In our Global IT Outsourcing Market Report 2021 and other industrial reports, we have seen severe impacts of COVID on the IT outsourcing industry globally. At first, the pandemic was well-controlled in big IT outsourcing countries such as India, China, and Vietnam. However, as the vaccine programs were activated in early 2021, as people get themselves lost their hair too soon too quickly, new waves of COVID-19 started to surge. India, especially India’s IT companies and their clients are now suffering.
How did this downturn happen that quickly, can it affect India’s IT outsourcing deal in the future, and how? Read along to see the whole picture and figures for today’s insights about India’s IT industry landscape.
2020, India survived its COVID battle
In Early 2021, amid the coronavirus pandemic, Moneycontrol reported that India’s IT companies are now the apple of the European market’s eye when it comes to IT outsourcing. To back up this opinion, the articles sourced The Economic Times: big India IT companies such as Wipro, Tata Consultancy Services (TCS), and Infosys have won large deals or acquired units in the region as local businesses looked to ‘quickly transform’ to adjust to the pandemic situation.
These kinds of mega-deal are the result of the severe COVID situation in Germany, and India’s good control when the country was quick to issue an in-time lockdown policy on 24 March 2020, making 1.3 billion people stay at home for at least 3 weeks. The lockdown was placed when the number of confirmed positive coronavirus cases in India was only 500.
India’s lockdown in 2020 is a shock for many of the UK’s largest businesses, including most of the big banks.
UK business offshoring work has been conducted in India so huge of volumes that on the back of this, large Indian IT suppliers, such as Tata Consultancy Services (TCS), Infosys, and Wipro, as well as BPO firms such as Genpact, have grown to be global giants over the last two decades. For years, UK companies, especially large ones have had minor roles shipped to India, from in call-center operations to IT support. Needless to say, India’s lockdown is a shock for many of the UK’s largest businesses, including most of the big banks.
Although disruption is inevitable, the Indian government acted quickly to ensure that its citizens as well as IT suppliers can be well equipped to continue to deliver services amid the lockdown. They defeated the pandemic the first time by setting up strict lockdown policies in 4 different phases:
- Phase 1: 25 March 2020 -14 April 2020 (21 days)
- Phase 2: 15 April 2020 – 3 May 2020 (19 days)
- Phase 3: 4 May 2020 – 17 May 2020 (14 days)
- Phase 4: 18 May 2020 – 31 May 2020 (14 days)
In 2020, India has ridded out the COVID-19 pandemic by working from home until the relaxing of restrictions in recent months spurred companies to call more employees back to the office. We can safely say that India survived its battle and thrive on mega deals with clients from the West. But by early April 2021, a major second wave of infections took hold in the country. India has surpassed 1 million active cases and overtook Brazil as having the second-most COVID-19 cases worldwide, behind only the United States.
This lost battle is the combination of several factors, and not far away, there are risks looming – not only for India’s IT companies, but their global clients also.
2021, India’s IT Companies Scramble to Handle the COVID-19 Surge
India’s second wave of infections has seen at least 300,000 people test positive each day, overwhelming healthcare facilities and crematoriums and driving an increasingly urgent international response.
What happens to giant India’s IT companies in Bengaluru and other cities now is that they have to set up COVID-19 ‘war-rooms’ for infected workers and maintain backroom operations.
Local IT managers say they struggled to get global chiefs outside India to recognize the seriousness of the outbreak.
The situation for IT outsourcing firms is not better. According to ITnews, workers at huge technology service providers such as Accenture, Infosys, and Wipro say their teams are now working 13-14 hours daily. They have to work under growing pressure and struggle to deliver projects as their teammates call in sick or have to take time off to care for friends and relatives.
The cost-cutting drives that once helps companies around the world gain advantages over domestic labor forces have now left them deeply reliant on the big Indian offices, which are now turning to war rooms to fight COVID-19. If the surge continues, the threat is more real than ever.
“Employees have contracted COVID-19 since the second wave began, causing severe pressure for projects that are nearing deadlines,”
Other sources at Accenture confirmed the growing issues with the pressure of work. According to Reuters, Accenture said it was providing some medical care and covering the cost of vaccinations for its employees but did not comment on the impact on productivity.
As for Wipro, the firm said they have not seen any disruption to operations and have transferred some client projects to offices outside India.
The situation has a huge impact on ODC projects placed in India. As for Wipro, recently there is only 3% of its nearly 200,000 employees are now working from the office on critical projects, and it expects more of those employees to work from home, it said. For those who have to work from the office, Wipro has made living arrangements at guest houses and hotels nearby.
Estimated impact of COVID-19 on service sector in India
From day one, India’s lockdown came at a huge cost. As the economy sputtered and unemployment rose, India’s growth forecast tumbled to a 30-year low.
Estimated impact of the coronavirus (COVID-19) on the service sector in India from April to December 2020, by type.
The service industry across India saw the steepest decline in growth rate compared to previous years due to the impact of COVID-19. Trade, hotels, transport, storage, and communication took the brunt of the impact during lockdown months. Towards the end of 2020, the decline slowed down but remained on the loss side.
Estimated Quarterly Impact from COVID-19 on India’s GDP FY 2020-2021
India’s quarterly GDP was estimated to grow by 0.4 percent in the third quarter of the financial year 2021 compared to the same quarter in the previous fiscal year. This was a significant improvement from the time between April and June 2020, when the country went into lockdown to contain the virus, and GDP growth declined by nearly 25 percent compared to the same time period in the previous year.
How can India’s IT companies recover from this disaster?
Key Questions to Ask
Before making any decisions, ask yourself these questions:
- How do we guarantee/ safeguard the safety of our own people first?
- How do we minimize disruption to the electronics value chain?
- How will such impacts affect our ability to provide market-ready products such as smartphones, laptops, optical fiber cables, appliances, automobiles, etc.?
- How do we support our key customers/suppliers to fulfill demand in current high-peaks as well as a partner to sustain their relations?
- How do we build or acquire technologies which will be needed for the future of work and manufacturing?
- How do we plan for a potential decrease in demand as we move forward with an uncertain economy?
Practical next steps for Indian IT outsourcing firms
- Technology leaders will be defined by what they do along the three dimensions of managing a crisis: respond, recover, and thrive. Some key next steps include:
- Evaluate the value chain and how disruptions can be mitigated and minimized in future events.
- Drive technology adoption and innovation to support the ‘future of’ scenarios
- Consider M&A opportunities to enhance and grow technology capabilities.
- Understand demand and supply-side shocks and develop inventory strategies to buffer volatility and risk.
- Implement digitally-enabled future of work tools, including those for business processes and back office functions.