Industry Overview : IT Industry towards $50 Billion

IT exports are on course to hit the mark next year. But rising costs are a worry for the prospects beyond Wipro and Infosys are today household names in India. About a decade ago, many had not even heard of them. Thanks to the buions of dollars they have generated in exports, the coun- try’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 ulans 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 compa- nies 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 marke 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 2007-2008

Jobs have been pouring, not only from Indian companies, but also from global names like IBM and Accenture, 0 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 I 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 a the scale in terms of the manpower that India offers. "The feedback received from several MNCs having multicountry operations comparing the various sourcing locations has revealed that India continues to offer and deliver the best a ‘bundle’ of benefits sought ftom global sourcing," says Nasscom president Kiran Karnik. He adds that with significant potential still untapped, it is expected that the global sourcing phenomenon will li 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, alaries and a shortage of skilled workers.

Overall, the budget has not been favourable to A the industry, as the cost advantage is get- t ine severely diminished. "Factors like the talent shor Lage would resubin 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.

Key Players

TCS ( Tata Consultancy Services )After reaching revenues of $4 billion, India’s biggest software service company has had a dream run in terms of shareholder sentiment, industry growth, and hiring talent. The year 2006-07 saw the company posting revenues of Rs 15,156.52 crore, a 34.2 per cent increase over the previous year. With this growth, TCS added 22,750 people to its workforce thereby taking its total staff strength to 85,000 employees through recruitments and mergers and acquisitions that the company undertook in the year. The company has set a target of achieving $10 billion in revenues by the year 2010, and says that it is on track to achieve that target.

Infosys Technologies, plans to hire 24,000 people in 2007-08 – and that is a sign of its growth ambitions. In the fiscal year 2006-07, the company, India’s No 2 software exporter, posted revenues of Rs 13,149 crore, a 45.6 per cent growth over the previous year. This overall growth saw Infosys, which in 1999 became India’s first company to list on the technology-oriented Nasdaq stock exchange in the US, add about 30,000 employees in 2006-07, taking the company’s total headcount to 72,241.

Wipro The third largest Indian software exporter, Wipro, is 84 per cent controlled by billionaire Azim Premji. It also has interests in computer hardware, consumer goods and business process outsourcing (BPO). Wipro has more than 68,000 employees in IT and BPO put together. The company has increased its focus in non-US regions and Europe, and Japan has also emerged as key market. In Europe, Wipro has acquired several companies to strengthen its focus on developing software for the retail and telecom industry segments.

Other players India’s software industry abounds with giants and would-be giants. In the services sector, other prominent names include HCL Technologies, Tech Mahindra, Patni Computer Systems and Satyam Computer Services. In software products, I-flex systems, which is being acquired by Oracle, and Subex Azure are among the majors.

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