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Three men and the rupee

According to global research firm IDC, IT spending in India is set to grow the fastest in the world in 2008. Over the next three years, the Indian market will nearly triple in size, becoming a $71 billion market by 2012 Devraj Uchil tells us.
Hindustan Times | By Devraj Uchil
UPDATED ON JAN 03, 2008 07:01 PM IST

The strengthening of the rupee against the dollar over 2007 did create worries, especially for businesses such as the IT and ITeS sectors, among others. The situation is not expected to reverse anytime soon and businesses would just have to deal with it. The top honchos of three IT/ITeS point to some key strategic foci that sound good.

“According to global research firm IDC, IT spending in India is set to grow the fastest in the world in 2008. Over the next three years, the Indian market will nearly triple in size, becoming a $71 billion market by 2012,” says Naresh Wadhwa, president & country manager, Cisco, India and SAARC. “Over the coming year, we expect to see greater traction coming from the increased adoption of unified communications, data center and security solutions in India.”

He adds that 2008 will see Cisco in India focus on driving innovation both internally and externally. “We will also direct our resources and energies toward disruptive solutions for the Indian market. In the future, we will further our reach deeper into India – beyond the tier II and III markets – into areas such as rural banking, connected agriculture, healthcare, and retail.”

Arvind Thakur, CEO, NIIT Technologies Ltd., admits that the strengthening rupee is increasing pressure on margins. “The strategy to deal with this will be to continue to extract more efficiencies through value addition, better pricing, improved offshore mix and change in resource mix.”

He is convinced that the way forward is to focus sharply on accelerating innovation programmes that include transformational approaches to break the linearity associated with traditional IT services. “Traditional IT services like applications development and maintenance are linear as growth in revenues involves proportionate increase in head count.”

He says that his company’s efforts are going to focus around building strong non-linear business lines – those where growth in revenues do not imply proportionate growth in head count. “In line with this new strategy, we will invest in services around IT infrastructure, IP asset-based solutions, and software as a service.”

Sanjay Kumar, CEO, vCustomer Corporation, points to the India opportunity in the face of the weakening dollar. “A major initiative in 2007 has been our foray into the domestic market. We have already bagged almost a dozen clients and are aiming at getting many more. We have also announced the opening of a new facility in Mumbai, designed primarily for our domestic customers, in the first quarter of 2008.”

Wadhwa points out that large software service providers are looking at increasing their billing rates for existing and new clients and ITeS businesses are looking at rationalising their wage structure as well as moving some of their operations to tier II and III cities in India, as well as to countries in South East Asia, in order to optimise operational costs. “In addition, the Indian IT and ITeS industry has also been catering to strong local demand for their services, which have also helped de-risk business to a certain extent.”

Kumar expands on his company’s initiatives: “The primary focus has been in driving automation and reducing business overheads. In 2007, we have grown substantially while increasing our non-revenue generating headcount by only five per cent.”

Undoubtedly, the offshore business in IT is attaining maturity. The industry would anyway have had to look at more innovative and competitive approaches to business. The strengthening rupee has probably triggered a speeding up of the process.

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