Nasscom: IT sector logs 28 per cent growth in
FY 2007-08 |
Som Mittal, President, Nasscom |
According to Nasscom's annual survey, despite FY 2007-08 not having been easy for the Indian IT software industry, the sector has logged in a 28 per cent (with adjusted exchange rates) growth. The figures rose up to US$ 52 billion for year 2007-08 as against US$ 39.6 billion in the previous fiscal.
"The current growth rates show the IT industry's resilience. Despite facing several problems last year, like the sub-prime crisis, fluctuating currency etc, Indian IT industry continued growth story. We saw revenues grow 28 per cent and employment 26 per cent in the exports sector alone. This is good for the industry," says Som Mittal, President, Nasscom.
The software services sector too moved northward by 30 per cent, to earn revenues of US$ 40.4 billion, while the domestic segment registered 26 per cent growth to touch revenues of US$ 11.6 billion. The survey also projects that the overall software and services revenues will grow by 21-24 per cent (with adjusted exchange rates) to touch US$ 50 billion in 2008-09.
“That's not all, the industry is well on track to reach its target of achieving US$ 75 billion by 2010. Mittal further adds, “Surveys done by CIOs reveal – in 2008 too, tech spending will be similar to 2007. In fact, to stretch the dollar, firms will continue to adopt more technology.”
Demand for technology-related services will however, vary. "As Indian IT companies are spreading to new geographies, Europe now constitutes nearly 32 per cent of our business," says Mittal. But next decade will be very different. "Although opportunities are immense, we will require new business models. Our biggest concern will be the ability to execute contracts," Mittal added.
Source: Nasscom |
'Indian IT sector set to be 2nd largest' |
"Indian IT industry may be passing through a rough patch because of a slowdown in the US economy and high inflation rates, but this stage will pass. India will continue to drive the global IT market for the next few years. In fact, it will emerge as the second most important IT industry in the world after the US in terms of revenue and employment," says a study. "India will create the second largest IT services labour pool after the US within the next seven to eight years. That's not all, domestic IT industry's contribution to our GDP is likely to rise from 0.8% in 2006-07 to 2.65% by 2015-16."
This has been forecasted by a yet to be released white paper 'India's Role in the Globalization of the IT Industry' by Evalueserve, a KPO. It says, "by 2015-2016, the number of professionals working in the IT industry will grow ten-fold (from 2001-2002) and the total revenue will grow 22 times." This means, the IT industry is likely to employ 3,750,000 professionals and record $193.1 billion in revenue by 2015-16.
"Since India's GDP is growing at 8.5% per annum in real terms and 14% in nominal terms, by 2015-16 our GDP is likely to be $2,400 billion. Given this, the IT industry is likely to constitute 8.05% of India's GDP."
While in the last decade, IT services exports (including engineering services, R&D, and those related to creating and maintaining software products) have been growing at 32% annually. Evalueserve estimates this growth rate will taper off and become around 20% in the next seven to eight years. The reason: rising wages, lack of high quality talent, and IT jobs relocating to other low-cost destinations in Eastern Europe and Latin America.
The paper thus concludes: First, by 2016 India will have the second highest number of IT professionals in the world after the US. In fact, US will employ between 1.25 to 1.33 times more professionals than India.
Second, even in 2016, the US IT industry will generate approximately $810 billion in annual revenue, which would be almost five times the revenue of the Indian IT industry. And third, since the IT industries in both the US and India have become inextricably linked with one another, both countries will import and export more IT services and products for the next seven to eight years.
Source: The Times of India |
| Domestic BPO sector to treble revenues by 2012 |
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There will be an almost four-fold rise in the number of people employed for providing back office services to Indian domestic firms as this industry is expected to more than treble in revenues by 2012. According to a study by the Pune-based research firm, Valuenotes Database, domestic business process outsourcing (BPO) firms would collectively employ about 5.4 lakh employees in the next four years as against 1.4 lakh staff currently. In the same time period, it will achieve revenues of Rs 22,800 crore from Rs 6,900 crore in fiscal 2008, the study suggests.
Apart from opening new vistas of opportunity for third party BPO companies, the growth in domestic BPOs would help in creation of job opportunities in semi-urban pockets of the country.
Unlike the international service providers, the driver for domestic BPOs is not labour or cost arbitrage but the need to provide better customer services, scale up rapidly, enhance productivity and reduce time to market, Mr Pranav Dixit, Senior Analyst with Valuenotes, told Business Line.
Third party vendors
Third party players will be better positioned to benefit from this growth wave going forward as companies are increasingly choosing them instead of forming a captive to get back-office work done. BPO observers feel that many captives are finding it difficult to scale up owing to lack of strategic direction within the parent firm. Moreover, they are not able to justify overheads in many cases with their current scale of operations.
