Budget digitisation initiatives could lead to $10.7 billion spent on technology services

Budget digitisation initiatives could lead to $10.7 billion spent on technology services

 

According to Gartner India, the budget’s suggestions on digitisation and technology reform could result in a multibillion-dollar opportunity for India’s prominent IT services providers like TCS, Infosys, Wipro, and Tech Mahindra.

According to the technology forecaster, the government might spend more than $10 billion on technological solutions in IT, data centres, platforms, software, and telecom.

According to the report, around half of the money will go for IT services and software. TCS is expected to lead the charge in digitisation and technology overhaul projects, whereas Tech Mahindra may do so in telecom and 5G options.

According to UnearthInsight’s analysis, federal government tenders in emergent categories like logistics, agriculture, and health-tech may go to smaller domain-specific corporations and startups, corroborating Gartner’s forecasts.

According to Apeksha Kaushik, principal analyst at Gartner Research, government initiatives such as establishing 75 digital banks in 75 districts and using excellent metres to provide fair access to utilities are moving the country closer to digital inclusion in service delivery.

“Digital government presents potential to improve existing citizen services while also transforming how government value is assessed and delivered,” she said.

Government investment in technology was $9.6 billion in 2021. According to Gartner, this is expected to grow 11.6 per cent to $10.7 billion by 2022. Around $5.5 billion might be spent on software and information technology services.

“As mobile became the major mode of service delivery, businesses turned to digital to stay afloat.” According to Kaushik, India is becoming a lucrative (technology spender) among emerging countries, thanks to a rapidly rising technology industry and initiatives like Make in India and production-linked incentive schemes.

According to Gartner, Indian public sector efforts currently generate around $2.4 billion in revenue for the IT sector.

While this is a small portion of the $195 billion Indian IT-BPM market, it has risen rapidly over the last five years, according to Gaurav Vasu, founder of UnearthInsight.

According to Vasu, the federal government’s IT spending has increased at an annual rate of 8-10 per cent during the last five years, compared to roughly 2-3 per cent previously.

“Based on the digitalisation plans outlined, the public sector (including the Navratna PSUs) has a potential income opportunity of $4-$5 billion for IT services,” he said.

The pricing range has proposed several digital projects, ranging from high-tech services for farmers to land data digitalisation and agricultural drones and an ecosystem for locals to upskill for digital jobs and digital colleges.

It has also launched an open ecosystem for health, digital passports, and measures to establish 75 digital banking models, launch a digital currency, digitise state and central level processes through single-point entry IT bridges, and launch an e-bill system for suppliers to submit paperless payments to central ministries. Furthermore, it intends to tax digital assets, requiring extensive technical intervention.

These significant steps will help Indian IT firms increase revenue from the domestic market, which has remained in the low single digits.

For example, TCS, which has been aggressive in the home market, will receive 5.5 per cent of its $25 billion annual revenue from the home market but has gained 15% year over year as of the third quarter.

This is roughly 3% for Infosys, but it has increased by 40% year over year as the third quarter. While HCL Tech does not disclose its India business breakdown, it gets 8% of its revenue from regions outside the Americas and Europe.

HCL Tech has indicated in the past that it does not focus on public sector offers in India, even though it works with various domestic and international prospects from India.

With technology supporting many significant growth endeavours, corporations’ approaches to the Indian market may shift.

 

Cognizant India’s chairman and managing director, Rajesh Nambiar, told ET that the Indian market is one that the company is paying close attention to. He claimed that the company has “huge intentions” for India and may wish to exploit opportunities.

He remarked, “We do have a booming home business.” “It’s little, but it’s still solid, and it’s done well in the last few quarters.” As a result, I’m optimistic about that aspect of our firm. It’s a pleasure to serve Indian customers, and we’ve continued to do so. We can’t overlook that when we look at the budget and then the country’s expected economic development.”

While traditional IT companies may lead large digitisation projects due to their experience working with government tenders, smaller players may be tapped by the federal government, according to Vasu of UnearthInsight.

“We feel they could reach out to mid-to small-sized health technology firms and healthcare startups in areas like healthcare, logistics, and agriculture, and also partner with companies through the Nasscom centre of excellence,” he said.

