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Is cloud computing a potent threat for Indian IT?
Jul 14, 2015

The Indian IT industry has built its fortunes on the back of outsourcing of services to the developed economies of the US and Europe. Aided by a cheaper but technologically efficient workforce, IT companies in India have managed to clock superlative growths in the past two decades. But the advent of the cloud computing technology can act as a potent disruptor, impacting the outsourcing models of Indian IT companies. The cloud computing technology enables companies to access servers and software through automated code writing on the Internet. This helps them in saving costs of maintaining local networks and personal computers. Therefore instead of employing large technology firms to run their back-end systems, companies are increasingly opting for pay as per service on the cloud.

The shift towards cloud computing by companies worldwide is being further initiated by increasing competition and shrinking budgets for information technology. Moreover companies are also demanding new technologies such as data analytics that help them analyze and optimize their business. The growing threat of new technologies is reflected in the value of the global outsourcing deals that fell from $206.8 bn in 2010 to $120.4 bn in 2014. Indian IT companies, that earn a substantial share of their earnings from outsourcing, are beginning to feel the heat. Tata Consultancy Services (TCS) is increasing spends on emerging digital technologies such as big data, mobile application development and cloud computing. But the share of revenues from this segment is still small. Therefore unless IT companies focus on embracing new technologies, the road ahead is likely to remain tough for them in future.

Data Source: The Wall Street Journal, KPMG

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