The Indian IT sector is expected to grow at 12-14 percent for the fiscal year 2016-17 in constant currency terms. It is also expected that the sector will triple its current annual revenue to reach US$ 350 billion by 2025. But, how is it really possible?
Continuous technological disruptions have compelled the IT industry to grow fast in order to survive. IT firms are constantly under pressure to evolve their products and services.The world is digitizing at an aggressive pace. In such a scenario, it has become hard for these companies to incorporate the most recent innovations. The digital world is ever-changing, and survival is becoming more and more difficult.
Few of these challenges that are affecting the software industry are:
- Reduced Time-to-Market
The customers always wants to use latest innovations and software. In such a case, the software companies are not able to market their products and keep up with the rising demand. They just focus on fulfilling the needs of the customers. New software development every single day has reduced the time-to-market.
- Extended Service Market
Owing to globalization, one can easily find service providers who offer infrastructure, platform and software as a service. Companies, nowadays try to recycle their software rather than developing it from scratch. Using software from the cloud includes high operational costs. On the other hand, speed and quality can be considerably high when recycling or reusing the software.
- Consumer/Customer Orientation
Today, software are used by more and more people around the world. It is important for the software developers to keep in mind the interface of the system. The user interface should be appealing, easy to understand and should have clarity of information. All these factors are important for the success of the organization in the market.
In spite of the hurdles, the Indian IT Industry grows stronger with time. To maintain this level of growth, IT firms must reinvent themselves as per the modern trends or else they will face extinction.
The key forces that are causing deep structural changes in the IT industry and fundamentally reshaping the way software companies do business are:
- Software-as-a-Service: In 2011, SaaS represented only 4.9% of the total software revenues but there has been a consistent and significant shift towards SaaS. Perpetual license revenue has been dwindling since 2004. But the subscription revenue (including SaaS) is estimated to grow at a 17.5% compounded annually. This would accumulate to 24% of total software revenue by 2016.
- Customer is King: As intuitive cloud services and low-cost apps are adopted, Chief Information Officers aren’t the only decision makers in the software buying process. Enterprise sales can only grow if the end user is content with the software.
- Emerging Hybrid Models: A varied range of business models starting from traditional licensed software to pure SaaS and hybrid models are available, which poses a challenge for the vendors. As a result, vendors will need to find and acquire new business models while trying to keep up with the revenues and profits during times when the overall industry pricing is under stress.
- Priority on Pricing: As there is a rise in IT consumers via low and no cost online platforms, the IT companies are struggling to explain the difference in value between a low-cost mobile app and a full-strength, licensed enterprise software package.
With the advent of 2017, the software industry grows stronger and certain drivers are bringing this change.
“Software functionality is driving deeper into every aspect of commercial and consumer life, which sustains strong demand trends across the group.”
-Keith Weiss, Lead Analyst, Morgan Stanley
Today, a series of changes drive the IT industry. These changes can play as a competitive advantage for the IT Industry to grow:
- Workflow Automation: Recently, many enterprise software applications have shifted focus to automating or analysing the data from transactions. To drive organizational adoption of digitalization and improve efficiency, many CIOs also plan to transfer new investments to building apps that would automate workflows and handle resources around them.
- Secular vs. Cyclical Security Challenges: Top order growth had slowed down across the cyber security group in 2016, raising concern on the secular positioning of security as public cloud adoption has risen. An increase in digitized assets in commercial and consumer areas would sustain a strong demand for security. Some Software companies are positioned to consolidate various functions into broader security platforms. In addition, they will drive more effective and efficient spending on cyber security. The vendors who can secure new threat vectors, such as cloud and mobile, will perform better than the overall group.
- Refocus on Small and Midsized Businesses: A still under-penetrated market opportunity, software providers that can help customers in this niche market solve their business challenges with easy-to-use, but effective solutions—and efficient distribution models—could sustain out sized growth in the software sector.
- Artificial Intelligence (AI): AI development is unraveling new potential for software-based solutions that previously existed only in the world of human labor. New abilities are emerging. They include effective natural language processing, image recognition, speech recognition and decision making. These are capable of sustaining massive new market opportunities. Even though it’s early, cloud-platform vendors are already building AI tool sets. The software companies which are incorporating these emergent capabilities could represent the new change.
Digitization is setting off an economic revolution. It has changed the way people see and do things. Everything has become “technology-fied”. In the case of software, the vital and operational challenge is that, it keeps on changing. With new technology coming in, even the software keeps on renewing. At times, it becomes difficult to catch up with the speed. Few companies who failed to inculcate the new technology into their product have perished.
Just like any other industry, digitization poses threat to the software industry as well. A company can either “grow fast or die fast”. And a company is bound to die fast without innovation. Consequently, these companies will have to invest in prospective avenues that will help them fetch profits. This will keep them steady in the market. Some challenges may be seen as setbacks by the software companies. However, the companies shouldn’t be bogged down by them.
Finally, A company has to leverage the new opportunities in order to overcome challenges. Only then, can it sustain itself and bring a revolution.
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