Theresa May’s Brexit Vote Defeat Complicates Indian IT Firms’ Future

The huge blow to British Prime Minister Theresa May’s Brexit deal in the House of Commons has further complicated an already-uncertain environment for Indian IT services firms. The UK is the second-largest market for the Indian IT industry after the US, and accounted for 17 per cent of its $167 billion revenues in 2017-18, according to industry body Nasscom. On Tuesday, the UK Parliament voted overwhelmingly against May’s Brexit deal, in a 432-202 margin.

The developments are being closely watched by Nasscom and IT companies in general, as a prolonged Brexit impasse will cause uncertainties among businesses operating in the region.

“Brexit has given rise to a fresh set of stability and growth concerns and next steps from the Chief Executive Officers (CEOs) and Boards have come under scrutiny. Large enterprises like British Telecom, Vodafone, BMW, Mercedes, Tata Group among others are being forced to relook and redefine their business strategy.

With free trade getting impacted, enterprises headquartered in Britain but operating in EU (and vice versa) can expect a backlash from local and regional competition, thereby resulting in pesky demand for their products and services. This will also mean slowing down of the overall economy.

Organizations will have to budget for significant increase in cost of doing business. Reasons may include the need to separate Britain and EU Headquarters, establish local support teams due to restricted workforce movement, rework employee and vendor contracts, conduct fresh regulatory and compliance audits among others. To cite some examples, Tata group, BMW among others have stated concerns regarding trade conditions, operating costs and possible operational changes because of Brexit.

Large enterprises will be forced to renegotiate their IT outsourcing and software licensing contracts and procure new IT infrastructure to adhere to local data privacy laws of today and tomorrow. The existing UK Data Protection Act is based on old EU rules and the new government can be expected to reform these laws in light of the proposed EU Privacy Reform. This will definitely attract fresh investments in technology to ensure enterprises from both sides can exchange data while ensuring compliance. Furthermore, restricted movement of workforce might deem Chief Information Officers (CIOs) to establish new local IT support teams.

To make matters more complex, CEOs and Boards can expect to grapple pressure from newer technology-led incumbents. It’s critical to remember that these young enterprises who are also grappling with Brexit are better equipped with latest technology, enjoy leaner operations with lower cost bases and are more desperate to eat into the market share,” said Sanchit Vir Gogia, Chief Analyst and CEO at Greyhound Research.

[Source]


Analyst:

Sanchit Vir Gogia: Sanchit is the Chief Analyst, Founder & CEO of Greyhound Research, a Global, Award-Winning, Technology & Innovation Research & Advisory firm. To read more about him, click here.

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