For Indian vendors, however, the pandemic era when they were extensively involved with IT is now in the rearview mirror. The programmers they were able to hire easily during the Covid 19 lockouts are getting restless since the global economy rebounded because they don’t have career opportunities. The turnover rate at TCS was more than 21% last quarter. These are all temporary problems for an industry that came into its own at the start of the millennium – the Y2K bug put India on the world map of tech services.
From here on, however, things could get tough. European customers, which typically account for a quarter to a third of Indian companies’ sales, will almost certainly cut their technology budgets – at least until the war in Ukraine ends and energy supplies return to normal. The more important U.S. market could also disappoint, as the Federal Reserve slows the economy to rein in inflation. Some U.S. companies may still be looking to information technology to cut costs as they brace for a recession. That means new outsourcing contracts.
Two decades later, India’s publicly traded software exporters generate more than $100 billion in revenue, employ 2 million people, and have a market capitalization of nearly $350 billion. TCS alone is worth more than International Business Machines Corp. But size comes at the expense of agility. The outsourcing industry is about helping global companies reduce friction in their work, and that’s something consulting firms have done better at lately.
Indian IT firms, closely managed from their headquarters in Mumbai or Bengaluru, still have a strong labor cost advantage when it comes to large-scale enterprise software. However, demand is shifting away from implementing SAP SE or Oracle Corp. technologies at customers’ premises. Demand for cloud-based workflow automation has led ServiceNow Inc.’s revenue to increase sixfold since 2015, while San Francisco-based Atlassian Corp.’s revenue has increased eightfold thanks to Jira, a cloud-based project tracking application.