A multipolar tech world more likely post Ukraine conflict

The ongoing Russia-Ukraine conflict is likely to change the world order in multiple ways. Technology industry is no exception to that. As trade channels get weaponised and technology denial becomes the norm, the globe may see evolution of a multipolar world with regard to technology systems in coming years. Nations will put effort to create their own critical technology systems to mitigate risks arising from conflict like situations. In a conversation with the Bizz Buzz, Founder & CEO of Pareekh Consulting and EIIR Trend, Pareekh Jain said Indian IT industry may face short-term uncertainty due to the conflict. However, as nations including India spend more on information technology, it will ultimately benefit Indian services providers. He also said that the credibility of India as an outsourcing destination is all set to rise as more work gets outsourced to the country owing to disruption in East European operations. India as a country has already been investing in technology stacks like UPI, RuPay and many more in coming years. The pace of such innovation is going to accelerate in coming years, he said adding that many success stories of ISRO is likely to be replicated in other sectors

In the near-term, more work is going to shift to offshore centres like India as near-shore centres in countries like Ukraine & Belarus are getting affected due to the conflict. Also, utilities in the European countries will be the first ones to be affected, which may arise to some client-specific issues. Moreover, Indian IT companies are trying to increase their foot hold on the East European countries by setting up new centres. These centres work as near-shore delivery centres for European clients. We may see Indian companies are going to go slow on expansion or setting up new centres

The Ukraine conflict may accelerate the development of alternate systems with regard to many technological applications. Now, people are realising that you can’t have a unipolar world with regard to technology. As of now, technology is a winner’s take all market with many US companies dominating the globe. After this conflict, we may see a multipolar world in the technology space as well. So, it is an opportunity for countries like India which can develop its own technology stacks like alternate mobile operating system, financial applications and many more. It is of geopolitical interest for a country like India that it doesn’t depend massively on any other country as far technology is concerned

What is the likely fallout of Russia-Ukraine conflict on the technology industry globally? Can you throw some light on this aspect?

This conflict may accelerate the development of alternate systems with regard to many technological applications. Now, people are realising that you can’t have a unipolar world with regard to technology. As of now, technology is a winner’s take all market with many US companies dominating the globe. After this conflict, we may see a multipolar world in the technology space as well. So, it is an opportunity for countries like India which can develop its own technology stacks like alternate mobile operating system, financial applications and many more. It is of geopolitical interest for a country like India that it doesn’t depend massively on any other country as far technology is concerned. This is not only related to economics anymore. So far, the idea in the technology world is that economies of scale play a critical role. That is the reason that one company dominating a specific ecosystem. But now, many companies will come up because of their strategic importance to their nations.

How do you see this playing out for Indian IT industry in coming years? Can we see more IT spend from the government for supporting innovation? Will Indian startup ecosystem and IT services companies be major beneficiaries of this push?

Definitely, this will happen. There are two ways of looking at it. Firstly, Indian technology industry may not gain much from the conflict zone. As far as domestic spend is concerned, many steps have already been taken in this direction. Many alternatives to various technological applications have been created within India. For instance, United Payments Interface (UPI), RuPay are successful test cases in India. We may see such innovations in other areas also. India can develop its own mobile operating system, own GPS, own internet, and many more such technology areas. Such innovations will also be supported by the government. Earlier, ISRO (Indian Space Research Organisation) has come up with many innovations in the space technology space. This is likely to spread to other areas with the support of the government. These things become imperative because of the risks of not having your own system can become very high. So, India has to develop these systems to mitigate risks.

East Europe has been developing as a zone for IT outsourcing in recent years and is being seen as a good offshore destination. What will happen to these centres after the Russia-Ukraine conflict? Will Indian talent be benefitted because more work may be outsourced to India?

In the near-term, more work is going to shift to offshore centres like India as near-shore centres in countries like Ukraine & Belarus are getting affected due to the conflict. Also, utilities in the European countries will be the first ones to be affected, which may arise to some client-specific issues. Moreover, Indian IT companies are trying to increase their foot hold on the East European countries by setting up new centres. These centres work as near-shore delivery centres for European clients. We may see Indian companies are going to go slow on expansion or setting up new centres.

What kind of business impact Indian IT industry can see due to this event? Will IT spend be negatively impacted?

As far as business impact is concerned, we have to wait and watch. Many companies have pulled out of Russia. Many IT services providers have also pulled out of the country. As companies pull out, there can be short-term uncertainty. The second order impact can be that there may be delay in decision making with regard to new projects. This is because, when companies exit, there must be some disruption in operations. The whole supply chain is also getting disrupted. Also, European financial companies are likely to get impacted due to their exposure. This war is changing everything. Also, semiconductor shortage is expected to continue due to this conflict. Commodity prices have started rising globally. So, there is a bit of uncertainty everywhere, which is not good for IT business. Enterprises are spending on digital because of growth expectations. So, if the growth possibility comes under question, spend on digital may see a bit of delay. So, delay in decision making or reprioritisation of projects may happen.

In a globalised world, these are the fault lines which are getting exposed now. After pandemic, companies have realised that they need to have manufacturing capability beyond China. Similarly, after this conflict, enterprises will evaluate their supply chain, operations and all other things. Overall, this can be beneficial for India. More supply chain may come to India. Another aspect is that if more nations put efforts to be technology independent, this augurs well for Indian IT firms because more number of players means more business for Indian service providers.