Non-Linear Revenue Strategy for Indian IT industry Key to Survival

Gone are the days of double-digit revenue growth for the Indian IT industry as companies have focused on the digital transition and cloud-led disruption that impacted revenue growth negatively. Digital businesses currently 20% -30% of Indian IT firms revenue, will continue to drive future growth and contribute 50% of revenue by 2021.

Digital is different from offshoring which is nonlinear revenue model compared to off shore’s linear revenue model as the number of employees increase the revenues will also increase. In the nonlinear model, a smaller number of employees more revenues or revenue per employee much higher. How Indian IT Industry adjusts to nonlinear revenue model, reducing dependence on large clients and adopting latest technologies is key to success of large and medium companies. Margins also improve if a company has a non-linear revenue model such as revenue based on outcome-based work. Indian tech players have been very proactively responding to customer and market demands for reskilling and non-linear approach of growth.

There had been 30% to 40% fall in net headcount addition in Indian IT services firms over the past few quarters indicate a positive trend of non-linear growth. Net employee addition by the top four Indian information technology (IT) services companies in 2017-18 dropped by more than three-fourths. Despite this companies showed good revenue, as the non-linear revenues drove the industry that also led to margin increase and profitability. Even though non-linearity strategy is being aggressively adopted, companies still hire the required number of people when there is a client demand for certain technologies or skill sets.

Non-linear disruptive revenue per employee growth will increase in coming years for Indian IT services as there will be higher Billing Rates for IoT services, Digital Transformation Deals and companies will keep up the growth at steady pace. Company officials and industry experts are of the opinion that factors like automation, rise of fixed price contracts and emergence of new levers of revenue flows are aiding the nonlinear drive. Indian IT firms are focusing their efforts towards non-linear growth, including investments in technology platforms, steps taken to consolidate, and automating of processes. 

Procurement & Supply Chain Management Software Market 2013- Strategic Importance

Procurement plays a critical role in cutting costs of acquiring the raw materials and other materials for the company’s operations. Company’s across the globe have automated this process and deployed advanced software technologies to effectively manage their procurement operations there by reducing costs and also surviving in the highly competitive markets. For offering the products and services at the lowest possible price and with good profit margins business managers have realized the importance of strategic sourcing and procurement and deployed software technologies to manage this critical business function. For materials that are high value in nature, whose prices constantly change based on the market conditions and whose availability is also highly competitive as competitors too fight for the same materials strategic sourcing and procurement is critical strategy.

According to Gartner, supply chain management and procurement software market grew by 7.3 per cent to $8.9 billion (£5.27 billion) in 2013. SAP dominated with number one position for more than a decade with a 23.9 per cent market share, growing its revenue by 24 per cent from $1.7 billion (£1.02 billion) in 2012 to $2.14 billion (£1.27 billion) in 2013. Oracle is second in the market with a market share of 16.3 per cent, down on 17.4 per cent in 2012, and revenue of $1.46 billion (£861.5 million), up just 0.1 per cent on 2012. JDA Software remained in third place in 2013 and according to Gartner a “year of transition as it worked through product rationalization and integration of several years of acquisitions and the 2013 merger with RedPraire. Gartner said the market grew because supply chain investments “kept their priority”, even as IT budget managers “remained cautious”. Chad Eschinger, research VP at Gartner, said: “Both influences have impacted strategic planning processes and have resulted in stronger price-based competition and smaller contracts. Cloud and subscription-based pricing is shifting revenue streams and influencing growth.”

Investment in Procurement and supply chain management software will lead to supplier relationship management, reduction in errors and quality issues, efficient and timely supply of the materials, reducing cost, reducing support costs. Even procurement managers using software can improve their productivity, achieve the strategic goals, negotiate efficiently, avoid unnecessary legal disputes and conflicts, manage their work and provide the relevant and necessary reports to the finance teams and top management. Procurement BPO is one of the critical process for the Indian IT & BPO Vendors and companies that outsource this function to third party vendors in India have over the years have seen significant cost reduction. But Procurement BPO market has matured and the companies are looking for vendors who will bring strategic impact to their business not only reduce costs. For doing so the automation and software technologies play a significant role and even Indian IT & BPO vendors are also developing products in this segment.