By Pareekh Jain, Founder & CEO of Pareekh Consulting & EIIR Trend
There is growing concern about a potential decline in business for Indian IT service providers due to AI-led disruption. These concerns are valid. However, there is a pathway for IT service providers to continue to grow.
The strategy is market share gain.
To understand the challenges and opportunities for Indian IT services, consider some simplified numbers. The global IT services market is potentially a $1 trillion market, of which Indian providers account for roughly $250 billion. AI will certainly disrupt parts of this market. Even if AI disrupts 20% of the market (which is still a distant scenario) the remaining opportunity would still be around $800 billion.
If Indian providers maintain their current share, the market could shrink to about $200 billion for them. However, even in a declining market, Indian IT service providers can continue to grow by taking market share from competitors. There is a pathway from $200 billion to $800 billion.
There are two ways of gaining market share. One is gaining share in the existing market where the service provider is competing. The other is expanding into new markets to compete and gain share.
Gaining Share in Existing Market
- Renewals: Contract renewals are a significant opportunity to capture market share from competitors. Incumbents often focus on defending their accounts, creating openings for challengers to be more aggressive. Recent public examples include Cognizant winning Daimler and Accenture winning Estée Lauder accounts. Earlier examples include Accenture taking over FedEx from another provider and Cognizant winning Takeda. There are many more such cases of market share gain not in public domain.
- Innovation: One way to gain the attention of clients is via innovation. Once you gain their attention, it is an opportunity to convince them to go with you rather than the competitor. Innovation can be related to solutions, new technologies including AI, business model including pricing, etc.
Market Expansion
- Services & Industries: Providers can expand into new industries and services proactively. Many IT Service providers entered the engineering services market through acquisitions. There are opportunities in underpenetrated verticals and micro verticals for Indian IT Service Providers, such as Construction and Public Sector.
- Geographies: Indian IT Service Providers have historically focused on the US, UK, Australia, parts of Europe, and Asia. There are opportunities in unexplored geographies such as France, Japan, Korea, Emerging Markets in LATAM, Africa, and Asia, including India.
Role of Inorganic Growth
Inorganic pursuits can accelerate the market expansion. When demand slows down, supply consolidates, in most industries and it will happen in the IT industry also
Bottom Line:
Many things will change with AI, but one thing that will not change is the fight in the market for market share.
Indian IT service providers have been gaining market share for many years from their global peers and may continue to do so if they play the game strategically, even if the overall market slows or declines due to GenAI.
Market Share Gain is an underestimated growth lever for IT Service Providers amidst the AI disruption.
(The writer is a veteran IT consultant and a voice of repute in the engineering services space globally. This article has been published with permission from EIIR Trend, where it appeared first)
