emerging technologies.
Digital Disruptions Reformulating Technology Requirements
Innovative technology has reduced the barriers to entry for startups to begin competing directly with the large established firms. Many startups targeting the various operations of a larger organization can pose challenges to the market performance of the company in the long run. For example, the Singapore-based DBS Bank recently started its own digital banking system that eliminates the need for the customer to create a physical account.
His next section highlighted the global and Indian scenario of technology spend in 2014; almost 90 percent of the global technology spend was made on traditional technology (such as application development, system integration, licensed software products, etc.) but only 10 percent was on digital technology (such as social, mobile, analytics, cloud, cybersecurity, etc.). Even though the overall IT spend on technologies is estimated to grow at an average of 3 to 4 percent globally, it is expected to decline at 4.5 percent on traditional technologies, but grow at 24 percent on digital technologies.In India, of the overall $119 billion IT spend made in 2014, almost 96 percent was on traditional IT while only 4 percent on digital IT. However, the spend on digital business is forecast to grow at about 39 percent – accounting for nearly 38 percent of revenues by 2025.
The Innovation Imperative
While discussing the clients' long-term transformation and changing digital business objectives, Mr. Ghosh pointed out that clients today choose their service providers based not only on cost-effectiveness and talent access, but on their ability to innovate and offer domain knowledge as well. Clients want to transform their business into a digital enterprise that's current on latest developments in technology and uses them to maximize their competitive advantage.
He concluded the session emphasizing that organizations need to nurture a culture of innovation.
Automation and Enterprise Trends
P.V. Sivaram focused more on developments in India from the automation and skills perspectives and provided an overview of AIA's organizational structure and objectives.
He further added that the government liberalizing barriers to foreign direct investment (FDI) into the country to woo global investors will create increased expectations and result in setting up a diverse manufacturing culture in the country. Hence, it is necessary for domestic players to build value for customers by being cost-conscious, innovative, and productive in order to thrive in the changing business environment.
Automation in the View of India in Transition
According to Mr. Sivaram, automation does not always have to be disruptive and break the existing system. For example, a driverless car will not be a complete disruption of the existing driver-operated car but will be a step-by-step improvement of the already digitally enabled cars of today. He cited another example of a Mumbai-based capsule manufacturing company that leveraged automation at different production levels phase by phase. Replacing 40 mechanical couplings with electronically geared servo axis resulted in the machine becoming twice as fast, which in turn led to a substantial increase in the capsule production with less energy, noise, and time.
Pan-India Model for Skill Building
Skill building is an important initiative of AIA. It is important to develop a competitive talent pool large enough to meet the changing requirements of modern manufacturing industries. To achieve this, AIA has developed a hub-and-spoke model that contains a mother center and a community center. The mother center acts as a hub, produces products, and develops course contents and curricula for training students, employees, and trainers. The community center, spread across geographically and networked to mother centers, will take the material from the mother center and deliver it to different industrial hubs.
Some of the topics covered by AIA members in its skill building programs include:
- Automation System Engineering
- Digital Simulation
- Energy Management
- Manufacturing Intelligence
- Safety Practices
- Quality Management
Mr. Sivaram also briefly touched upon the status of talent pool in India, where talent is both a differentiator and an opportunity. Referring to a research by HBR on "Talent in emerging areas," he pointed out that the country's talent pool has a surplus at some levels but a deficit in others. He further stated that industries in India will need many innovative solutions to meet the various challenges they face.
He concluded the session stating: "Let's build India together, with skills in industrial automation."
The sessions provided insights into the status of India's IT industry, the country's readiness to be a global player in digitalization, and developments in India from the automation and skilling perspective. Based on the above two presentations, we recommend the following actions for owner-operators:
- Create your own digital business within the organization to improve the competitiveness and market performance
- Reskill the talent pool to take up new challenges
- Drive innovation through startups, academia, and crowdsourcing
- Create separate funds and dedicated teams to drive innovation
- Make leaders accountable and responsible
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Keywords: AIA, Automation, Digital Enterprise, India, Innovation, NASSCOM, Digital Disruption, Transformation, ARC Advisory Group.