As the pandemic accelerates adoption of digital products and services, reporting Digital as a revenue stream will not be relevant a year or two from now, said Roop Singh, Chief Business Officer, Birlasoft.
Broadly, IT services firms bundle a range of services, including cloud, automation, business analytics and cybersecurity, under the digital head.
Most IT services firms report revenues for Digital and Core services. The latter includes support and maintenance of legacy systems such as mainframes. Digital accounts for over 35 percent of revenue and for some firms, including Birlasoft, it is 40-45 percent of their overall revenue.
While the Digital portion is growing, revenues from Core or Legacy, still the major chunk of business, is coming down.
A line that is blurring
Frequently Asked Questions
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According to Singh, the distinction between the two is blurring, more so amid the pandemic. “In every single project that we are tackling, whether it is bringing legacy platforms into the Cloud or whether we are providing end services, all of them have a Digital component.”
For instance, in the wake of the pandemic, companies had to shift to the Cloud quickly to ensure business continuity. Processes that run on mainframe systems had to be moved to the Cloud over the last five months. If not for the pandemic, it would have taken couple of years for the shift to happen.
In addition, cybersecurity is becoming important — with employees working remotely, network security has become essential.
A new normal
As the market shifts, organisations are not only reskilling themselves but consumers are also starting to learn what the new world is. “And given that they are looking at digital as a platform to build the technology, they (digital and legacy) all become singular. So, if we look at the industry overall, in a year or two, people will stop talking about Digital because of the way services are delivered,” Singh explained.
But reporting that shift would take time. For IT services organisations, increasing Digital revenue is a measure of how successful they have been in adopting to this new normal. IT service providers big and small are competing to gain market share in workplace transformation, cloud migration and remote working solutions, which are in huge demand.
Singh explained that down the line, Digital as a term would become synonymous with the work IT services companies do and it would all become one. “But for now we will continue with what the market peers are doing in terms of how we measure success in a particular market segment,” he added.