2017 is proving to be a tenacious year for IT companies in India. The growth that they are witnessing now is causing strain, and it would not be long before they start losing their markets. Fast-paced changes in politics and technologies are prompting these companies to reexamine their approaches to business. So how do startups and the IT industry look going ahead?
IT services companies need to undergo a strategic shift to stay relevant in the face of new technology launches and market dynamics. Indian service companies continue to focus in terms of delivering on customer expectations rather than creating new capabilities or breakthroughs. Today, Indian startups are filling the void left by IT companies and are redefining the technology landscape. It is, therefore, important to understand how large services companies can build a mutually rewarding relationship with startups.
Going ahead: Startups and the IT industry
The scene in the startup sector is misleading many to believe that they are doing well. Let’s look at the pluses. The Indian startup sector continues to grow at a robust rate of 10-12% YoY—standing third in terms of size globally. It remains attractive among investors, winning more than US$ 2 billion in assistance. Fintech startups are bagging the most capital (70%) from investors.
Now, the lowdowns. The growth in startups is being fueled by VC money, which helps them to show higher growth in a relatively short time. This in effect is also the prime reason for startups running out of money after the 24 months “golden period”. It is time startups think of sustaining their operations without draining their bank accounts.
Now, this is where IT services companies can join hands with startups that have a strong business model. Instead of going after the large, multi-year, hundreds of millions of dollar contracts, these companies can collaborate with startups that help in meeting their strategic business goals.
Focus on technological leadership
The question is how seriously are the services companies willing to get behind these startups? Are they willing to bet big and back them to succeed? Cloud computing, mobility, AI, Big data and virtualization are redefining the IT landscape worldwide. This has created a sort of trust deficit among the Indian IT companies, who were not quick to realize the business transformation. Of the 4750 Indian startups in 2016, only 750 are focusing on the cloud, mobility and virtualization sphere—the vast majority is in the ITeS sector. Given the state of affairs, the onus is on the industry bigwigs to facilitate and foster an ecosystem for these forward thinking startups to survive, compete and grow.
Large Indian services companies are well-equipped to provide for resources and knowhow required by these startups. On their part, the startups can help businesses reach their strategic goals. Such a mutually beneficial relationship between startups and the IT industry can provide startups with the following advantages:
Resources: Mobilizing or having access to resources can be less of a worry to startups, given their corporate backing and immense resources at their disposal.
Scalable infrastructure: Startups take a beating when revenue growth does not outstrip rising expenditure levels. They can rely on large companies’ sales, IT and workplace arrangements that permit growth with minimal costs and delays. Having access to scalable infrastructure is an immense boon to startups.
Marketing expertise: Reacting to the changing market conditions requires skilful marketing expertise, and startups often fare miserably when competing with established, larger companies. By leveraging the marketing expertise of larger companies, startups can be well-equipped to meet challenges.
Benefits for the IT industry
In addition to the above, companies too can reap the benefits of collaborating with startups.
Innovation: Large companies experience roadblocks when it comes to driving innovations, having invested in costly hardware and expensive staff. They can ride on startups’ penchant for creative ways to solve persistent and temporal problems without incurring much expenditure.
Technology: Startups have a fine-tuned technology strategy that always worked for them. IT companies can leverage this technology expertise to stimulate new marketing strategies towards meeting business goals.
Entrepreneurship: As companies grew in size, they seem to have traded their spirit of enterprise to painful processes, for protecting legacies built on entrepreneurship. On the other hand, the transparency and agility of startups is transformational. This can have a positive effect on companies to explore opportunities for growth.
Reclaiming the IT leadership
External forces and internal pressures will work their way in the corporate mindset to rationalize, innovate and grow their technological capability. The coming days will witness a realignment of funds, focus and strategy in the startups and the IT industry. The trend definitely seems to be on building technological capability. Let’s hope that the Indian IT companies take back the leadership role with renewed vigor and wisdom, and not just export CEOs to global companies. Going hand in hand looks to be the way for startups and the IT industry.