In a bullish outlook on the Indian software services sector, investment bank Merrill Lynch has predicted that spending on global IT services outsourced to India will increase to 6 per cent in 2003 from 3 per cent this year.
This would mean that Indias share in the global software services outsourcing would double from the present level.
The overall global IT services environment remains weak and companies are reporting uncertainty, cautious spending and delay in contract awards.
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However, global corporations prefer engaging with Indian companies, and spending with Indian firms is rising the fastest among all outside service categories.
Pointing out that India is gaining from work being shifted from high-cost contractors in the US and Europe, Merrill Lynch in its latest survey indicates that about 37 per cent of global chief information officers indicate spending with firms in India is expanding the quickest.
According to the survey, the percentage of work outsourced to India is low because there are a large number of organisations still untapped.
As per the survey, out of all chief information officers, 67 per cent had no outsourcing to India this year, but in 2003, some officers intended to start India outsourcing.
Besides, the percentage of officers with no outsourcing to India is likely to drop to 56 per cent in 2003.
Pointing out that IT spending is weaker in Europe and is expected to grow only 1 per cent in 2002, the survey says: "Given that currently Europe forms only 10 per cent to 20 per cent of revenues, it is a lesser source of concern to Indian vendors, than to some global vendors. In fact, we hear that Indian vendors are gaining some traction in Europe, though the going has been relatively slower than expected so far," Merrill Lynch indicates.
The Merrill Lynch survey also shows project pricing modestly down in India, in line with US-based consulting, over the past six months.
"Our survey shows project pricing modestly down in India, in line with US based consulting, over the past six months. But 62 per cent of the chief information officers polled have shown flat to higher pricing. This is in line with our cautious outlook on pricing, though in recent months, we have been indicating stabilising pricing," it says.
The survey also revealed that 62 per cent of the customers of Indian companies had reported either flat or higher pricing.