Nasscom expects exports to rise faster, by as much as 15%, to $57 billion (Rs2.6 trillion) in the year to March 2011 from $49.7 billion in the year earlier, it said

New Delhi/Mumbai: India’s software companies estimated a 5.5% growth in exports in the current fiscal year, reaffirming a growth trend that signals their emergence from a slump triggered by the global meltdown that saw overseas customers slashing technology budgets.

Nasscom expects exports to rise faster, by as much as 15%, to $57 billion (Rs2.6 trillion) in the year to March 2011 from $49.7 billion in the year earlier, it said in Delhi on Thursday. Nasscom said exports were $47.1 billion in fiscal 2009.

The estimate for the current year is in line with Nasscom’s projected growth of 4-7%, but shy of the $50 billion mark that the industry body had estimated earlier. The growth came in the face of a 3% cut in worldwide technology spend, estimated to have crossed $1.5 trillion in 2009.

“This milestone confirms the value delivered by the IT-BPO industry of India to its customers and stakeholders, and reaffirms the strength of the business model,” said Manish Dugar, chief financial officer at Wipro Technologies. Wipro Technologies is the IT services arm of Wipro Ltd, India’s No. 3 software exporter.

To be sure, the FY11 estimate is lower than the previous estimate of $60-62 billion, which was made at a time when the industry enjoyed much higher rates of growth. The pace was as much as 32% five years ago.

Nasscom chairman Pramod Bhasin attributed the revision to a slow recovery from the slump as well as the earlier projection not being an exact estimation. Following the global slump triggered by the collapse of Lehman Brothers Holdings Inc. in September 2008, Indian IT companies faced reduced demand for services from the US and Europe.

However, for the quarter ended December, the country’s largest IT exporters—Tata Consultancy Services Ltd (TCS) and Infosys Technologies Ltd—reported robust revenue growth on the back of increasing demand. Even as clients are finalizing budgets for the next fiscal, commentary from the management of TCS and Infosys indicated an increasing number of deals on the table.

Still, “the economic environment will take another two to three quarters to stabilize”, Bhasin said.

The projections look realistic and are definitely not conservative, said Krishnakumar Natarajan, chief executive at mid-sized IT firm MindTree Ltd. “A quarter down the line, when IT budgets are finalized, I believe these numbers would be validated if not revised upward.” For fiscal 2009, MindTree had a revenue of Rs1,012 crore.

T.V. Mohandas Pai, director, human resources, and an Infosys board member, expects more clarity in the next few months. “The current estimates are based on a poll of exporting companies, so it is fair to say that the numbers are realistic,” Pai said. “However, I am still very cautious. Closer to April, I expect to have better visibility about the next fiscal.” Analysts aren’t yet ready to put a number on the growth potential as the demand scenario is still evolving.

“We are seeing a stronger rebound of demand in the global IT services market, especially in the financial services industry, manufacturing and to a certain extent, in retail,” said Sid Pai, managing director at the Indian arm of outsourcing advisory TPI.

Pai said that one possible dampener in the short term could be protectionist laws in the US aimed at keeping jobs at home, preventing companies from offshoring jobs—the mainstay of most Indian IT exporters. “The protectionist sentiments we are seeing in the US will likely mean Indian players have to increase their local presence in that country,” TPI’s Pai said.

Mumbai: By mid-2011, the Indian information technology services sector will be back to growth in double-digits, according to research and advisory agency, Gartner.

The ector may not touch the 30-40 per cent growth rates it witnessed before the slowdown, but an register above 20 per cent growth as it nears calendar year 2011, says Partha Iyengar, regional research head and Vice President, Gartner India.

Iyengar says while IT budgets would be flat for some time in 2010, there is a sense of urgency among clients to increase their cost efficiencies and hence a push towards outsourcing and offshoring. “This is also evident in the closure of sale cycles. During the slowdown, deal closure time had gone up by a few months but are now back in the range of three to five months. For instance, we had a call from a client in Europe who were asking for at least 100 people in the next two months. They wanted to close the deal as soon as possible,” he says.

IT spending, too, is expected to reach $3.4 trillion in 2010 — a 4.6 per cent increase from 2009, according to a new Gartner report. Although modest, this projected growth represents a significant improvement from 2009, when worldwide IT spending declined 4.6 per cent.

Iyengar says the growth was anticipated. (Software body Nasscom now says the IT industry will grow at 14-17 per cent in FY11). “The key difference during this slowdown and the earlier one is the sense of urgency among clients,” he explains.

Iyengar also feels the demand scenario is not only sustainable but the level for outsourcing will go back to 2008 levels. Deals in the range of $100-300 million are also back on table for discussion, he says. “Unlike in the previous recession, the decision to outsource was on hold, not the projects. It was just put on hold. Now, these projects have been fast-paddled.”

But, Iyengar qualifies this by also saying that while demand is returning, concerns from the supply side remain the same. “How do you ramp up your hiring activity and even if you are able to get the numbers, will they be skilled enough? The only silver lining is that the firms did have some time to get their supply side in order,” he concludes.

On the political climate in the US, Iyengar opines that the decision to offshore work primarily depends on the financial and cost needs. “But, what is commendable is how Indian IT firms are moving up the value chain by expanding into US geographies,” he says.