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IT Industry Disruption

Waves of disruption have been changing the way people do business, causing large-scale lay-offs, restructuring and a paradigm shift in customer reach.

Ironically, the disruption caused by new technology has probably affected the IT vertical the most. We hear of extensive lay-offs by industry giants like IBM and TCS, who realized the need to keep pace with a rapidly changing services landscape. If reports are to be believed, IBM could be laying off 5000 employees in India alone, iGate may divest itself of up to 10% of its workforce, and Syntel about 3000 employees in the country.

What is causing this major reengineering amongst the big guys at tech? Just last year Cisco laid off around 6000 Indian employees. A quote from a spokesperson: “Technology disruption has never moved more quickly, requiring all companies to adapt and accelerate through change. We are taking action now to build for the future of cloud, security, vitalization, analytics, data center, IoE and collaboration.”

Labour arbitrage (read, TCS) and infrastructure services (IBM) are being circumvented by new age technology like cloud computing. That is what the customers are demanding and expect – IoT, mobile technology, cloud, robotics and more. Even data service giants like HP have been affected by cloud computing and mobile technology.

Industry leader Sarv Sarvanan (GM & VP COE APAC & JP, EMC) has a very pithy take on the current wave of disruption and how it is affecting the Indian IT vertical. He says that we are in the midst of a huge transition. “Disruption is coming from different directions. Start-ups are disrupting core areas of our business...Disruption is through business models like Amazon and Google.” Amazon has become the biggest provider of cloud infrastructure as they did not have the legacy tech that holds traditional companies back as they try to adapt.

IT Industry Disruption

For a country like India, disruption could actually throw up more opportunities as we have the skillsets that are required for the new age channels. Be it engineers or IT experts, Indian freshers have the know-how that can help a legacy organization revamp its Product portfolio, or enable a startup that is completely based on an innovative disruptive technology. Companies like GoIbibo or Uber simply restructured their services, leveraging disruptive channels to reach the customer directly.

Bangalore alone, the Startup Capital of India, witnesses multiple new entrepreneurial efforts daily that attempt to benefit from the new technologies, mobile offerings and on the Cloud services. Innovative products and services are being created to ride the technology trend.

This effort can be enabled only with renewed thinking and leadership, to help close the huge performance gaps caused by the disruption. Saravanan cautions that, “In the picture that I painted and a skill gap – if you don’t address that then it becomes as opportunity gap. As a country, are we prepared?”

Indeed, we should take a cue from TCS and IBM, and ramp up our talent in the new age technology skill sets. It may be worthwhile to still hold on to the technology legacies, where growth may be slower but still relevant, while companies ramp up on the new digital services that customers have come to expect.

As an official from Nasscom says, "You also have to understand that even as IT is disrupting other industries, the IT industry is also getting disrupted. So companies have to adjust and adapt to conditions and changing technology trends."

Funding the Transformation

For traditional organizations, this shift to newer technologies brings with it a sizeable cost. The solution to this could be within the existing portfolio itself. Streamlining the organization for more efficiencies could generate additional revenue, which could then be utilized to build up an alternate channel based on disruptive methods; the focus being on growth, skilled talent and innovative offerings.

Disruption ensures that it gives customers direct access to a product or service without intermediary channels. Once this direct innovative route is successful, then it quickly replaces conventional players.

The only way in which Indian companies can stay ahead of this game is to ensure that it is adequately skilled in the new technologies, regardless of the vertical, and employs foresight in how these technologies will affect their product or service market in the coming decades.

An interesting projection is Mc Kinsey’s report, ‘Disruptive Technologies: Advances that will transform life, business, and the global economy.’ It lists 12 technologies that could have a combined effect of $14 trillion to $33 trillion in 2025.

A slice of that pie would not be too bad for a progressive India, isn’t it?