Why Companies Should Develop Offerings Along New Digital Lines

India’s technology and business service providers are at the cusp of a significant opportunity as digital technologies get embedded in a widening range of products and services. The global and domestic market presents a huge opportunity for companies that can build expertise in these new technologies and deliver value through them. Moving to capture this digital opportunity, the Indian technology and services industry is on track to reach its goal of $200 billion to $225 billion in revenues by 2020 and furthermore, to reach revenues of $350 billion by 2025, says a report by NASSCOM and McKinsey & Company. The big implications for companies are:

  • The need to develop new service lines. New service lines will account for 40% of all revenues by 2025
  • Shifting portfolios to advanced, disruptive technologies
  • Managing customer digitization at different speeds. Companies will need to cater to customers who are Digital leaders, Smart followers as well as the Digital laggards
  • Re-skilling of people as revenues decouple from headcount
  • Forging new capabilities through M&A, partnerships, incubators and open innovation
Probably the most pressing need is for companies to develop offerings along new digital service lines, even as they re-invent their traditional service lines. Noshir Kaka, Managing Director, McKinsey & Company, India said, “Companies hoping to prosper in the new environment will have to closely watch six new service lines- including the Internet of Things, Cybersecurity, Social, Mobility, Analytics and Cloud.” As the industry grows over the next decade, its mix of technologies and demands will change significantly. Over all, the share of digital technology investment in cumulative expenditures will rise from 10 per cent in 2014 to 35 per cent in 2020 and 60 per cent in 2025. About 80 per cent of incremental expenditures will be driven by digital technologies. These could be platforms, cloud-based applications, big data analytics, mobile systems, social media, and cybersecurity, as well as services needed to integrate these technologies with legacy tech. Half of this incremental investment will be funded by a projected 20 to 25 per cent cut in legacy expenditures. These reductions will be largely in spends on infrastructure, traditional application development and packaged software. Over the next decade, five disruptive forces will shake the global economy and touch all aspects of society. These forces will create a world that is more interconnected, more interactive, and more aware, while at the same time one that is trying to harness and protect the same set of finite resources. The report outlines some key steps that need to be taken.
  • Foster Innovation clusters: that will fund research in key emerging technologies and linked to technology institutes.
  • Build Capabilities: Design, develop and rollout a massive reskilling program to train and reskill 4-5 million people.
  • Entrepreneurship: Turbo-charge the startup economy and government’s ongoing Startup India program.
  • Branding: Undertake a branding and public relations exercise, media campaign to reposition India as a global Digital Innovation Hub, moving ahead from its current pole position of low cost and efficiency leader.
  • Regulatory: To support the development of India as a centre for digital innovation, new regulations should help create a domestic market, protect intellectual property, strengthen cyber-security laws and ease the creation of public-private partnerships in education.


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