Indian IT sector revenues to grow ten fold in a decade

NASSCOM Strategic Review 2007’s key findings have been released. The Indian IT Industry is on course to achieve an exports target of $60 billion by 2010.

• Software and Services (IT-BPO) exports to exceed $31 billion in FY 2006-07, a 32.6 percent growth
• Employment in sector to exceed 1.6 million up from 1.28 million last year
• Domestic IT market broke out of the hardware linked growth pattern for the first time ever in FY ’06 and the trend of software and services gaining share is expected to continue; total sise expected to cross $15.9 billion in FY 2006-07, a 21 percent growth
• MNC investments reach an unprecedented scale; over $10 billion announced in FY 2006-07, to be invested over the next few years.
• Indian Service Providers have grown their share of contracts of values in excess of $50 million dollars from 1 percent in 2002 to 7 percent in 2006
• Offshore product development and engineering services to drive increased IP creation

Key findings of Strategic Review 2007

The highlights of the findings indicate that the Indian IT industry has grown its revenues ten fold in the past decade, from $4.8 billion in FY 1997-98 to $47.8 billion in FY 2006-07. Its contribution to GDP is estimated to have grown from 1.2 percent to 5.4 percent in the same period.

Commenting on the key findings of the Strategic Review 2007, Mr. B Ramalinga Raju, Founder and Chairman of Satyam Computer Services and Chairman, NASSCOM, said “The last decade is testament to the growing impact that the Indian IT industry is having on the global and local economies. The industry is perfectly poised to tap new opportunities in the offshoring and domestic segments for greater wealth and IP creation for the country.”

Kiran Karnik, President, NASSCOM said, “The Indian IT industry’s consistent growth in both exports and domestic segments and its ongoing expansion into new potentially high growth opportunities reaffirms the continued confidence and global competitiveness of the Indian IT sector. We are confident that the industry will achieve its ambitious target of $60 bn in exports in 2010. The challenges faced by industry are being addressed jointly by the industry, government and other stakeholders through both short and long term solutions.

Optimistic market signs indicate there is more headroom for growth, through large unaddressed areas and the possible unbundling of IT-BPO mega-deals with increasing shares of global delivery. The other positive sign is the maturing of the domestic IT industry. For the first time ever, the domestic industry has broken out of the hardware linked growth pattern and Indian firms are playing an increasing role within this segment.”

The Strategic Review 2007 reviews the industry’s performance in 2007, estimates the growth expected in the current fiscal (FY07), details the service line trends observed across the various industry segments over the past year, presents an assessment of India’s competitiveness as a sourcing destination, analyses the sustainability of each individual factor contributing to India’s leadership position and provides a view of the outlook projected for the global and Indian IT-ITES industries. It outlines the opportunities, challenges and agenda for key stakeholders to further extend India’s leadership in this space.

Employment Trends & NASSCOM Initiatives: Total IT Software and services employment to reach 1.6 million in FY07. The industry in collaboration with the  government and other stakeholders has initiated several initiatives to further enhance the availability and access to suitable talent for IT-ITES in India

• The NAC (NASSCOM Assessment of Competence) has been nationally rolled our in November 2006, after a successful pilot. This is being taken to a number of states in 2007
• A comprehensive skill assessment and certification programs for entry-level talent and executives (low-middle level management) is underway
• An image enhancement program to build greater awareness about the career opportunities in this segment is underway
• NASSCOM has been working with the academia across the country under its IT Workforce development initiative to encourage and facilitate greater industry interaction; NASSCOM has signed MoUs with UGC and AICTE to take forward these initiatives
• NASSCOM has suggested the concept of experimenting with adapting the Special Economic Zone concept (deregulation and removal of restrictions) for education, and create Special Education Zones. The long term steps that are needed include much higher government investment in education, major education reform and better compensation and research grants for teachers/researchers
• NASSCOM has proposed the setting up of a chain of finishing schools for IT professionals to make them more employable with a simple 3-4 months of honing of technical skills and imparting soft skill training, helping bridge the manpower supply-demand gap by at least 30-40 percent. It has been proposed that such finishing schools be set up by the IITs and National Institutes of Technology.

Emerging Locations - As global delivery matures, newer locations are emerging; however India is expected to remain the undisputed leader

• Going forward: For India to fully capitalise on the opportunity and sustain a disproportionate lead in the global IT-ITES space, stakeholders need to continue working towards timely and coherent execution of initiatives to address supply-side concerns across the following areas
• Augmenting Talent Supply
• Creating world-class infrastructure
• Strengthening information security
• Enhancing operational excellence
• Providing regulatory support
• Catalyzing domestic market development
• Fostering an ecosystem for innovation