IT’S become increasingly tough for tech companies in India. Before the end of the year, we reported that e-commerce and transport unicorns Flipkart and Ola were struggling to fundraise at high valuations and stay afloat in the face of foreign competitors.
The latest on this from Bloomberg is that the leaders of Infosys and Wipro, two of India’s top IT services firms, have alerted its staff to an uncertain future due to global political and economic conflict.
While Infosys’ CEO Vishal Sikka said that “employees need to innovate and bring out their best to survive” in a year-end note, Wipro’s chairman Azim Premji said that political and social developments could pose a threat to IT services.
“At a time when the world around us seems ever more influenced by the baser instincts and tendencies, we must bring the best of our intentions, and the best of our imagination, our knowledge and our conviction, to all that we do,” wrote Sikka in his memo.
“These questions have arisen from developments in the political arena, from the fast-unfolding environmental crisis and from forces that want to shape the world into a place of exclusion, conflict and suspicion,” said Premji.
IT services firms in India are struggling because it’s an industry that relies heavily on globalization trends and the outsourcing and staffing needs of corporations from around the world.
This won't stop with low-tech, low-skill heavy industry. "Google wants to open a data center in India! REVENGE WILL BE HAD!" https://t.co/BMCHj4aXaP
— Rick Wilson (@TheRickWilson) December 4, 2016
Case in point, Tata Consultancy Services, has had business affected by the macroeconomic swings of Britain and the US — two huge markets that make up for 80% of India’s $108 billion IT services industry revenues. While Brexit creates future uncertainty for IT services export spending from the UK, President-elect Trump being adamant on keeping jobs within the US could slow down the market for overseas workers.
Besides global political and social instability, technology itself is another huge threat to India’s IT services industry as it is now easier for overseas firms to automate simple IT tasks instead of outsourcing it. As reported by the Financial Times, the industry’s financial model is under stress and IT services firms will have to take tech advances in stride if they want to stay afloat.