Signs of revival for Indian IT?

After a below-par 2012, industry is optimistic on a better year ahead

With every new year, come along new hopes. For reversal of fortunes, revival reforms and rejuvenated growth trajectory.

This year, 2013, is no different. It is something Indian IT companies are expecting after a sluggish previous year that reflected the unflattering global outlook to a large extent.

When Kris S. Gopalakrishnan, executive co-chairman of Infosys, said recently that 2013 would be a better year for Indian IT, he didn't forget to factor in the global economy and its implications on the Indian IT sector, which relies on outsourced projects from predominantly Europe and the U.S..

"The global economy, I think, has improved, specially in the USA. China is growing faster. India has also started improving. So except for, may be Europe, rest of the world is trying to improve and it is good for the global economy... 2013 will be better than 2012."

The National Association of Software and Services Companies (NASSCOM) has also sounded positive, affirming that in FY2013, the export revenues are expected to grow by 11-14 per cent, while the domestic revenues will grow by 13-16 per cent.

It has estimated that the global technology spending would be at 4.5 per cent and global sourcing is expected to be a major driver of technology spending. NASSCOM estimates for FY2012-13, too, have been spelt out considering the ambivalent economic climate, which is plagued with delayed decision-making and differentiated growth across the industry sectors and companies.

On what's lying ahead in the year for the Indian IT and ITeS sectors, Som Mittal, president of NASSCOM, has stated, "Indian IT-BPO firms have matured from being service providers to strategic partners to their customers, highlighting their importance in enabling growth of customer businesses."

"Verticalization, operational excellence and an expanding global delivery model were internal priorities for the industry in this year. The domestic market for the last couple of years has been growing faster than the exports sector and would continue to be a key thrust area for the industry."

The India IT services market is forecast to reach $10.2 billion in 2013, which is a 12 per cent increase from an estimated $9.1 billion in 2012, according to Gartner, Inc. In addition, IT spending in India is projected to total $71.5 billion in 2013, a healthy 7.7 per cent surge from the $66.4 billion forecast for 2012.

The research agency has stated that the government infrastructure projects would strongly drive IT, in conjunction with the expansion of the financial services and manufacturing sub-sectors.

"Leveraging tier-2 and tier-3 cities for Indian business is a tactic that could be used in conjunction with the mainstream delivery from tier-1 locations," Arup Roy, principal research analyst, Gartner, was reported saying on the year's future trends.

As far as the third quarter of the financial year 2013 (Q3 FY2013) is concerned, Angel Broking predicts that US dollar revenue of tier-I IT companies would grow moderately by 2.2-3.2 per cent QoQ, with TCS maintaining its lead over the rest.

For tier-II IT companies, US dollar revenue growth is projected to be in a wider range. It would hover around 1.3 to 8.4 per cent QoQ.

Broking house Sharekhan Fundamental Research, too, puts TCS ahead of the pack, with its revenues expected to grow by 3.4 per cent QoQ, closely followed by HCL Technologies at 2.9 per cent and Wipro at 2.6 per cent, whereas Infosys Limited's revenue growth is pegged at 1.3 per cent QoQ, significantly lesser than its market peers.

Even though Infosys has slashed its guidance for the year, investors and the industry are looking forward to its Q3FY2013 results announcement on Friday.

First Published in http://www.ciol.com/ciol/news/155465/will-2013-spell-turnaround-indian-it-sector