Indian IT Q4 forecast
Indian IT Q4 forecastReuters

It's just a human thing that most of all get excited at the outset of a new year – new resolutions, dreams, plans, and the hope to get all that we ever wanted in the coming year. However, that may be business as usual, but it's not business per se. So when Infosys CEO Vishal Sikka, in his New Year message to company employees, talked about all the gloom and doom that he probably could, it has to mean more than what meets the eye.

Also read: Budget 2017: Personal computer, tablet sales could get a fillip

Consider these comments:

"The mountains ahead are tall ones. But there is no other way but to get there and go...if we don't, we will be made obsolete by the tidal wave of automation and technology-fuelled transformation that is almost upon us."

"We will not survive if we remain in the constricted space of doing as we are told, depending solely on cost-arbitrage, and working as reactive problem-solvers."

"By standing still, instead of moving forward decisively, we will face the brunt of these disruptive forces, as our industry has already started to see. A lot of the work that came to us and to others in our industry, can already be done with Al systems."

"Brexit, the American Presidential election, demonetization, cyber security, the refugee and terrorism situation were the events that seriously changed the way we viewed the world, but perhaps that biggest disruption is the one that has been proceeding irreversibly and unstoppably in our times is the accelerating force of technology and digitization."

Sikka also warned fellow Infosys officials against "lackadaisical" attitude towards greater value creation and cautioned that "the road ahead is long and not easy".

These statements were, of course, said in a certain context, but they still give the same message that they were meant to convey. (Read the full text of Sikka's Happy New Year message at the end of this article.)

And Sikka is not alone. Echoeing the same sentiments, though in a softer tone, was IT czar and philanthropist Azim Premji.

Wishing Wipro employees a splendid 2017, Premji said: "...forces that want to shape the world into a place of exclusion, conflict and suspicion have raised obstacles on the path to a better world in the past year."

While Premji largely focused on principles that can help people make a difference in life, and find a common ground rather than focus on conflicts, from the business point of view, he was spot on while talking about Donald Trump's victory in the US Presidential election, besides Brexit, posing a threat to Indian IT firms.

Sikka, on the other hand, foresees the risks to IT from automation and artificial intelligence.

What do these actually mean? Well, the writing on the wall is clear: if the Nifty IT Index was down 10 percent in 2016 and you thought that makes a good entry point for the IT stocks, things could be more tempting in 2017.

In mid-November 2016, India's IT software services body Nasscom cut the revenue growth guidance for the financial year 2016-17 to 8-10 percent from 10-12 percent projected at the beginning of the fiscal amid global macroeconomic headwinds. Now Nomura estimates top IT companies to report year-on-year revenue growth of 6.9 percent at a 13-quarter low and EBIT (earnings before interest and tax) margins may touch a historic low at 21.6 percent.

In August, Infosys, India's second largest IT exporter, asked about 500 employees to leave after poor quarterly results and the cancellation of a major contract with Royal Bank of Scotland that threatened close to 3,000 employee layoffs. Amid uncertain global circumstances, projects are getting delayed, profit margins are shrinking and hiring by IT companies now stands at the lowest in a decade.

In these times, a pick-up in growth is a far cry and analysts are expecting IT growth to contract by almost 3 percent in 2017. As top IT firms, including Tata Consultancy Services, Infosys, Wipro, HCL Tech and Mindtree, prepare to come out with their December quarter earnings, we can expect new lows to be the new normal in the coming quarters.


Here's the full text of Vishal Sikka's letter to Infosys employees:

Hi Friends,

The time around the end and beginning of a year, while a passage of our own construction, offers us valuable time for reflection, introspection and resolution. Sitting here in the Singapore Airlines lounge at Changi Airport, I've been looking back on the strange year gone by: Brexit, the American Presidential Election, demonetization, cybersecurity, the refugee and terrorism situation, and many others. There were events that seriously changed the way we viewed the world, but perhaps that biggest disruption is the one that has been proceeding irreversibly and unstoppably in our times - the accelerating force of technology and digitization. So, it is no surprise that I am surrounded by at least 5 magazines that have AI cover stories!

