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Towards $50 billion

India’s IT exports are on course to hit the mark next year. But rising costs are a worry for the prospects beyond, writes Venkatesh Ganesh. Pay scales

india Updated: Jul 27, 2007 02:07 IST
Venkatesh Ganesh

Wipro and Infosys are today household names in India. About a decade ago, many had not even heard of them. Thanks to the billions of dollars they have generated in exports, the country’s image has gone up in the international arena. Lakhs of information technology professionals are now India’s brand ambassadors in the large markets of the US and Europe.

The sector that has come to define ‘brand India’ at many a foreign forum has grown at an average of 25 per cent for five years and employs about 1.3 million professionals today (including those in business process outsourcing jobs). Continued outsourcing and offshoring of software and hardware design work to Indian companies is driving the demand. Add the fact that banks, manufacturing and some other sectors have not held back plans to boost computerization — and you have a strong demand scenario for Indian software companies.

A recent report by research group Forrester says that IT budgets in US companies would continue to expand. This comes as a huge relief for Indian IT companies, who are reeling under the impact of a stronger rupee (against the dollar), which has made their exports less competitive.

According to the National Association of Software and Service Companies (Nasscom), the Indian IT industry has just scratched the surface in the offshoring market, whose size is estimated to be about $330 billion in all. Out of this India is expected to corner $39.6 billion in 2006-07 and then go on to hit $50 billion by 2007-08.

Jobs have been pouring, not only from Indian companies, but also from global names like IBM and Accenture, which have expanded their bases in India. The year 2005-06 was a windfall year in terms of recruitments as software majors such as TCS, Infosys, Wipro, IBM, Accenture and others recruited in excess of a lakh workers — 80 per cent of them at the entry level. In 2005-06, IT software and services added over 120,000 employees who could do jobs ranging from low-end data entry jobs to high-end chip design. IT and allied sectors now account for about 5 per cent of India’s gross domestic product.

Companies such as Microsoft, Cisco and Intel are going beyond the usual low-end design, and towards more roles on the core work at the heart of new products — whether a microprocessor, a router or an operating system.

Inspired by the Indian IT and IT-enabled services success story, several other countries are competing with India to get business in offshore outsourcing. Countries such as China, Philippines, East Europe and Latin America are aggressively wooing customers. But, none of them offer the scale in terms of the manpower that India offers.

“The feedback received from several MNCs having multi-country operations comparing the various sourcing locations has revealed that India continues to offer and deliver the best ‘bundle’ of benefits sought from global sourcing,” says Nasscom president Kiran Karnik. He adds that with significant potential still untapped, it is expected that the global sourcing phenomenon will continue to expand in scope and geographic coverage. Building on its existing strengths, India is expected to remain the leading destination for global sourcing.

But India’s competitive edge in IT and IT-enabled services (ITES) as the preferred destination for offshoring is currently being threatened by various factors including rising costs in real estate, salaries and a shortage of skilled workers. Overall, the budget has not been favourable to the industry, as the cost advantage is getting severely diminished. “Factors like the talent shortage would result in global CEOs and CIOs reconsidering their reasons for offshoring to India,” says the CEO of a Bangalore-based IT company on the condition of anonymity.

Industry officials are keen to fan out into new towns like Bhuvaneshwar and Mangalore to find cheaper talent.

While the companies worry about how to maintain the growth momentum, it should not be a major worry for job seekers in the sector. India remains a powerhouse in software and IT — and it is still raining jobs in the sector here.