Indian tech service biz growth will accelerate: Nasscom-McKinsey

A Nasscom-McKinsey report shows that India’s technology services industry could accelerate growth by 2-4% over the next five years, reaching $300-$350 billion in annual revenue, leveraging cloud, AI, cybersecurity, and other emerging technologies.

“There’s untapped opportunities in newer technologies. Digital and cloud services provide an opportunity to reach $600-700 billion, while engineering services offer a $500 billion opportunity by 2025,” said Nasscom senior VP and chief strategy officer Sangeeta Gupta.

The report said that the annual decline in global spending on traditional technology is likely to accelerate from 3-4% today to 8-10%, and the share of traditional services in India’s tech services revenue will likely fall from 70-72% to 40-45% by 2025.

The technology services industry contributes 8% to the overall economy. The next decade is expected to continue to witness growth in technology spend – primarily driven by the rise of technology natives and digital reinventors, new tech-enabled business models like ecosystems, direct-to-stakeholder channels, and a rise in demand for Digital 2.0 accelerated by the industrialisation of cloud, AI and cybersecurity.

Competitive intensity is expected to rise further with hyperscalers, next-gen SaaS companies, players, and specialists competing for the tech. “As the competition intensifies, scale and specialisation will be critical to succeed,” Gupta said.

The technology services sector, valued at roughly $1 trillion today, is now among the most significant contributors to economic growth worldwide, especially in India, where the industry now produces about 27% of the nation’s exports and employs about 4.4 million people.

Nasscom president Debjani Ghosh said the Indian technology services sector can utilise 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. “The government needs to encourage and support digital literacy and skilling to ensure the country’s talent, energy, imagination, knowledge, and unmatched commitment unites to address the customers’ surging needs,” she said.