By 2012, revenues for third party vendors will grow at an annual rate of 44 per cent to Rs 7,700 crore from Rs 1,800 crore, Valuenotes says. (Currently, third party companies collectively control 27 per cent of this market.)
Telecom and banking, financial services and insurance together amount for nearly three-fourths of the total revenue generated by this sector. Low value but high volume services such as data entry, digitisation and aspects related to customer assistance would be easily outsourced in the Indian context, said Mr Dixit. Going forward, organisations and institutions in verticals such as government (for e-governance programmes) and retail (for customer loyalty and retention) are expected to increase outsourcing.
Entering Tier-2 cities
Since a lot of the back office work ought to be done in regional languages, BPO firms will be keen to set up shop in tier-2 and tier 3 cities, said Ms Neeraja Kandala, Senior Analyst, Valuenotes.
“By doing so, they can tap into the readily available talent pool which has the requisite linguistic capabilities. It also decreases their overall cost of doing business,” said Ms Kandala.
While margins in international BPO business could be anywhere between 15-20 per cent, it is on the lower side- between 10 and 12 per cent for domestic operations. However, the sheer size of the opportunity has prompted companies such as Genpact, Infosys and many others to seriously commit time and capital to this space.
Source : The Hindu Business Line |
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Indian SMB market at
35 million units: study
Small and medium business IT spend at $6.5billion in 07-08, is nearly 30% of the total IT spend in India, reveals study. Easy and affordable technology is driving the overall technology adoption process within the small and medium business (SMB) sector. This is evident from the fact that India already has 5000 IT/ITeS companies with 100% PC penetration. Contributing to this trend is the growing internet penetration with a CAGR of 46% in the last seven years.
A recent study on “IT opportunity in the Indian SMB sector”, by Zinnov Management Consulting reveals that the Indian SMB market today stands at 35 million units, with retail contributing 52% ( at 15 to 18 mn units). Spend on IT in '07-08 by SMBs was $6.6 billion, which is around 30% of the total IT spend in India. The report defines “SMBs” as organizations having a minimum employee strength of 999, essentially in three key categories namely retail, manufacturing and services. The services sector contributes 9.5 million units followed by manufacturing which ptiches in with about 7.3 million units.
Technology enablers
Special packages offered by leading IT companies include IBM’s Express Advantage product portfolio, that offers complete solutions from IBM’s Software, Systems and Technology, and Services groups. This addresses security, business recovery, employee collaboration and energy efficiency needs of mid-sized businesses. It recently rolled out the BladeCenter S, which aims to reduce the 25 to 45 servers used by an average mid-sized company by up to 80%, eliminating the need for the SMEs to own and operate data centres.
Cisco’s Unified Communications 500 Series for Small Business is a unified communications solution for small businesses that provides voice, data, voicemail and WebEx Automated Attendant, video, security, and wireless capabilities while integrating with existing desktop applications such as calendar, e-mail, and customer relationship management (CRM) programs. Cisco recently launched a Smart Care Service designed to help SMBs in India to simplify network maintenance.
Cisco India’s ‘Network On Wheels’ (NOW), is a mobile showcase of customized networking solutions that include advanced technologies such as Security, Wireless and Unified IP Communications.
Microsoft offers the SMB community a set of products that have been specially designed for them -- the Small Business Server 2003, Microsoft Dynamics NAV and Microsoft’s ERP offering. It also has a dedicated website like Merabusiness.com through which allows users to interacts with a host of businesses on relevant products for the SMB community, information on updates and investments.
India, China, Korea and ASEAN region are fastest growing SMB markets. Zinnov chief executive Pari Natarajan cites greater employee mobility, increased competition and expansion in terms of office locations as some of the reasons encouraging SMBs in India to embrace IT and the Internet.
“Government today has realized the potential of this growing segment. Most of the big players, irrespective of the vertical they belong to, are looking at this market and are formulating strategies to tap it, he adds.
For IT giants like IBM, India, China, ASEAN (especially Vietnam) and Korea are the fastest-growing SMB markets in the APAC region. Of these, India alone contributes 24% to this growth and hence forms a key focus area for IBM's SMB strategy. In order to sustain its market leadership, IBM plans on continuing with its expansion into Tier II and III cities.
The study highlights how globalization in trade is forcing SMBs to improve their efficiency in conducting business. With exports for SMB in India growing with a CAGR of 12.5% over the last 10 years, total imports have been growing with a CAGR of 16% and with more MNCs entering the country, technology adoption in SMBs by year 2015 will be imperative, if we have to stay ahead of competition. |
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