Is India still hot for offshoring?

NASSCOM 2006: Curtain Raiser

India started with a cost advantage, moved to quality and now to innovation.

Is India still hot for offshoring? This is the question that hopefully should get a satisfactory answer at the three-day NASSCOM 2006 event, beginning tomorrow at Grand Hyatt, Mumbai.

Why this topic? It's simple. Rising employment in the IT-ITES sector is cutting into profit margins. Nasscom data reveal that while revenue from software services would rise by 29.6 per cent in FY06, employment would go up at a higher pace of 34.01 per cent. This means that revenue per thousand employees would be lower at $44 million in FY06 from $45.5 million achieved in FY05.

"This year, we will be addressing various stakeholders of the IT community - NASSCOM members to begin with, international customers, the analyst community, the Indian government and global thought leaders," says Sangeeta Gupta. vice president of NASSCOM.

She adds that India will be "reinventing and extending its leadership" in the IT-ITES sector. "We started with a cost-advantage. Then, moved towards quality with many IT companies achieving the SEI-CMM levels. Now, the stress is on innovation," says Gupta, adding: "There's also a strong business element to the event."

A lot is still being said about the great India edge in the IT services and BPO sectors. India, according to NASSCOM figures, is continuing its run as a leader in the IT-ITES domains, and, despite increasing competition, managing to sustain its market share in the global arena.

The Indian IT-ITES continues to record strong growth and is expected to grow by 28% in FY06. The service exports growth has been estimated at 32%.

S Ramadorai, chairman of NASSCOM and CEO & MD of TCS, had told the media that "the Indian IT-ITES sector continues to chart double-digit growth, and is expected to exceed $36 billion in annual revenue in FY06. Out of this, software and services exports are estimated to grow by 32% to reach $23.4 billion in FY06. Indian IT-ITES is well on track to achieve the targets that the industry aspires to achieve by the end of the decade."

Corroborating the sentiment, Kiran Karnik, president of NASSCOM, had added: "2005 offered a steady growth for the industry. Along with increased presence of Indian IT companies across the globe, we saw new services lines emerging, and the industry reached the next level in services offered. Mergers and acquisitions by Indian players was also a key trend. Inspite of the growth seen so far, it is estimated that less than 10% of the addressable market for globally sourced IT-ITES has been captured till date indicating significant headroom for growth."

As global sourcing matures and demand for multi-country delivery capability increases, newer destinations are being explored. However, India continues to offer and deliver the best bundle of benefits, maintains NASSCOM.

The future holds significant opportunity for India - larger than the aggressive targets set by the industry for itself. Key stakeholders have initiated efforts to ensure that Indian IT-ITES achieves its full potential. Successful execution would remain the key.

Incidentally, during NASSCOM 2005, when Indian President Abdul Kalam delivered the keynote speech, he did so through video conferencing. He had exhorted the Indian software and services and BPO segments to improve its share in the global markets and achieve an export target of around $200 billion by 2008.

This year, Kalam will be present in person and that should be an added attraction.