The year 2022 has been a sobering one for the tech ecosystem in general. The crypto crash has wiped out more than $2 trillion in wealth, though some might argue it was a mirage in the first place. As per Crunchbase, venture capital-backed companies absorbed $2.9 billion in the third quarter of 2022, down 66% sequentially and 81% year-on-year. This slowdown shows no sign of easing. Also, we have the ongoing Big Tech downsizing, with tens of thousands of job losses. Now with 2023 upon us, this is an opportune moment to reflect upon this tumultuous year, learn lessons and start looking ahead.
The next year is going to be a better one for technology companies. I believe that the worst is behind us. While the impact of the global macroeconomic downturn will be felt, the sector will also benefit from the continuing digitalization of the Indian economy in general and corporate India in particular. I spotlight five areas of interest from an Indian perspective.
IT Services companies will sail through the storm: This $250 billion behemoth of an industry has weathered the dotcom bust of 2000-01, the Great Recession of 2008-09 and innumerable shifts in technology and business model transformations. Through all of this, it has consistently delivered double-digit growth rates and net margins that the so-called new-age tech companies can only dream of: north of 20%. TCS, for example, grew 23% in 2008-09 when it was a mere $6 billion company, and still forecasts double-digit growth with revenues now at $20 billion-plus. It is a fact that when downturns come, customers seek to do more outsourcing as part of their cost-cutting exercises. Indian IT companies tend to benefit from this. The industry has also invested heavily to stay relevant, for example in cloud capabilities, and IT companies have managed to grab centre stage in the digital transformation journeys of customers.
Fintech will come of age: India’s public digital infrastructure is in place and a new account aggregator (AA) ecosystem will be the trigger for the democratization of credit availability to even micro businesses and relatively less well-off households. AAs seek the consent of credit-seekers (and others) to make their financial records and other relevant data available to lenders (and other institutions), which in turn allows the latter to offer well-targeted loans (and investment products), something that was held back by lack of data earlier. This expansion of credit, which will be delivered almost entirely by fintech firms, is expected to further drive consumption, home purchases and the migration of savings to financial investments. Keep an eye on companies such as Finarkein Analytics.
OpenAI and its chat platform ChatGPT have created quite a stir with their sharp transformational capabilities: For the first time, the general populace has been exposed to the raw power of Machine Learning (ML) and Artificial Intelligence (AI) technologies. Platforms such as ChatGPT, while inspiring awe, also help familiarize us with the power of AI, paving the way for eventual widespread adoption. I forecast that AI will start to make its presence felt in high human cost verticals such as the legal profession, accountancy firms and the like. Simultaneously, we will also see industrial scale deployments in the financial sector for use cases such as fraud detection, cross-selling of products, marketing automation as well as hiring and talent management. Exciting times lie ahead for intelligent automation. Startups such as VoiceOC today enable patients to literally talk to computers and shortlist doctors, set up appointments, and then engage over WhatsApp to book tests and even make payments.
Electric mobility is going mainstream with two-wheelers as well as intra-city goods carriers such as auto-rickshaws and light trucks: It has also created a new public transport utility vehicle, the e-rickshaw, though its benefits can be debated. Two-wheeler electric vehicle (EV) sales will grow at 29% per annum to over $1 billion by 2027-28 as per Researchandmarkets.com. In my estimation, this is a gross underestimate of the market’s potential. Also, with the proliferation of charging networks and evolution in battery technology, electric cars look set to join the EV boom in 2023; they have been only 1-2% of total car sales in India so far, but their growth will be very steep in the coming years. Overall, 2023 will be a landmark year in the transition to electric mobility.
Finally, I see 5G telecom as an absolute game changer: As 5G networks proliferate, the changes wrought within the overall ecosystem will be breathtaking. Imagine its impact on media consumption, for example, once you can download an entire season of a Netflix show within a minute. Or consider the implications of a newfound ability to email MRI output files running into gigabytes to a specialist doctor for remote consultation. The much-maligned Metaverse will start to take shape as more brands see it as the next platform for consumer engagement in the post-Facebook era. Bandwidth will go from being scarce (though not too expensive) to plentiful and almost free in the 5G world. Let your imagination run wild over what this can do for you, your business, your children’s education and your parents’ healthcare.
The year 2023 will be a challenging one overall. But from an India perspective, there is much to look forward to as Digital India continues to take shape.
