Indian IT targets Arabian Gulf
MUMBAI // Bangalore is buzzing with activity; billboards for new luxury apartments are visible across the city, the roads are constantly lined with traffic, and well-educated workers flock to the city’s modern offices.
All this has been driven by the booming IT sector, which has made it the industry hub.
But the picture is not as rosy as it appears. India’s IT sector is facing a challenging environment, amid slow growth in the West, the United Kingdom’s vote to exit the European Union, restrictions on and higher costs of visas for the United States, competition from other Asian countries and venture capital drying up for start-ups.
As the US and the UK face slow growth – markets that have been driven by outsourcing of IT service to Indian companies that provide skilled workers at competitive costs – IT firms are looking to the Arabian Gulf as an increasingly important area of focus to generate business.
“The IT sector is currently having a cautious outlook,” says Srividya Kannan, the founder and director of Avaali Solutions, headquartered in Bangalore. “Margins continue to stay under pressure due to headwinds from rupee depreciation, wages and visa fee rises and further pricing pressures.”
Amid all of this, the Arabian Gulf is becoming increasingly important to firms such as Avaali.
“This market is very important for the Indian IT sector and we cannot afford to ignore it,” says Ms Kannan. “The countries here are still the geographical centre to some of the hottest developing markets. As far as Avaali’s plans go, we’re certainly planning to strengthen our operations in this market as we believe that our solutions are now more relevant than ever for enterprises in this market, to enable margin improvements and improve governance.”
Others say they have similar plans.
“The Arabian Gulf is going to be an important market for the Indian IT sector as the Middle East is one of the world’s fastest-growing markets in the banking, financial services and insurance space,” says Gautam Ramanujan, the chief commercial officer of Infiniti Software Solutions, based in Chennai. “The region’s financial services sector is in the process of significant change and this would bring tremendous opportunity for the Indian IT sector. We have been aggressively targeting the Middle East market for the past few quarters and we have been able to build a very healthy pipeline of prospective customers in the region.”
India has a distinct advantage because of its geographical proximity to the market and Infiniti has plans to double its customer base in the region over the next two quarters, he says.
The web solutions company Websters – which is part of SoftAge, a technology company based in Gurgaon, north India – already has a presence in the UAE and now wants to expand across the region, says its co-founder Sheraz Saeed.
“We plan to put more effort into Oman, Saudi Arabia and Qatar markets,” he says.
Bertrand Yella, the managing director of IBEE Hosting, a web-hosting solutions company headquartered in Hyderabad, says his company also has expansion plans for the Gulf for new servers that it has recently launched.
Its customers globally are demanding better and better technology, while expecting costs to be competitive, which is challenging for Indian IT firms, he says.
Brexit has turned this into “a phase of uncertainty”, Mr Yella adds.
Infosys, the Indian IT major, this month lost a US$300 million contract with Royal Bank of Scotland, which has been linked to the Brexit issue.
“The immediate impact is of course the decline in the value of the British pound and its consequent impact to the existing contracts, which would need to be negotiated again,” says Ms Kannan. “Also the decisions relating to large projects may get delayed resulting in unpredictability on the revenue front.
“There are also people issues that IT companies will need to take care of, given that London can no longer be the central hub for easy people movement across the EU.”
Mr Ramanujan says there is a shift in India’s IT industry and companies are taking a long, hard look at their business strategies.
“There are some near-term concerns as the traditional business model is undergoing a significant change,” says Mr Ramanujan. “Some of the largest Indian IT companies are digging deep into their pockets to go out on an acquisition spree, to buy companies that help with automation. To build their own portfolio of products, companies like Infosys, TCS and Wipro are aggressively scouting for companies to acquire.”
Hiring has slowed, as headwinds eat into companies’ revenues.
“Recruitment in the IT industry has seen a significant slowdown in 2016,” says Ajay Kolla, the founder and chief executive of Wisdomjobs.com, a jobs portal in India. “Job creation in the industry has fallen significantly, by about 10 per cent, as compared to the past year.
“While there haven’t been any large scale layoffs yet in the Indian IT sector, the decision of several top IT companies to delink revenue and headcount has resulted in stagnant hiring. With companies emphasising the implementation of new technologies to automate several processes – and consequently cutting down on bench strength – hiring at the entry level has taken a big hit.”
Mr Kolla says he has noticed a change in the type of skills companies in the sector are demanding.
“The focus this year has shifted to hiring those with experience in new technologies such as artificial intelligence and cloud computing from the traditional practice of volume-hiring freshers.”
Nikhilesh Tiwari, the cofounder of Helical Insight, a business intelligence framework developed by Helical IT Solutions, says his company is striving to keep up with changing technologies to remain competitive and ahead of the curve.
“With the coming of new technologies like artificial intelligence and machine learning, we are seeing more and more automation in repetitive tasks like that of data entry, BPO [business-process outsourcing],” he says, adding that the firm has plans to target the Middle East for business.
“We are seeing more and more chatbots taking the work of chat agents. With Helical Insight we are trying to bring the same kind of automation in business intelligence by integrating artificial intelligence and machine learning inside business intelligence and data analysis. Indian IT companies are slowly trying to diversify their geographical portfolio and thus hedge the risks, and the Saudi market is one of them.”
But experts say, despite hurdles that the IT sector in India is facing, there is still scope for the industry to grow for those companies that manage to keep up with shifting demands from customers and continue to grow their markets.
“There is infinite room for us to grow,” says Ambarish Gupta, the chief executive and founder of Knowlarity Communications, a cloud telephony company which has a presence in Dubai. “Cloud telephony is massively underserved.”
Mr Ramanujan says that “overall in the long run the potential of the Indian IT sector is huge. The world will always look at India for its offshore development efforts as long as the Indian IT sector focuses on continuous improvement in service quality as well as keeping the costs low”.
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