IT will boom, but only the fittest will survive, say experts
Monday, 17 February 2003, 20:30 IST
Printer Print Email Email
MUMBAI: If the experts are to be believed, the sun is not setting on the Indian software industry. Chastened by a major churn in the IT sector that saw annual growth come down to a conservative 28 percent as opposed nearly double that in the last decade, the industry is however consolidating. According to experts who congregated at the annual meet of the National Software and Services Companies (Nasscom) here, the Indian software sector will have to provide a lot of value. Speakers at this year's sessions noted that small and medium Indian software companies would need to focus on niche markets in order to survive the competition. According to Rita Terdiman, director, Gartner, the focus would henceforth be on core competency. "Software business would need to focus on a niche area and deliver quality." Management guru C.K. Prahlad first propounded the concept of core competency in the last decade. According to him, companies must first establish a core competency in a niche and seek to "own" that niche by becoming the most important player in that segment. Observers here feel only a handful companies like Tata Consultancy Services, Infosys, Wipro, Satyam and others in the top 10 would get away by being generalists. Nasscom 2003 attracted numerous international business visitors from Europe, the U.S. and Asia. Most visitors were bullish on the prospects for outsourcing to the Indian IT-enabled services (ITES) sector. With the major international companies cutting costs in a big way, outsourcing contracts amounting to about $100 billion could come to India by 2008, estimates Nasscom. According to a survey by McKinsey on behalf of Nasscom, over 70 percent of the top 30 global IT services vendors have an Indian presence and are now looking at business process outsourcing (BPO). "The ITES-BPO segment is expected to grow in financial year 2003 by 60 percent, blistering by today's standards, to reach $2.4 billion. However, the challenges the industry is facing are different from the ones last year. This year, the uppermost concern is the geopolitical risk, the threat of war and the political backlash of U.S. federal governments," McKinsey says in its report. McKinsey feels four types of ITES-BPO companies could emerge: task experts in areas like credit card and payroll processing; process boutiques like HR (human resources) processing; horizontal factories like call centres; and bundled service providers. McKinsey advises ITES-BPO companies to choose their niches carefully and create efficiencies in them. It, however, notes that several business models are yet to emerge in the long term. Nasscom, in its survey, notes that the demand for software professionals is expected to increase to 1.1 million by 2008 as against a supply of only 885,000. According to Nasscom, Indian software exports posted a growth of 28 percent in the April-December period of the current fiscal year on increased outsourcing by overseas clients. Software and services exports generated revenues of 340 billion in the nine-month period ended December 31, 2002, up from 266 billion logged in the year-ago period. However, the Indian industry is already tilting heavily towards the ITES and BPO segment. While IT services posted a growth of 20 percent in the April-December 2002 period, ITES and BPO rose 61 percent in the same period, Nasscom said.
Source: IANS
siliconindia