Central banks, government institutions, agencies, and others are all predicting a challenging macroeconomic environment in the short run. Muted demand is expected to lead to squeezed margins, depleted cash reserves, and lower internal investment in key areas for most businesses. Subdued business sentiment will have a knock-on effect on the technology sector, which acts as an ultimate enabler for businesses around the world.
However, as the recessionary outlook fructifies, we in the tech industry must perceive this as an opportunity, rather than a challenge. We have the chance to pivot our industry and reposition ourselves from being the ‘services hub of the world’ to the ‘concept-to-market hub of the world’. There are some key steps that we must take to ensure that we don’t just survive the recession, but thrive through it and beyond it.
Finding the right opportunity
As per McKinsey-Nasscom joint research, 70% of CIOs expect an economic slowdown over the next 18 months. 80% of CIOs are also expecting a 15% reduction in discretionary spending. This means that we as an industry need to first focus on the basics to build businesses of the future, so we can enable our clients and partners to build businesses of the future.
However, let us juxtapose this to the concept of modern business today. We need to understand that technology is at the core of everything business and service-related. What this means is that while the CIO function as a cost center may be declining, the appetite for technology consumption is thriving in some key growth hotspots. On similar lines, we at Tech Mahindra have bet big on creating deep verticalization to drive sustainable growth. Whether it is electric vehicles in manufacturing, 5G adoption for telecom companies, or the expansion of the start-up/fintech ecosystem for banking & financial services, every industry has certain growth hotspots that will drive large tech demand.
A focus on efficiency as a lever is also critical to funding future transformations. The recessionary outlook will push all of us to keep our house in order – cost, efficiency, and productivity will be common themes across all industries. Some of the questions that clients are asking us more and more – are we optimally using the cloud? Are we automating our processes and systems enough? Do I have the right blueprint to establish brain-bot collaborations? There are many such examples that we are seeing in our customers that make me think that adoption of digital technologies, has increased, but thoughtful use of digital technologies still needs to happen.
Other growth hotspots exist. Many countries will drive efficiency by offshoring many of their business processes. It is therefore key for India to solidify its position as the ‘GCC Hub of the world’, an avenue which will drive a lot of trickle-down opportunities for the tech industry. Similarly, constrained circumstances call for the ecosystem to come together to strengthen. For tech firms, working closely with ecosystem players such as CSPs (Cloud Service Providers), platform/ SaaS companies, etc. to build robust and differentiated products which can be taken to market will be very important.
Building for the future
As a gloomy macroeconomic outlook looms, it is important to put in place the building blocks that will drive this industry forward in the future. McKinsey – NASSCOM findings expect a 300-400 bps slowdown in the overall tech services market. However, there are some important initiatives that all tech firms should put in place now, to build for the future.
For example, cloud services spend from migration and managed services (a 70% chunk of overall cloud services spend) is expected to grow at a 12–15% CAGR. I have myself observed on the ground, that customers are demanding the shift of cloud computing as a cost-strategy to growth-strategy, both for providers and buyers. The creation of industrialized cloud platforms such as manufacturing clouds with IT-OT integration, telco clouds with OSS-BSS integration, etc. are all logical steps that tech firms must take today to reap the benefits of in the very near future.
This segues into another critical aspect of building for the future. As the outlook turns gloomy, enterprises will want to consolidate and strengthen relationships with their trusted technology partners, who have consistently co-created and delivered value for them. The voice of the customer has therefore become more critical than ever before – a trend that we expect will deepen even further. Delivering value to our clients today will reap manifold rewards in the future. Our conversations, for example, with an American multinational bank and an insurance provider, were significant proof of this – today, the focus of these firms is to expand their digital channels, optimize the customer experience, and look at technologies such as Metaverse, etc. to expand customer acquisition. This proves that even in today’s scenario, customers are looking for value co-creation with trusted vendors.
Chief Strategy Officer & Head of Growth,
Tech Mahindra
Conclusion: Talent as the key enabler
The realization should dawn on us that if we as an industry play our cards right, we can hunker down, ride out the headwinds, and build for the future in a big way. Seeking out growth hotspots, working through value based outcomes, and deepening relationships with both ecosystem partners and clients are all key to immediate and future success.
However, the key layer that binds the industry together is ‘people’. As we undergo an industry transformation ourselves, it is important to transform the talent that we bring in. Whether it is reskilling/ upskilling our existing talent, or bringing in fresh talent through various initiatives, such as school/ college internships, NASSCOM Futureskills, etc., it is important that we make talent the critical fulcrum to drive the future of our industry.
I am positive that within the doom and gloom that encompasses the current outlook, our industry will become a bright spot not just for India but for the world. Now is our time to not just support our country, but the world, by becoming the technology leaders for a new era, a new ‘Techade’.