India IT Services:Cloud, automation, SaaS etc - what's the end game for India IT? We need to be more watchful but see no reason to despair

类别:行业研究 机构:摩根大通证券(亚太)有限公司 研究员:Viju K George,Amit Sharma 日期:2015-07-30

Concern no. 1: Greenfield ERP is in secular decline. This may be true, butfocus on the rise of new age software (e.g. SaaS) and newer ancillaryrevenue streams. IT services players we speak to agree that large globalcorporations in the G-500/F-500 club (especially in DM) have already installedcore ERP systems (SAP/Oracle) and don’t need such big-bang implementationsanymore; larger-scale greenfield ERP (as they occur today) are primarily in EMthese days. We believe that much of the ongoing traction in traditional ERPimplementation for offshore IT services players does not accrue from newlicense sales but from optimizing and/or consolidating existing installations.

    Legacy installations can be inefficient and unwieldy, needing to be optimized orupgraded – often, they are not compatible with each other, needing multipleERP systems to be harmonized across geographies/LOBs/subsidiaries. ERPdrivers for India IT come from simplifying or consolidating existing ERP – notfrom large licenses. Not to mention the gathering steam in size and tenure ofSaaS implementations. At its 2014 Analyst Meet, Accenture noted that theSaaS projects are getting more complex, approaching end-to-end in nature andthat the effort compression in SaaS deployments vis-à-vis a traditional onpremiseERP deployment is continually shrinking. As per Accenture, this gapmight have been 30%+ two years back but is now ~15-25% (more likely at thelow-end of this range). With time, we are seeing a growing convergence inproject size between the on-premise world & the SaaS world.

    Concern 2: New technology waves, rapidly rising automation (“hyperautomation”),shrinking time-to-market, and abundant productivity gainswill shrink IT budgets or dampen growth of IT budgets. We contend thatwe’ve had IT waves in the past decade (ERP, offshoring, internet in the 21stcentury) that have brought about step-changes in productivity/cost reduction, yetenterprise IT budgets/IT Services spending have only increased (except in 2009after the Lehman collapse) – even if just modestly. Clients tended to funnelsavings (generated by more efficient ways of delivering the existing stuff) intodeveloping newer applications for innovation & growth. What new ageproductivity waves such as cloud/automation allows them to do is generatesavings to fund more items on their agenda that might have not receivedattention in the past for budget constraints. Past waves bear this behavior out.

    Concern no.3: Miniaturization of corporate apps using digital technologiesimplies that effort to deploy such apps today is much lower today than inthe past resulting in compression. Again, the easy assumption is that existingapps are miniaturized and nothing more takes place. What gets missed is thatthere will be many more and richer corporate apps connected to many moredevices. The sheer number, heterogeneity of devices, explosion of form factors,need for better consumer experience and development of the ecosystem makesystem integration more complex than before. There are many more mobiledevices/tablets than PCs today – by implication, third-party system integrationopportunities are likely be greater than in a PC-driven world. There is also amultiplier to this in pull-through services, including business processrestructuring, systems and ERP application integration (not core ERP), businessprocess change, data harmonization, analytics and infrastructure services, aswell as analysis and integration with external sources, such as social media.

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