IT's all about Trump, protectionism, digitisation in 2017

Already battling headwinds of a slowing growth, the USD 150-billion Indian IT industry is staring at arguably its biggest uncertainty in recent times after Donald Trump was elected as President of the US, which accounts for around 60 per cent of its export earnings.
While artificial intelligence, digital and automation are the buzzwords this year, worrylines have started to emerge on "creeping" protectionism and negative sentiment in key markets.
IT companies, however, can take comfort from the fact that global technology spend is expected to grow 3 per cent in 2017 after sliding 0.3 per cent in 2016 and long-term targets of the industry of grossing USD 225 billion by 2020 and USD 350 billion by 2025 remain intact, at least for now.

"For 2017, the big concern areas include protectionism and anti-globalisation creeping into markets like the US, the UK and the rest of Europe, Singapore and Australia. Second, the need to update skill base we have in India and rising need for digital and consulting skills, and third, the policy initiatives like GST which can impact the industry," said R Chandrashekhar, President of software association Nasscom.
Trump, who is due to take over as the 45th US President next month, is known for his hardline stance on protectionism and anti-immigration.
While the industry has tried putting on a brave front, there are underlying concerns about tightening of visa norms that will push up the cost of doing business.

Flagging the issue of protectionism and negative sentiment around skilled worker movement in the US, Chandrashekhar argues that corporate America also needs technology services, given the shortage of science, technology, engineering and mathematics (STEM) skills.

"The issue is as much about what is good for the US economy. The fact is that according to US' own statistics, over one million IT-related jobs will remain unfilled in 2018... So, reality has to be kept in mind before steps are taken," he said.
Indian players like TCS and Infosys are heavily dependent on the US market.
The other big market -- the UK -- also did not bring much good news for the sector this year, with the country announcing its separation from the EU.

While companies as well as industry body Nasscom said there may be short-term impact on contracts, Britain exiting from the UK holds opportunities for India over a longer term.
The IT industry, which has been a poster boy for Indian exports sector, has been battling factors like fluctuating currency and rising visa costs over the past many years.
This year, hurt by Brexit (Britain's exit) coupled with
global macroeconomic uncertainties, companies like Infosys and Wipro had to slash their growth forecast for the year. Nasscom, too, was forced to revise downwards the industry's export revenue growth guidance of 10-12 per cent for 2016-17 to 8-10 per cent.

According to analysts, Indian IT companies are ramping up local hiring in international markets to comply with regulations, which may impact margins.
However, companies are also investing significantly in artificial intelligence and machine learning to automate workflows for managing costs. This will also play an important role in reaching the USD 350 billion target.
2016 was also a big one for acquisitions. Be it Verizon acquiring Yahoo for USD 4.83 billion or Microsoft's buyout of LinkedIn for USD 26.2 billion, the technology world was buzzing with activity.
Indian companies were not far behind. Wipro acquired Appirio for USD 500 million while HCL Technologies announced the merger of smaller rival Geometric for USD 200 million.

Infosys invested in a number of startups like UNSILO, TidalScale, Cloudyn and ideaForge that work in areas ranging from artificial intelligence to drone.
"Developing the local market into a technology-consuming one will be a key challenge. India has made a brand for its software industry globally. We, however, are yet to be known as technology-consuming country," said Cyient founder and Executive Chairman B V R Mohan Reddy.
"Technology can play a vital role for a country like India where we can solve problems of providing access to essential services like healthcare, education, skill development and the like. Technology can be social equaliser."

Another area that was in spotlight was security. October saw the Indian banking sector witnessing the biggest-ever security breach with 32 lakh debit cards of various public and private banks being feared to have been compromised by cyber malware attack in some ATM systems.
Already, the IT ministry is on a war footing to further strengthen laws governing the digital ecosystem and is looking to review the Information Technology Act. The ministry has also informed banks that any "unusual cyber movement" should be immediately reported to CERT-In, the cyber emergency response team. Further, a technical solution in the form of 'Botnet centre' has also been created to bolster security.

The need for stronger cyber security measures is likely to become more pronounced in 2017, given the push for digital transactions in the aftermath of demonetisation.
"We expect Block chain technologies to see wider adoption in 2017. The demand is largely fuelled by increasing cyber security concerns among financial services customers," HCL Technologies CTO Kalyan Kumar said.
With India being a hub of growing smartphone penetration and now the spike in digital payments post demonetisation, it is imperative that a robust cyber security product and service industry is built in the country, say experts.
In all, countering protectionism that is creeping in different geographies, supporting government initiatives like Digital India and Skill India, and strengthening footprint in newer markets like Japan, China, Africa and Nordics will be some of the focus for the industry as well as Nasscom in 2017.

That said, much will depend on how things shape up in the US in particular with regard to outsourcing policies of the new Trump administration. Like the rest of the world, the Indian industry too will watch out for clues to that billion dollar question.