Indian IT to shift focus on digital technologies as core services fails to attract
- IT sector is taking a shift towards latest digital technologies
- The good old legacy applications fails to attract new clients
IT clients world wide are shifting their investment towards a more robust and growth oriented digital technologies. Existing technologies and legacy applications which used to be the front runner to run their businesses are failing to attract new clients in todays time. Time has changes and hence the way of working in IT. Newer technologies offer an efficient way of delivering the products with in less time. Be it Agile which reduces the product’s ‘time to market’ or the various automation skills which reduces the overall manual effort, the truth is traditional applications are not able to match the productivity offered by digital ones.
Why the shift to digital technologies is necessary
The need to make a shift can be clearly understood from the quarterly results of various IT companies. Infosys declared their quarterly results on last Friday. Infosys’ revenue from the core IT services fell 5% in the third quarter. And this trend is likely to continue in the coming quarters.
Clients have also decided to cut short or compress their spends on the core competencies and invest more into new digital technologies. Another challenge the IT sector is facing is from the start ups. Most of the startups are working on newer skills like Artificial Intelligence, Big Data, Agile and Machine Learning. Hence it becomes duly important for these companies to accelerate their spends on digital transformation.
“The portfolio consolidation is coming to an end, leaving the compression to drive negative growth. We expect this to continue and to accelerate, hence we would expect the 5% compression to expand over time and may even hit as much as 15% in a few years,” said Peter Bendor-Samuel, CEO of IT advisory firm Everest Research.
However is also being observed that the reduced growth in core sector can be compensated against the growth in digital sector. Taking Infosys for example, their core revenue in third quarter stood at $1.9 billion which is 5% down compared to same period last year but their digital revenue stood at $1.3 billion, a growth of 41% compared to same quarter previous year. Digital revenue of Infosys contributes 40% to overall revenue. This is due to the increased focus on digital technologies. The decline in core sector comes mainly in banking and retail domains.
“Although the industry is seeing a gradual decline in core revenue, complex design and build work to transform core IT systems is growing at a healthy 6%”, said Phil Fersht, chief executive, HfS Research.
Another challenge in the coming months would be due to the United States elections. The results of the elections would certainly impact the spending during the fourth quarter of current year and first quarter of next year.