Nasscom projects single digit export earnings for IT, ITeS

Nasscom projects single digit export earnings for IT, ITeS
The Financial Express, July 30, 2009, Page 12

fe Bureaus, Chennai, New Delhi

For the first time in the history of the Indian software exports, the sector will grow at a single digit rate.

According to figures released by the IT industry body Nasscom, the IT-BPO export revenues are expected to grow between 4-7% to stand between $48-50 billion in the financial year 2009-2010. In the last financial year, the IT export revenues grew by 16.3% to clock revenues of $46.3 billion. On Wednesday, Nasscom released industry figures for the financial year 2008-09 along with the outlook for the current fiscal.

Som Mittal, president, Nasscom told FE that the growth projections have been arrived at considering the fact that the economic downturn has led to severe cuts in the IT budgets across the globe, especially in discretionary spending. “There are other factors as well like there has been a shift from onsite to offshore, which has brought down the revenues though the effort continues. Moreover, in some sectors the transactional volume has come down like in the BPO industry. There have also been cases where companies have started in-sourcing the work instead of outsourcing it as they had more employees to do it in-house,” he said. .

The total revenues of the IT and BPO industry, which includes exports and the domestic market was at $58.8 billion for the financial year 2008-09, a growth of around 13% year-on-year. However, the growth in the domestic market exceeded the export market growth rate at 21% with revenues of Rs 570 billion in FY08-09. Even in the current fiscal, IT-BPO Domestic revenues are expected to grow at a healthy rate of 15-18%, to reach Rs 650-670 billion. Within the export segment, IT services have grown by 14.7% to clock revenues of $26.5 billion and BPO exports are up by 16.5% registering revenues of $2.7 billion.

Mittal said that there are huge opportunities in the domestic space especially in the government vertical along with sectors like retail, manufacturing and utilities among others which remain highly under penetrated in terms of IT investment.

He added that the SMB market which accounts for roughly 50% to 60% of the potential market in India continues to be largely unaddressed. They are also expected to increase their IT spends to increase efficiency in these tough times.

Moreover, there are emerging verticals with significant growth potential for the BPO industry like aviation, hospitality and retail.

“Social infrastructure like schools, colleges and hospitals needs to be developed to increase the IT business penetration in tier-II cities,” he said.

R Chandrasekaran, president and MD, Cognizant said that migration of more onshore work to offshore would open up the possibility of adding more jobs in India. Nasscom is also working on a curriculum for the finishing school model to impart skill upgradation to passing out graduates aspiring for jobs in IT, he added.

The reason behind the move is that the industry will not be hiring at the same rate this year and students passing out this year can engage themselves in these skill upgradation courses to be better prepared for the job market.

While the IT and BPO industry, added a total of 22 lakh people in the last financial year, up 10% from the year-ago period, this year, “the hiring will be tens of thousands compared to hundreds of thousands like in the last many years,” warned Mittal.

While IT services exports added around 9.22 lakh people, the BPO exports industry was a close second with addition of 7.86 people.

Emphasising the need to rework on the model that the IT industry used to operate on, Mittal said that US is the biggest market for the industry and will continue to remain so despite other emerging geographies fast catching up.

“The industry can look for newer geographies like Middle East or look for new verticals within the existing geographies of US and Europe,” he said.

Mittal added that healthcare, utilities and energy are the sectors where growth will be coming in the future. Moreover, the industry needs to focus on a newer customer base.

“So far we have mainly focussed on the Fortune 500 companies. But the spend outside the Fortune 500 is the same as of the Fortune 500. So, we need to address that market,” he said.