By all indications, the future promises to be even more disruptive, especially for our own business, which is impacted by the multiple factors of technological and geo-political disruption. We will not survive if we remain in the constricted space of doing as we are told, depending solely on cost-arbitrage, and working as reactive problem-solvers. By "standing still" instead of moving forward decisively, we will face the brunt of these disruptive forces, as our industry has already started to see. A lot of the work that came to us and to others in our industry, can already be done with AI systems. So as I think about all this, and as I've said to you often, our path forward is very clear - we need to harness the dual forces of automation and innovation. We must embrace automation to become more productive in the work that we do, and with the resulting capacity, focus our attention upwards towards innovation, both for ourselves and our clients.

The foundation for all of this is our culture, our values and especially our infrastructure for life-long learning.

I am often asked, how do we do this?

On automation:

Mastering automation. We must bring it into everything we do. In addition to doing our job, we must work on building a tool that helps us do the job faster/better/cheaper.

"There is an automation for that": Preserving the sanctity of our "human-ness" requires that we must strive to do a routine/mechanizable activity only one time, and build automation to take care of the activity the next time around.

We must see automation, and the amalgamation of our human work with automation, as an opportunity to transcend the assumptions of the present, not a threat to our future, and we must help everyone else see this as well.

We must understand Mana deeply, now deployed at 20+ clients, and learn to deliver value using it. Take the classes on Mana and machine learning on Digital Tutor and the Infosys Learning Platform. For hands-on experience on Mana 2.0, we have created a seven day course weaving in real-world examples. To create a culture of 'Machine Learning First', you could opt for the two-day exploratory training on machine learning, provided by ETA.

On innovation:

The Zero Distance culture of innovation, now almost two years old in the company is very encouraging. But often, it is very small in terms of the innovation delivered. And in chasing small improvements, sometimes we can miss the point of the big thing, the larger picture of potential greater value. Also, often we don't have visibility beyond the silos that we've been given to work on/in by our clients, and sometimes (although we are removing this one through collaboration) even silos of our own making. Often, our clients just aren't ready for what we bring to the table, they don't see us as innovators. So how do we break these presumptions and live as innovators?

Martin Luther King, Jr. said: "If you can't fly then run, if you can't run then walk, if you can't walk then crawl, but whatever you do you have to keep moving forward." He was, of course, talking about freedom. But it applies equally to us. To our freedom, from the tyranny of the mundane, of the cost-driven value delivery, our freedom to think, to innovate, to create. So as I met our teams over the last two weeks, I've asked them to do what I'll ask you, first try and fly. See if you can find an opportunity to fly. Fly in this case means a total digital transformation of our clients' business processes that we happen to be involved in. We have a select few examples that come close to "Fly". If we can't fly, we must run. Run here is a new process, refurbished apps. Walk is a new process, with the same apps. Crawl is with the same process, same apps, but accelerated using automation, using implementation excellence, using tools like AssistEdge, and others. And this is not limited to teams in delivery or consulting or BPO. This applies to all of us! The work our Finance and BEF teams have done in rethinking OTR is a great example of transformation; as is the work some of our AssistEdge teams did in bringing conversational interfaces to the product to completely reimagine its experience; or the work our HR team has done in identifying and nurturing talent using data science, just three great examples...

And the all-important base of learning & education:

Learnability - we will advance in automation and innovation by learning about these topics:

An immersive training capsule called "Automation - A Way of Life" is being rolled out for all fresh hires in Mysore.

An updated module on Design Thinking will also include concrete examples, and Infosys success stories.

We must remember that operational excellence is an imperative for each one of us. We must focus on delivering the best solutions in the smartest, fastest way possible, and not give up or give in to weaker instincts. Often, teams deliver only what is told, without going beyond the given scope, and with a lackadaisical attitude towards greater value creation. This can no longer be the case. Many teams that I have met recently have begun to understand and execute on the duality of automation and innovation, and to bring value to clients, not just mechanically execute the jobs we are handed. I've had some incredible meetings with clients from Australia to India and beyond and a very encouraging floorwalk at IBPO in Jaipur too, where we have begun seeing the effects of automation. Our clients have collectively rewarded us for this by giving us the best client survey results in over a decade, as well as in other forums. But there is a long way to go. The road ahead is long and not easy. The mountains ahead are tall ones. But there is no other way but to get there and go beyond. If we don't, we will be made obsolete by the tidal wave of automation and technology-fuelled transformation that is almost upon us. On the other hand, if we do achieve all that we set out to do, we can be that one great force powering the purposeful evolution of our world. A world where our AIs may make us more successful, but also more human. Where our ability to learn, and to deliver the purposeful fruits of those learnings, helps us all be mode.

