Indian IT-Dimensions and Directions

When NASSCOM announced the results for the Software industry for the
financial year 2004-05, it was almost predictable that the industry would
surpass its own expectations. It recorded a 32% overall growth against a
forecast of 25%, powered by a 49% growth in BPO that put the rather weaker 27%
growth in software in the shade. Add to these encouraging numbers a few more
dimensions-over 660 $1-mn-plus clients, industry employment crossing a million
and revenues from the higher end product development and R&D services
clocking an impressive level of $3 bn in an overall software exports pie of
$17.2 bn, and you see a picture of a vibrant industry-one that has truly put
India on the world map and given many more industry sectors the confidence to go
for the global market with a vengeance!

Ganesh Natarajan

overall prognosis for the near term continues to be very optimistic
and it would take a catastrophe to upset the IT applecart at this

A few lesser-noticed statistics are revealing too-Domestic revenues in
Software and BPO services grew by 23%, giving way to some optimism that the
spending on IT, which had been so pitiful in our country, may finally be
turning. The growth of the SME sector-estimated at 20-22%-is again a healthy
number. A third wave of growth is beginning to swell in many parts of the
country. The natural marriage between domestic consumers in government
industries and small but high quality SMEs is still to happen in a big way, but
the signs of partnership are evident.

The overall prognosis for the near term continues to be very optimistic and
it would take a catastrophe to upset the IT applecart at this stage. The NASSCOM
survey points out that market indicators remain strong for the present, with
both onsite and offshore realizable rates hardening, the penetration of Fortune
1000 companies by the significant software and BPO players increasing and new
markets like Japan, Germany and Singapore opening their doors wider to the
offshore outsourcing phenomenon. The identification of new niches like
Engineering Services, Infrastructure and Network Management, and the move up the
consulting value chain has seen Indian players come closer to their well
renowned global counterparts. Though the significant expansion of IBM and
Accenture in their offshore development activities does raise the occasional
concern about wages spiraling out of control in the medium term. The integration
of software and BPO offerings is also a sign of a maturing industry that now
focuses on the transformation of processes and business outcomes rather than
just technology. And the fact that many of the small and mid-sized players have
learnt to focus on niche skills and walk away from low pricing matches have led
to the industry truly emerging as a multi-dimensional high value adding group of
companies rather than just a few winners and a large group of me-too players.

Opportunities in the domestic market too are opening up with global retailers
and India’s own expanding chains embracing world class technologies.
Manufacturing is taking off in a big way and other industries including
aviation, logistics, hospitality, pharmaceuticals and the entire range of
financial services are looking at transformational IT solutions to become truly
world class. The low volume of PC production in the country and the slow
adoption of e-Governance except for isolated success stories do give cause for
some concern but there is an overall feeling of optimism in the country that
will provide enough opportunities in IT and ITeS to keep both the domestic and
export sectors growing.

And for all the Cassandras who had scoffed at the ambitious $50 bn goal for
2008-09, here’s one in the eye-on a ten year growth percentage that has an
asking rate of 31%, just the sustenance of the present levels of growth will see
that magic number reached and surpassed-more power to Indian IT!

The author is Deputy Chairman & MD of Zensar Technologies and Chairman
of the NASSCOM Innovation Initiative
Ganesh Natarajan

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