Back to the Future

The monsoons of the year 2004 gave me an opportunity to take a break-from

the industry, the company and most important, the ubiquitous email, sms and

mobile phone world to go trekking in the Himalayas and ponder on what has been

and what will be in this exciting industry-in the next four years and through

this decade. Five insights that flashed through my mind in the Valley of

Flowers, Hemkund and Kedarnath are worth recording and pondering about as the

industry moves from survival to consolidation to a new phase of growth.

First there is no doubt in my mind that the 30% growth track will continue

through to 2008, driven by the growth of insourced Application Portfolio

Management centers for the multinationals, the continued movement of BPO jobs to

India and the expansion of IT services to new markets such as Latin America,

Continental Europe and China- yes China will prove to be as big a market

tomorrow as it is today a competitor and Indian firms who realize that there is

money to be made through development as well as marketing in China will be the

true winners. Beyond 2008, the growth percentages may even accelerate as India

takes its rightful position as the outsourcing destination of choice for IT and

BPO. The $100 bn industry is not a distant dream-it may well be achieved in

this decade.

Ganesh Natarajan Indian firms who realize that there is money to be made through development as well as marketing in China will be the true winners

Second, the profitability of Indian Software vendors to a certain extent and

on a larger scale, that of global players like IBM, Accenture and Cap Gemini

will continue to be under pressure so long as the current model of throwing

lower cost bodies at projects and processes continues to be the dominant reason

for offshore outsourcing. With all the global players discovering "best

shore" strategies and even mid tier companies in the developed world

queuing up to discover what (US presidential) candidate Kerry is so concerned

about, every country from Vietnam to Columbia will clamber on the bandwagon and

put intense pressure on bill rates.

Third, new ways of development will emerge as Indian ingenuity discover a new

paradigm for competitive advantage and profitable growth. At Zensar we have

discovered a new wave of success-in software development, product enhancement

and migrations through our automated solution blueprinting framework and in ITeS

through the business process optimization and outsourcing sequence and every

significant offshore services provider will develop their own methodologies to

make the transition less wage arbitrage and more innovation dependent.

Fourth, the CEOs of the industry, individually and collectively through

outstanding organizations like Nasscom will push the envelop of capability and

raise the bar for competition through the discovery and invention of new product

and service opportunities-solution patterns for different vertical segments,

knowledge and tutoring support for the global knowledge seeking community etc

etc. This will keep the IT juggernaut rolling and raise the image of India and

Indians in the world.

Fifth, domestic consumption of IT will really take off—after retaining its

share of the IT pie in the recent fiscal, the government impetus on eGovernance

and the pursuit of IT-led competitiveness by the fast exporting domestic

manufacturing industry will drive higher and higher investments in IT and build

a symbiotic relationship between providers and users of technology solutions

that in turn will accelerate each of the above four factors.

Amidst all these positive trends, there are some areas where the industry

needs to tread carefully. The human resource issue is one which can make the

wheels come off the IT bandwagon. With the industry-institution linkage still

far from satisfactory, attrition and wage escalation assuming startling

dimensions and the aspirations of starry eyed youngsters entering the industry

rewriting the meaning of the Herzberg motivation model every year, finding,

managing and retaining high quality talent is going to be a major focus area for

the industry.

The author is deputy chairman & managing director of Zensar

Technologies and chairman of Nasscom's SME Forum for Western India Ganesh

Natarajan