Speaking amid a meltdown in internet startups and telecom companies in April 2001, the then CEO of Infosys, N R Narayana Murthy, spooked the markets with a statement that offered a dour outlook on earnings in what has come to be known as a “fog on the windshield” statement. That came to mind on Wednesday when Nasscom the national association that clubs players in the $150-billion IT-BPO industry, held off on a customary forecast for the new fiscal year starting in April 2017.
The big question: is there fog on the windshield again? The answer is yes, but not in a not so simple way. The biggest issue in the public imagination surrounding the uncertainty in the industry is, of course, the Trump Factor. By creating uncertainties on the number of H-1B visas used by companies like Infosys, Wipro and TCS to do onsite services, the US president has created a headline effect.
But there is more to this than that. On one hand, Wall Street is booming with indices at new highs, inflation under control in the US (India’s prime market for outsourcing contracts ) and even interest rate increases are on the cards. Typically, if Trump cracks down on visas, this may be a time to rejoice for companies that want to bring more outsourcing work offshore to centres like India.
This time, however, simple calculations may not work because the industry faces several uncertainties all of which put together may make Nasscom pause for breath as it is doing this week even as business leaders sound as gung-ho as ever on the future of the industry.
Let us look at some factors at work:
Changing models: There was a time when Indian IT companies wrote software applications for giant multinationals much the way a tailor stitched custom-made suits. Some of that software is so easy to use, or so critical to employ, that some clients are doing it in-house rather than outsource to Indian companies in a new wave of thinking.
Europe is struggling: The US is recovering, but Europe continues to have a multiple fracture in its body economic. Think Greek crisis, Brexit, terrorism, rise of right wing parties and refugee crisis together, and you know that it is a minefield.
Strategic digital disruption: Startups like Uber and Airbnb are disrupting economics because, like Facebook, they do much of the software on their own than through partners because it is “strategic” and “core.” They are also disrupting traditional players who might have been customers for Indian companies. Some of the disruption also requires new skills that India needs to build up on.
Right wing concerns: If jobs stolen by immigrants caused Brexit, the impending exit of Britain from the European Union, you can imagine the potential uncertainties on the business process management (BPM) industry that serves up call centre operations and other back-office work from India.
Software automation: This is not but not the least of concerns. Software is getting written by smarter pieces of software, if there is a simple way to explain this. Artificial intelligence is taking over and was described by IBM’s CEO Ginni Rometty at the Nasscom annual conference as being now “mainstream”. It is also at the heart of what Infosys CEO Vishal Sikka is doing to reinvent the company.
All these factors together are playing inside the heads of industry bosses as they try to add up (and subtract) numbers of the industry that for two decades ran on the simple arithmetic of costs and demand. If there was “fog on the windshield” in 2001, what we are witnessing now is the equivalent of a traffic jam on a dusty day.
New opportunities may lie ahead as pervasive use of computing in healthcare, medicine and governance throw up new trends, but what we are seeing now is like a Bangalore junction: narrow roads, honking cars, large buses, small bicycles and pedestrians. You get the picture.
(The author is a senior journalist. He tweets as @madversity)
Published Date: Feb 16, 2017 12:10 PM | Updated Date: Feb 16, 2017 17:34 PM