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July 24, 2020 08:43 pm

Indian IT Consultancies Struggle Against Technological Obsolescence

Few people outside their home country have heard of Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies or Tech Mahindra, India's five biggest information technology (IT) consultancies. Yet even when enterprise software to manage marketing, production, inventory and the like comes from Oracle of America or Germany's SAP, it is often the Indian companies that install and maintain software for clients. But for all their tech nous, the Indian giants have also been unable to keep pace with technological change. The Economist (may be paywalled): Corporate software is becoming easier to use, reducing demand for their services. The lucrative legacy business of running mainframes is evaporating. Helping clients shift to the cloud makes money but not nearly as much. Despite some interesting pilot projects -- such as Tech Mahindra's use of artificial intelligence to tell apart 1,645 Indian languages or Infosys's covid-19 contact-tracing in Rhode Island -- the consultancies have not come up with a killer app, let alone powerful platforms like those of America's big tech firms. Worse still, multinationals are increasingly reluctant to outsource their IT. Rather than hire the consultants, many are creating subsidiaries in India to do the job in-house -- sucking away both custom and workers from the consultancies. Before the pandemic India hosted more than 1,400 of these so-called "captive centres", employing a total of more than 1m people, according to an analysis by the Ken, an Indian news website; around 70% of them were owned by big American firms. Walmart Labs India, owned by the American supermarket chain, is reportedly on course to double its staff numbers to 7,000 in the next year or two. The popularity of such in-house operations has to do with the changing economics of technology. This once required armies of people, so spreading costs among many clients made sense. With falling prices of hardware and software, and more skilled workers around, a captive centre can pay for itself with just 50 employees, says Peter Bendor Samuel of the Everest Group, a research firm.

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