What 2022 holds for Kerala’s IT sector – a plethora of opportunities and a need for change


Before Bengaluru, Hyderabad and Gurugram became IT hotspots, Kerala was always at the forefront of the electronics and IT revolution in India.

When the pandemic raged on and put a stop to many of Kerala’s traditional strongholds like tourism, alcoholic beverages, and export-oriented industries like cashew, spices, handlooms etc., the Kerala IT industry was able to weather the storm admirably.

For example, in FY 2020-21, Technopark registered a 7 per cent increase in its export income to touch Rs 8,500 crore and this is expected to cross Rs 9,000 crore this financial year. This growth was a result of not just the proactive actions of the Central and state governments, but is also a proof that the Kerala IT industry is resilient and thriving.

In fact, for the last few years, several companies have been operating outside the parks and the total exports are definitely much higher.

While we rejoice at this achievement, it is important to realise that the world around is evolving. Change, in every sense, has been the ‘The New Normal’. Customer demands, business models, market hotspots, employee expectations, and the way employees work have radically transformed in the last couple of years.

And 2022 will not be any different. For Kerala to be competitive and take on a bigger share of the global IT industry, it will have to work with an open mindset and be agile enough to scale up and delight all its stakeholders.

First let us look at what we can call as the cornerstone of our IT industry — the people. Driven by the ‘Great Resignation’ and the numerous job opportunities available, attrition in many IT companies across the state has more than doubled from the normal 10 to 20 pert cent to 30 to 40 per cent and beyond.

As a response, some of the larger companies tried to attract resources with a higher salary, even if it hit their profit margins, offset partially by the Work From Home (WFH) scenario. Some looked at hiring fresh graduates, some went beyond the traditional hiring hotspots to hunt for new talent, while some opted for a gig model.

During the last couple of years, the employees also worked harder and continuously upskilled themselves to stay relevant and justify their higher costs. We can expect this trend to continue as organisations, strapped for talent, will enter hitherto unexplored markets to tap new source of employees.

Do not be surprised if companies from Kerala also employ people from abroad as the pandemic has shown that for the right people, location is not really a constraint.

The way the Kerala IT companies work will also go into a dramatic shift as 2022 unfolds. While most of the companies working out of Kerala were not known to be supporters of a remote-working model, they were forced to adopt, as the nation went into a lockdown in 2020.

WFH came home sooner than expected. Now it is the norm as collaboration is over conference calls than through collocation. But in 2022, we can expect these companies to move towards a hybrid model as soon as the situation allows them, because surveys show that more than 50 per cent people feel that they would prefer working out of office for at least 2-3 days a week.

The fresh hires, however, want to experience the office environment and they will form the core group as the work shifts back to office. This will ultimately create a domino effect, as the remote hires and gig employees will face a problem, and only the ones who are critical for the organisation and are capable to work by themselves without supervision will stay back home.

Another category of employees who might feel the pinch are the ones recruited much above the market rates to fill in urgent vacancies. Most companies in the last one year would have trained other resources on the skills so that the critical resource can be replaced easily.

Business models will also go for a significant change as customers will focus on shifting the cost of software from capital to operating expenses. This will create an increase in demand for SaaS based models, and it will be important that the IT companies in Kerala are ready for the subscription economy.

The customers will become more demanding as the expectation from the IT vendors will not just be to provide patented products that offer a great functionality, but also offer help in either one or more of the following – expand the customers’ business, ensure cost controls, grow profit margins, bring in the necessary regulatory compliances, or enhance the customer experience.

The customer industry portfolio distribution will also go for a drastic shift as the focus will shift towards industries such as banking, health, insurance etc. It is also important to understand that there will be tremendous opportunities for the Kerala IT companies if they are cognizant of the changing geo-political relations and are able to seize the opportunity. The workforce will also have to be trained in the new technologies and business scenarios so that we can stay ahead.

In 2022, the expectations from customers will also increase. While we have traditionally had a cost advantage, it is no more relevant as the customers are prioritising the strength of the product in terms of functionality, scalability, usability, and presence of the latest technologies such as AI, ML, Blockchain, Web 3.0, Big Data etc. over cost.

Moreover, there are other IT hotspots which can compete on cost. This would mean that the IT companies, which were focused on services, will have to start moving up the value chain in 2022 to stay relevant. The changing global scenario will also facilitate the smaller and medium-sized IT companies as they will be more agile and nimble in responding to the changing customer expectations.

The government can also do its bit by further promoting SMEs and startups.

2022 will certainly be a year of great opportunities, which, if used diligently, can help lay a strong platform to leap from and become a strong force in not just India, but across the world.

(Vijayaraghavan is the first CEO of Technopark besides being a former State Planning Board member. The views expressed are personal)



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