If you thought the role of public sector units (PSUs) in the Indian economy would shrink in the days to come, you'd be wrong.
According to a study released this week by consulting firm Zinnov, Indian PSUs are expected to witness a turnover of more than US$1 trillion by 2020, from US$383 billion in 2011-12. A large part of the growth will be attributed to investments in modern forms of IT including cloud, big data, and mobility.
Praveen Bhadada, Zinnov's director of market expansion, said in a statement: "India is a hub of 225 PSUs operating across verticals, with 16 of these companies featuring in the global list of top 2,000 companies. With their growing size and dominance, PSUs have started looking at IT to address global competition."
He cited the example of State Bank of India which has deployed one of the largest core banking implementation globally as well as oil-PSU Bharat Petroleum Corporation (BPCL) which has made early investments in big data.
IT is viewed as an enabler for cost reduction through the automation of processes and integrated IT setups. "Today PSUs are looking at IT to analyze customer information efficiently and develop targeted and customized offerings for customers," Bhadada added.
According to the Zinnov report, IT spend accounts for about 2 percent of total PSU revenue, which is higher than most other verticals, and was valued at US$8.5 billion in 2011-12. Energy and BFSI (banking, financial services and insurance) are major PSU verticals for IT investments.
The PSU sector gives employment to 1.4 million, with 40 percent of companies operating in the manufacturing sector. Indian PSUs have been witnessing revenue growth of 11 percent since 2009.
"PSUs are looking at investing in technology to help address the challenges they faced in early years of transition toward establishing a more transparent and accountable organization, reduce the cost of production, and enhance productivity and customer reach," the report stated.
It also looked at some of the challenges faced by the Indian PSU sector, pointing to talent as one such challenge. Lack of performance incentives in terms of recognition and accelerated growth paths for workforce gives rise to productivity challenges, said Zinnov.
In addition, other challenges like lack of quantitative benchmarks against domestic private companies or global equivalents is affecting the performance of the sector. The broad-based decision-making structure, with stakeholders holding overlapping responsibilities, among PSUs also results in lack of accountability.