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India continues to be the preferred digital services destination of the world; nasscom-Avasant Digital Enterprise 5.0 report

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The landscape of digital transformation is broadening, with digital spending proving resilient in the face of economic headwinds. nasscom in collaboration with Avasant has today released, “Digital Enterprise Maturity 5.0: Digital Readiness in the Era of AI.” The 5th edition of Digital Enterprise Maturity report analysis is based on a survey of 550 enterprises across 11 major sectors and seven chief geographic regions.

According to the survey, 71% of enterprises have spent over 20% of their tech spends on digital in CY2023. Moreover, nearly 90% of companies have signalled plans to boost investments in key digital technology areas in 2024, including AI/machine learning (AI/ML), big data analytics, cloud computing, cybersecurity, and intelligent automation. With the adoption of Generative AI set to expand significantly, the focus is anticipated to shift more toward cybersecurity in the next 18 months, by H1CY2025.

Approximately 85% of high-tech companies, along with over 70% of those in telecom, media and entertainment, BFSI, and energy and utilities sectors, have dedicated more than 20% of their technology budgets to digital advancements. Notably, the sectors witnessing the most significant increases in digital spending allocations from 2022 are energy and utilities, high-tech, retail, and telecom, media, and entertainment.

Gen AI has emerged as a prominent technology in 2023, attracting targeted investment from nearly 70% of global enterprises. This has led to sectors including BFSI, high-tech, discrete manufacturing, telecom, media and entertainment, as well as energy, utilities, and alternatives significantly expanding their digital services contracts.
The recent period of 12 to 18 months has underscored the necessity of a robust digital talent strategy for the effective scaling of digital projects and sustaining agility in the face of fluctuating market dynamics. In 2023, 83% of enterprises reported that over 6% of their total workforce was dedicated to digital roles, a notable increase from 66% in 2022. This surge in digital talent emphasis was propelled by the advancements in Generative AI, which, in turn, sparked a heightened focus on cloud computing and data-related skills. Traditional sectors such as energy and utilities, along with construction and engineering, demonstrated substantial growth in their digital talent base, reflecting a broad-based commitment across industries to deepen their digital capabilities.

Notably, the number of enterprises awarding digital services contracts with durations of four years or more doubled in CY2023. India continues to be the preferred outsourcing destination for businesses aiming to build and expand their digital services portfolio, with over 50% of companies in the travel and transportation, telecom, media and entertainment, and construction and engineering sectors choosing it for their outsourcing needs. Between 47% and 49% of firms in sectors like telecom, media and entertainment, discrete manufacturing, and energy and utilities outsourced digital services work to their own capability centres in India. Nearshoring trends were also notable, with 45% of high-tech and travel and transportation companies, alongside 41% to 43% of telecom, discrete manufacturing, and construction firms, opting to nearshore to India in 2023, underscoring the country’s growing appeal as a global hub for digital services outsourcing.

Sangeeta Gupta, Sr. Vice President and Chief Strategy Officer at nasscom said, “A strategic framework for businesses seeking to hasten digital adoption in an era where artificial intelligence and skills are paramount. Prioritising the development of digital talent within organisations is essential to ensure the workforce can effectively leverage AI and other advanced technologies. Moreover, focusing on data mastery to extract actionable insights and informed decision-making is critical.”

Avasant Managing Partner Akshay Khanna said, “The digital landscape is undergoing a profound transformation, and enterprises are at the forefront of this change. The commitment to digital maturity is no longer just about streamlining costs but about boldly shaping the future. In this AI-driven era, we see companies prioritising groundbreaking innovation, elevating customer experience, and accelerating market responsiveness. They are not just adapting to change; they are defining it. As they invest in digital prowess, digital talent becomes paramount, ensuring their workforce is not just ready but leading the charge in this new digital dawn.”

FY2024 Outlook

68% of global enterprises anticipate an uptick in client demand, while 80% expect revenues to either maintain current levels or increase, even amid pricing pressures. A strategic pivot towards competitive differentiation is projected to be the primary business focus in 2024, superseding the cost management emphasis of 2023. Investment hotspots over the next 12 to 18 months include cybersecurity, AI/machine learning, Generative AI, networking technology, and automation, largely fueled by the imperative to leverage data more effectively.

Generative AI is poised to receive heightened investment in 2024, with 73% of firms that allocated budgets to Gen AI in 2023 deeming it essential to increase spending, especially in talent development. The top five Gen AI-related roles in high demand for 2024 are anticipated to centre on model fine-tuning and application, comprising positions such as Gen AI developers, prompt engineers, AI model curators, and AI content creators, in addition to the pivotal role of chief AI officer.

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