TCS has a long history of providing state governments enterprise resource planning (ERP) solutions through both products and platforms. Vasu asserted that it would benefit from broader digitalisation measures.

He added that TCS benefits from having CMC (a former government-owned IT services provider) under its belt in programmes that involve technological overhaul and file digitisation, such as the Indian Railways and Passport Seva initiatives.

The second phase of the Rs 8,000 crore Passport Seva challenge was recently awarded TCS.

TCS may fulfil the Ministry of External Affairs’ contract for supplying digital passports, which was announced in the Budget and is worth over Rs 1,200 crore.

Companies like Tech Mahindra and KPIT have a strong telecom track record and benefit from 5G projects.

TCS Quartz and Infosys’ India Trade Connect are among the blockchain options expected to compete for the central bank’s digital currency option.

Budget 2022 suggested plans for the Reserve Bank of India to issue a Digital Rupee in 2022-23, “using blockchain and other technologies,” leaving the sector open for IT service partners.

“We believe that India will be a platform-driven market, where everyone is habituated to a platform, whether it’s consumers, institutions, or corporations,” said N Ganapathy Subramaniam, TCS’s chief working officer, during the company’s third-quarter results released in January. “They’re pursuing digital in a significant way, and they’re big consumers of digital platforms.”

TCS is positioning itself to provide apps and platforms that integrate with India’s digital stack and provide solutions to government, business, and even B2C customers.

It might also invest in banking platforms and APIs for microservices integrated into the India digital stack.

The India stack refers to a collection of APIs that allow Indian governments and businesses to provide digital services to their citizens.

 

Information technology in India

 

Information technology services, consulting, and outsourcing is part of India’s huge information technology industry. In 2020, the IT industry will contribute 8% of India’s GDP. The revenue of the IT and BPM business is expected to reach US$194 billion in FY 2021, up 2.3 per cent year on year. In FY 2021, the IT industry is expected to generate US$45 billion in domestic sales and US$150 billion in export income. As of March 2021, the IT-BPM sector employs 4.5 million workers.

Employee attrition is highest in the Indian IT-BPM business. In recent years, the business has seen a surge in resignations from all levels of the organisation. The Indian IT industry is notorious for abusing cheap labour as a worldwide outsourcing powerhouse. As the IT-BPM sector evolves, many people are concerned that artificial intelligence (AI) will drive major automation and job loss in the future years. Two-thirds of India’s IT services exports are to the United States.

 

History

India’s IT services business began in Mumbai in 1967 with the founding of Tata Consultancy Services, which collaborated with Burroughs in 1977 to launch India’s IT services export. SEEPZ, the first software export zone and forerunner of today’s IT parks was founded in Mumbai in 1973. In the 1980s, SEEPZ accounted for more than 80% of the country’s software exports.

The Task Force published a thorough background report on the condition of technology in India and an IT Action Plan with 108 recommendations within 90 days of its formation. Because it drew on the expertise and grievances of state governments, federal agencies, universities, and the software sector, the Task Force was able to rush. Much of what it advocated was also in line with international organisations like the World Trade Organization (WTO), the International Telecommunication Union (ITU), and the World Bank.

In addition, the Task Force took into account Singapore’s and other countries’ experiences with similar schemes. It wasn’t so much a matter of coming up with something new as it was a matter of enacting a consensus that had already formed among the networking community and government.

When it launched in 1999, TIDEL Park in Chennai was Asia’s largest IT park.

VSAT lines that were regulated first appeared in 1994. Desai (2006) outlines the actions made in 1991 to reduce connecting regulations:

In 1991, the Department of Electronics overcame the deadlock by forming Software Technology Parks of India (STPI). This government-owned company could provide VSAT communications without infringing on the government’s monopoly. STPI established software technology parks in various cities, each offering enterprises satellite access; the local link was a wireless radio link. The government began allowing individual enterprises to have their dedicated links in 1993, allowing work done in India to be directly transferred outside. Indian companies quickly persuaded their American clients that a satellite connection was as reliable as a team of programmers in the client’s office.

