Global Economics

New Opportunities for India's IT Companies


The pace of outsourcing is starting to pick up again—and there's new business to be won from companies inside India

One billion consumers, a growing economy, expanding small and medium enterprises—the equivalent of a packed stadium, sunny weather and the perfect pitch for India's IT services industry to play its next innings. All the industry needs to win is skilled batsmen with the right technique and temperament. In this respect, there are many seasoned players—Infosys, TCS, and Wipro, to name a few.

International collaboration for offshore support catapulted India to the forefront of the IT world, making it a premier outsourcing destination. India's technical populace is capable of knocking the ball to the boundary thanks to their proficiency in English, which gives India an advantage over several other countries.

It is estimated that over 4 million technical workers and more than 67,785 computer software professionals are trained in India every year.

Weighed down by the global economic downturn, companies have frozen IT budgets and put off-shoring decisions on hold. Though the lull is far from over, companies have now resumed outsourcing non-core activities, in their drive to be cost-efficient.

New deals involve 'business transformation outsourcing', where clients outsource the restructuring of entire processes such as payroll or HR administration in order to achieve cost savings. This opens up a gamut of opportunities.

The IT services industry is witnessing new paradigms to suit the evolving global demand. The move towards service-oriented business models has resulted in cheaper services as it eliminates the need for purchasing expensive hardware.

The service model is expected to drive demand for IT services as it requires skilled manpower to handle customer interaction. IT sector is also using the success formula of the home-brewed IPL to focus on the domestic market.

The IT services industry is on a fast growth trajectory as it expands into diverse industry verticals and caters to demands of the tier-I and II cities. The most important factor driving the industry (besides cost optimisation) is the need to achieve operational excellence and innovation. With approximately 7.4 million units in the country, SMBs form the largest business segment in India, and they are demanding that IT services grow and deal with the fast-changing global scene.

Enterprises are beginning to understand the value of IT investments beyond mere cost-cutting and are using IT to enhance business performance. According to Gartner, India's IT spending is likely to double between 2007 and 2012, touching the $110-billion mark.

While demand is strongest in the telecom and financial services sectors, there is also substantial demand from services, infrastructure, manufacturing, and government sectors. As industries grow, so does their demand for technology support. The PC market directly impacts the demand for IT services, and is expected to grow by 13.7% in 2009.

In BFSI space, the increasing use of plastic cards and the movement of business activity to the internet will drive IT spends much higher than the current 5-7% of revenue. Networking infrastructure and services are other areas of fast-paced growth as expanding firms demand better connectivity and ease of communication.

IT services comprised approximately 7% of India's GDP in 2008, up from 4.8 % in 2005-06. Montek Singh Ahluwalia Deputy Chairman, Planning Commission, believes that India can grow by 6.5-7 % in 2009-10, indicating a promising market for IT services.

Despite the crisis, IT services have established their indispensability in a world where firms look towards embracing all measures that give them a price advantage. All in all, the outlook for the new age Dhonis and Sehwags of the IT domain looks quite promising.


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