IT sector to touch $350 bn in revenues by 2025

Nasscom report says sector to grow between 10-11% in next 10 years

Nasscom, apex body for the information technology sector, said the segment would nearly triple its annual revenue to $350 billion by 2025. A report issued on Monday by Nasscom and McKinsey, titled 'Perspective 2025: Shaping the digital revolution', said the sector was "well on track" to grow from $132 bn in FY15 to $225 bn by 2020 and $350 bn by 2025. Of the $350 bn, exports are expected to account for about $280 bn.

But this growth would depend on a number of actions by the firms in this space, including making a significant investment in building the digital business and creating new service catalogue, pursuing an active merger and acquisition strategy.

"There is a continued progression of double-digit growth, despite expansion of base. But, below the calm waters, there is a lot of churn happening as well and firms will have to do a lot of things to address the challenges," Nasscom President R Chandrashekhar said.

It has said the range of products and services requiring enabling of IT is widening. "The industry is expected to grow at over 11 per cent (annually). About 1.2-2 million people will be added with the next $100 bn revenue."

Chandrashekhar added the sector faced various obstacles, geopolitical to regulatory. Also, there was a need for innovation and 'disruption'.

The sector today employs around three million people directly.

The total addressable market for global technology and business services is likely to expand to about $4 trillion by 2025, said the report.

The global and domestic market presents a huge opportunity for companies that can build expertise in these technologies and deliver value through these.

"The technology and services industry in India has become a transformational partner for its customers. The report identifies innovative and disruptive technologies that will shape the enterprise of the future," said B V R Mohan Reddy, chairman of Nasscom.

He said taxation issued and difficulties around starting and exiting of businesses are major problems the sector is facing. "We are engaging with the government to suggest how it can be made easy for entrepreneurs to start a business. We are looking at rebranding Nasscom and the role we play to reflect the changes in the environment."

Noshir Kaka, managing director in India of McKinsey, said IT companies trying to prosper in this day and age will have to work in six new areas - the internet of things, cyber security, social, mobility, analytics and cloud.

"Probably the most pressing need is for companies to develop offerings, along with new digital service lines, even as they re-invent their traditional ones," he said. "The focus on Digital India, Skills India and other such initiatives will drive consumption in India."
KEY TAKEAWAYS

• Overall enterprise spending on tech & business services will increase from $2.8 lakh crore in 2014 to $4 lakh crore in 2025
• Enterprise spending on legacy areas is likely to decline by 15-25% over the next five years
• Share of digital technologies will increase to 35% by 2020 and 60% of total spend by 2025
• Sector is expected to grow at 11+% to $225+ bn in 2020 and at 10+% to $350+ bn by 2025
• Revenues of $350+ bn will likely have international revenues of $280+ bn and domestic revenues of $70+ bn
• The next $100 bn of revenues will likely add 1.2-2 mn people to the sector