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IT services industry is not immune to its customers' problems: Rishad Premji

IT services industry is not immune to its customers' problems: Rishad Premji

21 September 2020, New Delhi

India IT industry has enhanced its reputation for meeting its customers’ needs during the covid crisis, but it has not been immune to their problems, says Mr Rishad Premji, Chairman, Wipro.

Speaking at the 47th National Management Convention of All India Management Association (AIMA), Mr Premji said that Indian IT services industry struggled in the April-June quarter because customers cut spending on technology early on in the covid crisis, but since then the industry had stabilized as customers have come back looking for help in shifting to the digital model. “There is a change in the customers’ mindset and they are becoming more comfortable with the digital medium,” he said.

Mr Premji said that the digital delivery model had opened up tremendous opportunities for Indian IT industry, especially in the area of talent sourcing. “We can crowdsource talent from anywhere in the world and provide same quality of work from anywhere,“ he said, adding “this makes talent more inclusive.”

Mr Premji credited the government for relaxing work regulations and permitting work from home. He hoped that the change would be made permanent beyond the current expiry of 31 December 2020. “The government has been very supportive of the IT industry at a very critical time,” he said.

On the risk posed by changing technologies to the IT services industry, Mr Premji said that cloud and software as service would change the industry, but there were still many large companies in the world with multiple legacy systems and they would need help in transitioning to the new technologies. Moreover, Indian IT industry would leverage new technologies, such as AI, to deliver work to its customers.

In a separate session, Mr N R Narayana Murthy said that things will remain the same for Indian IT industry as things change. According to him, India IT services companies will continue to grow at 7%-10% and their operating margin will continue to be 15%-20%. However, he argued that Indian IT companies will have to become more like consulting firms to increase their per capita revenue. “Indian IT industry has to move from reactive problem solving to proactive problem recognition and solution development,” he said.

Regarding consolidation in the Indian IT industry, Mr Narayana Murthy said that the valuation of the top 6-7 Indian IT majors was in thousands of crores and none of them had the financial resources to acquire each other. He argued that there was no point in acquiring smaller IT companies in the country as they would only dilute the large companies’ quality. He said the only reason to acquire other companies would be to multiply revenue in a weaker area of the company or an IPR or strengthening presence in a geography. He added that the acquired company must bring high margins and not just high revenues. “We must have industry leading margins,” he said.

On the sustainability of the trends of work from home and business by video, Mr Premji said that it would be wrong to discount the power of person to person dealings. “While videoconferencing does 80% of the job, it does not allow building of relationships and trust. Digital interaction is transactional,” he said.

Mr Premji said that the work from home trend will not lead to foreign customers transferring work from local remote workers to Indian remote workers. Customers still want people near them, he said.

“Now, it will be a hybrid model,” Mr Premji said, adding that reskilling people would now be a major task for Indian IT companies.