Indian IT had a good year in fiscal 2018. India exported $126 Bn of IT services, with the software industry raking in total revenues of $169 Bn, and employing around 4.5 Mn people directly. Besides, 60% of global outsourcing came to India in FY2018.
Despite a very harsh economic environment evidenced by lower spending, revenues grew between 7-9%. Captives of MNCs grew more rapidly than others as companies tried to reduce costs.
The startup sector did well too. According to an Inc42 report, there are 39K active startups in India. They raised $13.7 Bn of investments in the calendar year 2017, throwing up 26 unicorns and 31 soonicorns. As of date, startups have created a total value of $130 Bn!
We estimate Indian startups employ around 600K people
2019 Brings Brighter Tidings For IT Services
The growth of IT services is expected to be around 7-9% in constant currency with spending increasing in the US, particularly in BFSI (banking, financial services, and insurance). Europe is seeing traction and Japan seems to be opening up.
IT services companies have retrained the majority of their staff in digitisation and new technologies, overcoming the negative impact of a tougher regulatory regime for H1B visas in the US. They have also increased localisation, along with increased spending on sales and marketing.
In the past three years, hiring was low as IT services companies increased utilisation from around 77% to 85%. Their ability to meet the challenge of currency movements, increased competition due to lower spending, a hostile visa environment, and rapid technological change is indeed commendable.
In fiscal 2019, IT companies are expected to hire around 250K people with the last eight months seeing sharp rises in recruitment. Fresher compensation is expected to go up by 20% to ensure good talent joins the industry. Digital revenues are growing in double digits. AI/ML, IOT, Big Data, digitisation, and mobile technologies are the flavour of the year.
Many companies are buying back stocks to enhance returns to investors. There is also a trend of early retirements as senior people leave to rebalance their lives and others join startups.
Startups Will See Greater Action In 2019
The big funds are flush with cash and looking to invest large cheques. The recent $1 Bn investment in Swiggy is a portend of things to come as they seek out opportunities to dominate the market. India should get between $12 Bn – $15 Bn in investments in 2019 as many soonicorns raise capital and break out.
Here too, AI/ML, blockchain, IOT, big data, data analytics, and robotics will grow as technology goes deeper and becomes more sophisticated. Vertical ecommerce, fintech, medtech, agritech, and life sciences will see rapid growth. Many B2B enterprise software startups, too, are growing in size.
Startups will add between 200K-250K employees across skills this year, with ecommerce, local delivery, and supply chain startups leading the way. The demand for high-quality talent is exploding and a serious shortage of resources could emerge.
Overall, 2019 will be a year of growth with 450K-500K jobs being created across IT services and startups.
The key will be the growth in Indian capital investing in startups, which currently stands at 10% of investments and needs to increase.