On November 23, 2001, a group of experts from the EU and India was founded to encourage joint study and development. India and the European Union committed to bilateral research and technology cooperation on June 25, 2002. India has been the Associate Member State of CERN since 2017, and a joint India-EU Software Education and Development Center will open in Bangalore in 2017.

 

Contemporary situation

India is the world’s greatest exporter of information technology. The Indian IT business is dominated by exports, which account for roughly 79 per cent of overall income. On the other hand, the local market is large, with solid revenue growth. 

The industry’s contribution to overall Indian exports (goods and services) has climbed from less than 4% in FY1998 to around 25% in FY2012. According to Sharma, India’s technologically advanced services industry accounted for 40% of the country’s GDP and 30% of export revenues in 2006, despite employing just 25% of the workforce (2006). Tata Consultancy Services, Infosys, Wipro, Tech Mahindra, and HCL Technologies are the “Top Five Indian IT Services Providers,” according to Gartner.

 

 

Major information technology hubs

 

 

Bangalore

 

Bangalore is India’s largest technological hub and a worldwide technology hub. Bangalore employed 10 lakh, people directly and another 30 lakh indirectly in fiscal 2016–17, accounting for 38 per cent of India’s total IT exports worth $45 billion. The city is recognised as India’s “Silicon Valley.” Electronic City, ITPL, Bagmane Tech Park, Embassy Golf Links, Manyata Tech Park, Global Village Tech Park, and Embassy TechVillage are notable tech parks. Apart from them, IT companies can be found in various locations throughout the city. Infosys, Wipro, HCL Technologies, SAP Labs, Accenture, TCS, Oracle, IBM India, Sonata Software, Mindtree, and Intuit India are some of the area’s notable IT companies.

Bangalore is also renowned as India’s “startup capital,” with 44 per cent of all Indian unicorn startup businesses based there as of 2020.

 

Hyderabad

 

Hyderabad, often known as Cyberabad or HITEC City, is India’s second-largest information technology exporter and a major global IT centre and the country’s largest bioinformatics hub. Hyderabad has surpassed Chennai and Pune as the second-largest city in the country for software exports. Accenture, Amazon, Deloitte, Tata Consultancy Services, Microsoft, HCL Technologies, Oracle Corporation, Google, Qualcomm, Dell, and Cognizant are just a few of the notable tech giants.

Hyderabad’s IT exports are expected to reach 128,807 crores (US$15 billion) by 2020, and the city is home to 1500 IT and ITES enterprises that employ 582,126 people. HITEC City, Genome Valley, and Hyderabad Pharma City are notable tech and pharma parks.

 

Chennai

 

After Bangalore and Hyderabad, Chennai is India’s third-largest exporter of information technology (IT) and business process outsourcing (BPO) services as of 2018. When TIDEL Park in Chennai was developed, it was advertised as Asia’s largest IT park. International Tech Park, DLF Cybercity SEZ, Mahindra World City, SIPCOT IT Park, Olympia Tech Park, One Indiabulls Park, L&T Estancia IT SEZ, Ramanujan IT City, and Chennai One SEZ are some of the notable tech parks in the city.

The city has an expressway known as the IT expressways, a popular location for IT companies. Tata Consultancy Services, Infosys, Zoho, Capgemini, Amazon, Mindtree, Cognizant, Accenture, UST Global, BirlaSoft, HCL Technologies, and Comcast all have offices in Chennai, with some of them making it their primary location.

 

Pune

 

The Maharashtra Industrial Development Corporation’s Rajiv Gandhi Infotech Park in Hinjawadi is a 60,000 crore (US$8.9 billion) project (MIDC). The IT Park covers around 2,800 acres (11 km2) and is home to more than 800 IT enterprises of various sizes.

Apart from Hinjawadi, IT firms may be found in Magarpatta city, Kharadi, Kalyani Nagar, Yerawada, Aundh, and other city areas. TCS, Wipro, Infosys, Cognizant, Tech Mahindra, Cybage, Zensar technologies, Amdocs, Capgemini, Sungard, HCL Technologies, Persistent technology, and other major IT businesses have offices in Pune. The IT industry employs over 500,000 individuals as of 2019.

