Technology | MSME | Build | Future | Trends

Although the Indian IT sector is not directly impacted by US tariffs, the indirect effects could be significant. With 55-70% of revenue coming from the US market, the tariffs are likely to have visible secondary or indirect impacts in the coming quarters. Concerns and uncertainties in business processes and services are already prevalent, as companies strive to deliver more efficient, value-added solutions through AI. Additionally, growing fears of U.S. inflation and recession are further complicating the landscape, making it increasingly difficult to initiate new ventures and projects.

Companies manufacturing laptops, servers, network equipment, IoT devices, and other IT hardware for export to the US may be directly affected. These uncertainties could prompt investors and customers to renegotiate contracts or add clauses addressing these geopolitical risks. Planned expansions or projects might also face increased scrutiny from investors due to these uncertainties and risks.

Diversification

One solution to mitigate these challenges is diversification:

• Market Diversification: Leverage opportunities in other markets beyond the US.
• Product Diversification: Expand into other non-tariffed products or categories.
• Supply Chain Diversification: Capitalise on domestic consumption of raw materials and promote local products to boost the economy.

Higher-margin, value-added services

Another potential area is higher-margin, value-added services. Establishing specialized, deep centers of excellence by combining domain expertise with AI research can create competitive advantages. India could prioritize domains where it already has an edge, offering solutions with intellectual property rights and ownership. Since current AI models and algorithms are largely based on training datasets from Western countries, there is a significant opportunity for India, being a data-strong nation, to redefine these models.

Revenue Rethinking

Furthermore, companies can consider shifting their revenue models. Moving away from traditional Time & Money billing to models based on a percentage of revenue, cost savings, or outcomes could generate continuous income as services are consumed. Additionally, offering services in an as-a-service model can foster stickier ecosystems with recurring revenue streams.

Overall, while US tariffs may not directly affect the Indian IT sector, the secondary impacts require strategic adaptation through diversification, investment in higher-margin services, and innovative revenue models to sustain growth in an uncertain global marketplace.