Protecting IT margins

BS OPINION

 It is an expanding torrent that will test to the full the capabilities of the sector inscaling up without sacrificing either quality or deliverability.

 This, coupled with the gradual stabilisation of prices (their fall is easing off), signals a boom ahead.

 But the need to deliver additional volumes has also spawned a recruitment drive that will hike compensations. This will squeeze margins already under pressure from the appreciation of the rupee.

 Industry leaders who assembled in Bangalore last week for IT.Com, the premier annual IT show in the country, emphasised that it is not enough to offer more complete end-to-end solutions, important as that is as a strategy to improve margins.

 Nasscom has additionally renewed its focus on encouraging Indian companies to go into the software products business. Products, once the market accepts them, offer steady revenue streams and enhance margins.

 But you need a different mindset to make it in products, an area which has been largely sidestepped by Indian software companies as they have concentrated on services.

 Nasscom is showcasing winners like i-flex, commissioning country surveys by leading research agencies that can be shared by small players, and encouraging the setting up of testing capabilities that are a critical part of the ecosystem that product companies need.

 Attention is also being focused on derisking the offshoring exercise for customers. Companies around the world are realising the need to outsource, but offshoring to India is a conscious step and many perceived risks have to be addressed.

 This is also necessary for attracting venture capital and private equity funding, for which the BPO business in India has developed an appetite.

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