Nasscom to take up regulatory issues with government to spur growth

Nasscom to take up regulatory issues with government to spur growth
The Financial Express, November 19, 2009, Page 7

Rachana Khanzode, Mumbai

In a bid to promote growth of the engineering services sector Nasscom (National Association for Software Services Companies) is in talks with the government to overcome regulatory challenges. The engineering services industry has been facing a number of challenges with respect to export/import regulations, infrastructure like testing units with capabilities, international certification and domain expertise.

Krishna Mikkilineni, co-chairman, engineering services, Nasscom, and president and MD, Honeywell Technology Solutions, said: “We are in talks with the government with respect to the export and import regulations that restrict transfer of products from India to US and Europe. We are also working out on other challenges with the government like infrastructure, testing capabilities, international certification and academia.” The industry is facing a challenge to take up projects that involves end to end product development because these products cannot be sent to the clients in the US or Europe due to regulatory challenges. The US contributes about 58% while Europe contributes 29% of the total revenues. Also, India doesn’t have a certification that has recognition in the international market. These challenges have put its nearest competitor China in a better position to deliver products.

A day before, Nasscom said that the engineering services industry, which is now at its nascent stages with market of about $ 7 billion to $ 9 billion in 2009, is poised to grow to $ 50 billion by 2020. Regu Ayyaswamy, VP & global head, engineering and industrial services, Tata Consultancy Services, said, “The $50 billion target by 2020 is quite a doable number if there is a collaboration between the industry, government and academia. We have the potential and the value but the fact is that the China can do it faster because of these challenges.”

Currently, India has a market share of 20-25% while China has a market share of about 15-20%. While third party service providers that have been facing tough times in the IT services and BPO space are backing big time on the engineering services based on the non-linear model. Therefore these initiatives by the Nasscom become extremely important for the industry. S Valmeeka Nathan, VP & global head, product life cycle & engineering solutions at Infosys technologies, says, “Engineering services has a high margin advantage, non-linear built and potential to bring transformation in our relationships with the client.”