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DIGITAL ENTERPRISE TRANSFORMATION, INDIA PARADIGM: DIGITAL TRANSFORMATION CONTRACTS AND OUTSOURCING TRENDS
DIGITAL ENTERPRISE TRANSFORMATION, INDIA PARADIGM: DIGITAL TRANSFORMATION CONTRACTS AND OUTSOURCING TRENDS

November 4, 2022

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This is the second of the multi-part blog series titled ‘DIGITAL ENTERPRISE TRANSFORMATION, INDIA PARADIGM’ and covers the State of Technology Adoption in India from the perspective of digital transformation contracts’ duration, outsourcing trends & vendor consolidation.

 

‘In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.’

-           Jeff Bezos, Founder, Amazon

This blog is in line with my previous blog (DIGITAL ENTERPRISE TRANSFORMATION, INDIA PARADIGM: STATE OF TECHNOLOGY ADOPTION – EXPANSION OF DIGITAL SPENDING) which set the context for my current and upcoming blogs, discussing the key findings on digital enterprise transformation from an Indian end-user business perspective derived from the NASSCOM-Avasant “Digital Enterprise Survey” conducted in May’2022.

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KEY HIGHLIGHTS: 

1. Indian companies have a higher propensity to enter into long-term relationships (3+ years) with respect to tech contracts constituting a significant digital transformation element, as compared to their global peers

Indian enterprises indicate a slightly higher willingness to commit to digital transformation as a part of their broader business strategy by engaging in long-term trusted partnerships as compared to their global peers. In fact, ~20% more Indian enterprises exhibited the willingness to enter long-term (3+ years) tech contracts with a considerable digital transformation constituent, in FY2022, as compared to their global peers. Also, the propensity of Indian enterprises to enter long-term (>3 years) tech contracts constituting a significant digital transformation component, has gone up by ~1.5X between FY2020 and FY2022.

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2. In FY2022, Indian end-user enterprises indicate a possibility of allocating a bigger share of their digital spend towards outsourcing contracts as compared to their global counterparts, who tend to spend a relatively greater percentage of their digital spend on managing workflows in-house.

Overall, tech outsourcing is projected to grow by 20% annually (Press Articles) in the coming decade as more enterprises upgrade current technologies/adopt newer technologies, revitalize IT projects and accelerate digital transformation measures. Scarcity of highly skilled in-house digital talent and top-quality software offerings is driving more companies to spend greater amounts on outsourcing their digital transformation projects.

Further, pandemic inflicted-disruptions have triggered enterprises to shift their digital transformation interventions into top gear to enable industry-wide digitalization, rapid automation, transition to cloud computing, fortifying enterprise security structures and preserving data security & privacy through cutting-edge cybersecurity solutions. Since digital transformation projects are complex and span across multiple years, Indian enterprises on the demand-side of tech, in their endeavor to climb the digital maturity curve swiftly and become ‘digital-first’ companies, exhibit an increased propensity to spend on outsourcing contracts for digital transformation as compared to their global peers. This can help Indian enterprises expedite their digital transformation journey and lessen the gap with their global counterparts, who might already be at a higher point on the digital maturity curve. Thus, Indian enterprises not only recognize the need for accelerated digital adoption in terms of enabling innovation and staying relevant as well as competitive, but also to ensure business continuity. Hence, in addition to managing their digital transformation journey in-house, they are willing to expand their spending on digital transformation contracts with specialist outsourced vendors.

3. Vendor consolidation for Indian enterprises is slightly on the lower side as compared to global peers

Global enterprises are increasingly considering vendor consolidation to reap various benefits such as significant cost-reduction in outsourced spend, avoiding complexities of engaging with too many different vendors, and fast-tracking digital transformation by circumventing resistance/hesitation from small contractors in digital adoption. Indian companies, on the other hand, opt to have a sizeable, good mix of strategic (for large-scale and long-term contracts spanning more than a year) and tactical (for short-term specialized projects and as a hedge to Tier 1 risk, usually for less than a year) partners. In fact, Indian enterprises have a much wider partner ecosystem (almost 50% higher) than their global peers and look at leveraging the best of ‘all worlds’.

In order to attain agile operating models, engaging multiple vendors who can deploy resources in a time and material (T&M) mode, offers increased flexibility and the opportunity to procure required capabilities in the blink of an eye. Further, by employing a multitude of diversified vendors, businesses can leverage dual benefits in the form of security of business-critical knowledge possessed by existing vendors which could be crucial for the smooth functioning of digital operations, as well as easy and quick access to high-quality specialist talent by onboarding new vendors.

Indian enterprises have thus jumped on to the digital transformation bandwagon full throttle and are adapting to the fast-paced tech disruptions speedily by utilizing and leveraging all possible resources. Digital transformation is no longer a ‘nice-to-have’ process but a ‘must-have’ core business/strategic imperative, and enterprises realize that in today’s disruptive day and age, ‘survival is not just of the fittest but the quickest as well’.

In my forthcoming blogs, we will examine key trends in areas such as business process digitalization, distribution of workflows on Cloud, digital talent, hybrid work models, different dimensions of digital maturity and projected outlook for FY2023 with respect to Indian end-user enterprises. 

For more information on Digital Transformation and Digital Enterprise Maturity, please refer to the report downloadable at the following links: 

NASSCOM Website: https://nasscom.in/knowledge-center/publications/digital-enterprise-maturity-30-boosting-business-resilience-through 

NASSCOM Community:https://community.nasscom.in/communities/digital-transformation/digital-enterprise-maturity-30-boosting-business-resilience 

Earlier versions of the report can be downloaded from the following links: 

A NEW ORDER OUT OF CHAOS-BUILDING A FUTURE READY ORGANISATION-https://community.nasscom.in/communities/digital-transformation/new-order-out-chaos-building-future-ready-organisation 

REIMAGINING INDIAN ENTERPRISES' TECH LANDSCAPE IN A DIGITAL-FIRST WORLD – A NEW ORDER OUT OF CHAOS- https://community.nasscom.in/communities/digital-transformation/reimagining-indian-enterprises-tech-landscape-digital-first 

DEFINING THE DIGITAL ENTERPRISE - MAR 2020 -https://community.nasscom.in/communities/digital-transformation/defining-the-digital-enterprise-mar-2020.html 

Sources:

  1. DIGITAL ENTERPRISE MATURITY 3.0 - Boosting Business Resilience Through Technology 
  2. India Today Press Article

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Prerna Buckshee
Manager - Research

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