With the Standard & Poor’s downgraded its credit rating of US, the world’s largest economy, to ‘AA+’ from ‘AAA’ triggering fresh fears about the overall health of global economy, It is widely speculated that a turbulent US market may be a trouble for the Indian IT outsourcing sector, for which the US market accounts for close to 60% of revenues.
Economictimes (ET) has published its perspectives on how another recession may affect the IT sector. There are a number of news articles coming up in this regard and the news is rife that Indian IT players may get impacted.
My personal viewpoint is that if the present situation worsens in the U.S. , there could be a significant impact for small to mid size IT solution players in India (E.g. 1000 to 10000 people size,50 to 500 Cr. revenues) working on the global services/delivery model as compared to the large players .Especially the bottom line revenues may get eroded and growth rates may get stalled and these companies may have to be prepared for a long haul.
In such a situation, such S&M IT services companies can capitalize the potential offered by Cloud computing to spruce up their business. Here is why Cloud capabilities and service offerings under their belt may be helpful to get more business.
- With budget constraints and cost cutting initiatives ,Organisations may want to reduce the costs and overheads of running non-core,departmental applications. Migration to the Cloud could help . Hence there could possibly be more work emerging in this space.
- S&M IT services players may deploy their excess internal IT staff/resources that gets developed in a recessionary environment to develop IT solutions for business acceleration to the cloud. This could give them an edge and provide new avenues.
- ISVs (Independent software vendors) may find it hard to sell their software on the on-premise model in a recessionary scenario and they may have to reinvent low cost SaaS delivery models using Cloud Computing and time to market may have to be shorter. This is another scenario to explore with the right capabilities and service offerings
- There is a huge SMB market sector in India which is yet to reap the benefits of the ondemand Cloud computing for their IT and business operations. During recessionary times, Indian SMBs may be looking at optimizing their business operations through cost,resource and efficiency factors and Cloud computing can be one of the avenues to address some of their critical needs. Already we have public Clouds in India and Private clouds can be built. This may provide an opportunity for S&M IT players to redirect their resources and efforts to provide low cost cloud based Business-technology solutions. This could be a new source of revenue to make up for the reduction in the pure-play outsourcing business. So playing in the home turf which is reasonably well insulated from the affections in the US and West could provide the playing ground.
- Finally , Cloud computing may be used as a tool and with the right approach,solutions and capabilities, S&M Indian IT players with the the ability to help lower the costs/TCO,increase productivity,scale up with lesser burnout,solve business problems,bring better sustainability,increase ROI for their clients may be in a position turn around the scenario in to a positive one.
To Summarize my thoughts, Cloud computing provides a low entry barrier and a flexible and low cost model for organisations to sustain and optimize their IT and business efficiencies. Especially this is a boon during a recession . IT players who are able to provide value to organizations as well as solve the business problems through cloud computing especially during an inclement economic climate may be able to survive and sustain better,differentiate and may even be able to grow their business during such times.
Perhaps,Cloudshoring may be the new mantra to talk about !!