 

Delhi NCR

 

Delhi NCR is one of India’s key IT hubs. Several enterprises serving local and worldwide markets rely on these IT hubs in NCR cities like Gurgaon and Noida.

 

How India’s Growth Opportunities Are Being Digitised in Budget 2022

 

By constructing a digital economy and a thriving FinTech ecosystem, the Union Budget 2022 has achieved a fine balance between macro-growth and all-inclusive welfare. It features several exciting projects that will aid prospective entrepreneurs, FinTechs, and the startup ecosystem as a whole in succeeding. 

To begin with, a thriving digital economy demands a robust digital infrastructure. Data centres and Energy Storage Systems, including dense charging infrastructure and grid-scale battery systems, were proposed by the Finance Minister to be included in the harmonised infrastructure list. This will make credit for digital infrastructure and clean energy storage more accessible.

The digital payments industry has also gotten a big boost from the budget. More people will use digital payments due to the decision to preserve financial support for the ecosystem from previous years. Digital payments are also user-friendly and cost-effective, according to the government.

This is highly motivating. Making digital banking available to people all around the country by establishing 75 digital banking facilities in 75 districts is great and exemplifies the government’s forward-thinking attitude. Adoption will be aided, as well as financial inclusion. This necessitates more collaboration between traditional banks and FinTechs. Connecting post offices to the banking system might be a game-changer, opening up many new possibilities.

The proposed launch of the Central Bank Digital Currency (CBDC) or Digital Rupee by RBI, which will commence in FY 2022-2023, reaffirms the government’s long-term vision and emphasis on futuristic technologies. This will improve currency management efficiency and cost-effectiveness while expanding the number of options available. However, the industry is currently waiting for more information on CBDC.

The government’s declaration that existing tax benefits for startups will be extended for another year until March 31, 2023, is an important announcement that will make the business environment for entrepreneurs even more hospitable. Furthermore, long-term capital gains from asset transfers will be capped at 15%, encouraging long-term investments in startup shares. With suggestions like allocating Rs 283.5 crore for the Startup India Seed Fund Scheme in the budget, the government’s trust in this industry is evident. By creating an enabling environment, these initiatives will encourage entrepreneurship and innovation. The government’s commitment to Atma Nirbhar Bharat is also reaffirmed.

Being a unicorn hub, India is only behind the United States and China. According to the NASSCOM-Zinnov report, 42 unicorns were born in 2021, breaking the previous record of the most unicorns born in a single year. The FM’s announcement of forming an expert group to advise on necessary measures to scale up the industry further is a positive move in this direction.

 

A Better View of Technology Spending Improves Business Outcomes

 

Know where your money is going in terms of technology…

It seems simple enough: complete openness over IT spending will boost corporate results. However, for many businesses, this is a continuing problem preventing them from attaining their desired business outcomes from digital technology expenditures.

According to Bain and Company, a worldwide management consulting organisation, full transparency is vital for digital success and can lower run expenses by 10%.

“Many businesses struggle to determine whether or not the investment is worthwhile.”

In 2019, the organisation discovered that just 8% of companies were receiving their money’s worth from digital technology investments to attain their desired business goals. Over 90%, on the other hand, had failed to realise the potential of a technology-enabled company strategy.

According to Darren Johnson and Vishy Padmanabhan’s recent paper, A Better View of Technology Spending Improves Business Outcomes; the successful 8% have one thing in common: they’re 3.5 times more likely than the rest to believe they have full transparency over IT spending.

“In these companies, technology investment data is available in real-time (not on a PowerPoint slide from last month) and in tailored perspectives that deliver the right data to each stakeholder, whether they are in finance, technology, or business activities,” Johnson and Padmanabhan write.

However, gaining visibility is complex, and maintaining visibility over time is even more difficult, according to the duo.

“Many firms struggle to gain a clear view of where the money is going, how it changes over time, and whether the investment is worth it since the technology budget is distributed over numerous departments and business units.” Despite this, the technology expenditure climbs every year.”

When you add in the fact that most business and finance executives are unable to ‘completely decipher’ spending data and link it to the products and services they oversee, ‘the promise of openness is only partially achieved.’

 

edited and proofread by nikita sharma