Consolidation signals high confidence in IT: Nasscom's Murugesh and Rao

With digital transformation taking place all over, it is a great time for service providers to make a mark, says Rao.

The recent consolidation in the information technology (IT) services sector is a trend that shows confidence is high in the industry, said Keshav Murugesh, the newly appointed chairman of Nasscom for the year 2019-20. Along with vice-chairman U B Pravin Rao, he spoke to Neha Alawadhi about issues facing the industry and the way forward for the coming year. Edited excerpts:
 
What is your strategy for the coming year and main focus areas?
 
Murugesh: We want to build a strong credence working as a strong partner of the government, both internal as well as external. The ability for Nasscom to focus on creating new markets and new lines of services is a third initiative.

 

Rao: With digital transformation taking place all over, it is a great time for service providers to make a mark. At the same time, the government has also set an ambitious goal of making India a digital and innovation hub. One focus area is obviously working with the government. There is a lot of talk of data protection, e-commerce and related things. So, we are ensuring it is a consultative process. While we respect and understand the criticality of data, it is important to figure out ways and means which do not hamper cross-border flow of data. Second one is from the skilling perspective. There is huge shortage of talent across the world and India has an opportunity since we have 4 million people in the industry.

 
How do you see the recent consolidation in the sector? There was Mindtree-L&T and NIIT Technologies, and there has been some consolidation in the BPM sector as well.
 
Murugesh: Consolidation for some people is a way of growth. Sometimes, founders believe it’s time to exit and leave the company in even stronger hands to build more capability for the former set of employees. The reason someone looks to buy another asset is that he or she first and foremost sees that the demand for overall services continues to be strong. That’s why someone is willing to make large commitments.

 
Rao: There is tremendous growth opportunity in the foreseeable future. The other time when you find consolidation is when an industry is seeing a slowdown,. The IT industry is far from it. So, consolidation is for a strategic reason or a company-specific issue.
 
How are you looking at the trade situation across the world, including US-China, US-India and UK, and how is it likely to impact IT services?
 
Murugesh: For the growth of any industry, IT services and BPM included, it has never been smooth. There is likely to be some constraint, which we think is a problem at the time. But it addresses itself with the help of advocacy from the industry body as well as very mature and partner-led thinking from governments. When Brexit happened, we assumed it will impact all IT companies, but at the end of the day, the industry faced a currency volatility. We face that everyday, and your business models will have to make progress irrespective of these fluctuations. The trade wars you speak about are never good for the world. But if we know it, so will all the leaders of the world. Therefore, it is our job at Nasscom to work with various governments, within India and outside of India. It is too early at this point in time to talk about any trend. We have to make sure that we are partnering the government in getting the right outcomes for the industry. IT is a very big part of India’s GDP component.

 
What is your view on the special economic zone (SEZ) sunset period? How important is that for the industry?
 
Murugesh: We, as an industry body, believe that for India to achieve the $5 trillion (GDP) number, we need exports to deliver and IT services to deliver way ahead of whatever is required. One of the requirements from the Budget is the right model of sunsetting of SEZs, which have had a very good effect on the Indian industry.
 
Rao: Anything the government does to ensure continuity of policy, forward looking schemes that help in terms of ease of doing business and higher competitive advantage for businesses should continue.