Indian IT-ITES industry exports poised to grow to (€) 42 billion by 2010

Indian IT - ITES companies have created their own service delivery models, entered into long term customer relationship, expanded their service portfolios, extended their services propositions beyond cost savings to quality and innovation and have tried to find sustainable solutions to various issues such as risk many, human capital attractions and cost management.

The Indian IT-enabled services and Business Process Outsourcing (ITES-BPO) industries have demonstrated superiority, sustained cost advantage powered value proposition in ITES.




Indian ITES-BPO exports grew from (€) 4.4 billion in FY 2005-06 to (€) 5.88 billion in FY 2006-07 expected to grow to (€) 7.33- 7.7 bn in FY08. The total size of the domestic market (including hardware) was (€) 11.48 billion in FY 2007.


Key Highlights of the IT-ITES sector performance

IT Industry-Sector-wise break-up

In a bid to counter twin effects of rupee appreciation and expiration of Software Technology Park of India (STPI) scheme, IT and ITeS have started taking safeguard measures by spreading to Tier II and III cities to cut their operational costs by about 15% to survive and maintain profit margins, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). ITeS companies have started moving towards II and III tier cities of Lucknow, Kochi, Varanasi, Mohali, Jamshedpur, Allahabad, Chandigarh, Deharadun, and Mysore. The shift is being noticed from BPO hubs in cities like Gurgaon, Bangalore, Hyderabad, Delhi, Noida, Chennai, Kolkata etc.

Revenues:

• Revenue from the Indian IT software and services sector (including the domestic and exports segments and excluding hardware) touched nearly (€) 28 billion during year 2007 and is expected to grow by nearly 27 percent to clock (€) 34.3-35 billion in FY08.
• Contribution to GDP in FY 2007 was 5.2% up from 4.8% last year.
• Service and software exports remain the mainstay of the sector contributing (€) 22 billion during FY 07, beating forecast to register a 33% growth.
• Increasing traction in offshore product development and engineering services is supplementing India's efforts in IP creation. This segment has grown by 22-23 percent to report (€) 3.43 billion in exports.
• MNC investments reach an unprecedented scale; over (€) 7 billion announced in FY 2006-07, to be invested over the next few years.

Conclusion:

Industry is on track to reach the targeted (€) 42 billion in exports by 2010. For India to fully capitalize on the opportunity and sustain a disproportionate lead in the global IT-ITES space, stakeholders need to continue working towards timely and coherent execution of initiatives to address supply-side concerns across the following areas:

• Augmenting Talent Supply
• Creating world-class infrastructure
• Strengthening information security
• Enhancing operational excellence
• Providing regulatory support
• Catalyzing domestic market development
• Fostering an ecosystem for innovation

IT solutions, which include hardware, software and services, delivery will witness change in 2008, with pockets of success and growing awareness setting the stage for wider market adoption, for which the small and medium enterprise (SME) segment will be a key driver, according to IT research company IDC (India). Even though there is a growing interest of vendors in new geographies (beyond BRIC nations i.e. Brazil, Russia, India and China), India would continue to remain the center of attraction (India currently contributes to about one-fifth of the total BRIC revenues).

As the US economy is facing slump in the credit market, high-energy costs, falling housing demand, increasing unemployment, the chances of recession in US are high. This would compel the companies to cut down their IT expenditure budgets, which could hit the Indian IT market. Hence, the sector is in a compelling need to expand in the European markets like France and Germany. Since majority of the businesses in these countries are carried out in their native languages, it is necessary to take measures in order to impart French and German language skills to larger section of Indian population.

India will be uniquely positioned to sustain its global leadership position, grow its offshore IT-ITES industries at an annual rate of 24% to 25%, sustain nearly 10 m jobs, and generate export revenues of more than US$ 86 bn by FY12 (as per NASSCOM estimates). Further, growing at current trends, Indian IT-ITES exports are projected to reach nearly US$ 330 bn by FY20 (nearly 14% of the projected worldwide spend).