Let us do this, together. Wishing you a Happy New Year.



Here's the letter sent by Azim Premji to Wipro employees:

Dear Wiproite,

Four weeks ago in the gentle morning winter sun, I watched the assembly proceedings, of a school which serves a severely disadvantaged community, in Sirohi in Rajasthan. It was deeply engaging for me, because the children were completely and meaningfully engaged.

After the assembly, a confident young girl - probably no more than 11 years old - talked with genuine joy, about how good and satisfied she felt. This child was talking about the fulfillment that comes from something well done. Then, she posed a question to me: what was it that I have done, that makes me feel really happy and fulfilled?

It is not as though this question has not been asked of me before. But that moment and the question, was suffused with the child's genuine curiosity and pure heart, and so became a moment of great clarity and insight for me. The greatest fulfilment is in knowing that the work that we are doing at the Foundation has some role in shaping confident, thinking, caring and ethical human beings like her.

For five decades, I have been completely invested in Wipro and its people. Wipro makes a real difference to its clients across the world, and this is what powers its success. It is your commitment and hard work, and that of every Wiproite, that actually makes this happen. I have the greatest pride in this.

The importance of this success of Wipro has become manifold more, because it's the success of Wipro that enables the possibility of making a difference to some of the most disadvantaged people in the world. This is because almost 40% of Wipro is owned by a philanthropic trust, which is completely focused on trying to contribute to developing a better world, including helping children like the girl that I met in Sirohi.

On the eve of the coming New Year, I must say that the year 2016, seems to have raised questions and obstacles, on the path to a better world, which cannot be ignored. These questions have arisen from developments in the political arena, from the fast unfolding environmental crisis and from forces that want to shape the world in to a place of exclusion, conflict and suspicion.

Once we start addressing these issues head on rather than ignoring them, I am confident that we will continue to make progress. It's not that only people in public life can play a part, but each one of us in our own roles can make a difference, and we as a company can make a substantial difference.

For this, I feel that if we use four principles to guide our actions, we can be constructive without yielding on the quest for a better world.

These four principles are:

* Finding Common ground: We must find common ground, rather than focusing on conflicts. The reality of the world is that there will always be disagreement and differences between people, but finding common ground is the only way of moving forward. This is as true in business as in politics and social issues, and as true in personal as in public life.

* Concern for others: We must have genuine concern for others. We must respect all human beings equally and we must have the same respect for nature. This respect must manifest in action. If we have concern, then finding common ground becomes possible.

* Connectedness: We must recognize that societies, economies, and the environment are all deeply connected. Individual human beings and peoples find meaning in this connectedness, not in separation and isolation. Our problems and solutions are deeply connected. So every effort of ours to find solutions and to find meaning, must strengthen this connectedness.

* Commitment to Values: The bedrock of everything must be an unflinching commitment to Values, at the core of which is Integrity. Integrity is certainly about honesty and honoring commitments, but it is more than that. It is about having the courage to persevere for what is right and what is good.

The child who asked me that question represents the possibility of the kind of a person who can help make a truly better world.
What inspires me and fills me with hope is that that child is not alone. Just in those six days in Rajasthan, in one of the most disadvantaged parts of the world, I met scores of people who have the same spirit, including women who have been victims of trafficking now fighting against it, public school teachers going way beyond the call of duty, NGO workers who have embraced the problems of others and the average farmer citizen who lends a shoulder to the fight for the good. All of them are people battling the most complex of challenges, yet unyielding in their efforts and positivism.

This is what I see across the world, from San Francisco to Tokyo, all places that I go to, I meet people with the same spirit and fire. That includes an uncountable number of Wiproites.

And that is why I am full of hope for a better world, a more just, equitable, humane and sustainable world. I know that if we persevere, we will prevail.

I wish you all a splendid 2017.