Indian technology services industry could reach $350 bn by 2025: NASSCOM

As the demand for digital transformation solutions continues to grow, the Indian technology services industry could touch $300-$350 billion in annual revenues by 2025, the National Association of Software and Services Companies (NASSCOM) said in a new report. 

India’s technology services sector continues to grow at about 10% per annum and can accelerate that growth by 2-4 percentage points, reaching up to the $350 bn mark over the next five years, according to the study, Future of Technology Services – Winning in this decade. 

Technology services industry, valued at roughly $1 trillion today, is a major driver of the global economic engine. In India, it makes up about 27% of national exports, 8% of national GDP, and is the source of livelihood for 4.4 million people.  

However, in order to achieve the said growth, the players operating in the industry would have to focus more and win on the front of emerging technologies (like AI, cloud, and cybersecurity), working closely in collaboration with other stakeholders across the private sector, NASSCOM, academia and the government. 

This is because the annual decline in global spending on traditional technologies is expected to increase from 3-4% to 8-10%. By 2025, traditional technologies would make only 40-45% of tech services’ revenues – significantly down from 70-72% today. 

“The Indian Technology services sector can utilize the potential of deep technologies like cloud, artificial intelligence, machine learning, IoT, etc., through effective transformational practices, thereby contributing to the overall economy in the coming decade,” Debjani Ghosh, President at NASSCOM, said.  

“The government needs to encourage and support digital literacy and skilling to ensure its talent, energy, imagination, knowledge, and unmatched commitment unites to address the customers' surging needs. It is equally vital for India to reach a new level of cooperation to continue the remarkable growth observed in the sector,” Ghosh added. 

Even though tech service providers have the challenging to task of increasing their revenue per employee and recruiting people with up-to-date digital skills, NASSCOM estimates that the industry will see massive transformation in the next decade.  

This will be driven by five key megatrends -- government playing a more significant role in digital services, increased investment and innovation, the rise of regional power centers dominated by local players, changing future of work, and direct-to-stakeholder business channels. 

Over the next decade, the report said, overall technology spending will continue to increase, given the rise in tech-enabled business models and the demand for Digital 2.0 accelerated by the industrialization of Cloud, AI and cybersecurity. Technology natives and digital reinventor, which will account for about 60% of the world’s largest companies by 2030, are expected to contribute about 75% of enterprise technology spending, the report said. 

To keep up with the ever-changing needs of these customers as well as the surging competition, service providers will have to focus on scale and specialization to differentiate themselves, it added. They would have to refresh their service lines and offerings and stay relevant to cater to these more digitally adept enterprises, who expect higher-quality services and have very different buying behavior. 

Additionally, talent will also be a key differentiator, and the war for acquiring and retaining top talent will aggravate in the future.