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2010: A year of rebirth for India's IT

Last updated on: December 23, 2010 09:02 IST

2010: A year of rebirth for India's IT

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Stuti Roy & Anmol Khurana in New Delhi

The year 2010 marked a period of revival for the $60-billion Indian IT industry, with the global economy assuming some semblance of normalcy after a period of prolonged turbulence and demand for software technology products on the rise again.

According to industry body National Association of Software and Service Companies, the Indian IT-BPO industry is well-poised to reach the $70-billion mark by the end of the current fiscal.

The year started on a positive note, with software majors like Tata Consultancy Services  and Infosys posting good profits, contrary to early indications of a drop in revenues.

As the year progressed, core markets like the US -- along with emerging vertical and geographic segments -- witnessed a significant pick-up in demand, resulting in a 5.5 per cent jump in overall industry revenue.

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With the government projected to spend Rs 25,000 crore (Rs 250 billion) this fiscal on information technology initiatives, it has emerged as one of the biggest growth verticals for the domestic IT-BPO sector, Nasscom said.

As a result, over the next two years, the domestic IT-BPO services segment is expected to grow from $12.8 billion in FY'2009 to $16.7 billion in FY'2011, translating into a CAGR of 14 per cent, it added.

Meanwhile, the products industry is expected to grow by over 11 per cent in the same period.

The sector also witnessed a turnaround in terms of hiring.

A year ago, software companies had not only frozen hiring, but had also slashed jobs as a result of the slowdown in demand.

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However, as the year began, industry players gave a positive outlook on the hiring scenario in the country, as well as in other offshore centres.

The country's largest software vendor, TCS, plans to hire over 50,000 employees this fiscal -- much higher than the guidance it had given in the previous financial year -- while Infosys expects to add about 20,000 people by March, 2011.

According to analysts, with attrition levels hovering around 18-20 per cent, the Indian IT industry is expected to hire about two lakh employees over the next one year.

However, one of the adverse impacts of the global recession was the rise of protectionist sentiments across major markets like the US and Europe.

In August, the US House of Representatives passed a Bill that effected a steep hike in visa fees for skilled workers.

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Image: School children wave India's national flag during the Independence Day celebrations in Chennai.
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The move was aimed at raising $600 million to beef up security along the US-Mexico border, but would also result in $200 million in additional visa costs for Indian companies every year.

In addition, the US state of Ohio has also banned outsourcing of government IT and back office projects to offshore locations.

Earlier in the year, US President Barack Obama had also announced that tax benefits would be taken away from American companies that ship jobs overseas.

Though the US, which is the largest contributor to the Indian IT sector's revenues, saw demand returning, the slowdown in Europe continued.

Currency fluctuation and a significant drop in new orders from the European region, the second largest market for Indian IT players, added to the woes of the IT companies.

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Rising costs also posed a tough challenge, something that might continue in the year ahead.

It gains relevance as other countries like Vietnam and Philippines have emerged as strong competitors to Indian players with their cost-effective structures.

According to Nasscom, forex fluctuation has dented India's competitiveness and 'steps need to be taken to address India's increased risk perception.'

In November, US President Obama arrived in India on a three-day visit, accompanied by US Commerce Secretary Gary Locke, top administration officials and corporate leaders.

Addressing a US-India business meet in Mumbai, Obama said the caricature of India as the land of call centres and back offices that cost American jobs was a real perception in his country.

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Photographs: Reuters
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However, he was also quick to add that the US saw great opportunity in India, as it is one of the fastest growing markets in the world.

The year 2010 brought good news for Mahindra Satyam, the new brand identity of scam-hit Satyam Computer Services.

The new management, which took over last year after a multi-crore accounting fraud by founder chairman B Ramalinga Raju was exposed, announced its financial results for the 2009-10 financial year and the first two quarters of 2010-11 after a prolonged silence to evaluate the extent of Raju's fraud.

The IT firms are also gearing up for leadership changes in the year ahead. During 2010, speculation was rife about banker K V Kamath succeeding N R Narayana Murthy as chairman at Infosys Technologies.

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However, the company has remained tight-lipped about any specific names and has left the decision to a nominations committee, which will announce the successor next year.

In September, Azim Premji's elder son, Rishad was roped in as chief strategy officer for IT services, elevating him into the senior management echelon at Wipro.

Though the senior Premji has always denied that his son is in line for the top job and will eventually succeed him, Rishad has been quietly and quickly climbing the corporate ladder.

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Image: Azim Premji.
Photographs: Courtesy: Wesleyan University
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The year 2010 also saw a lot of philanthropic initiatives taken up by the leaders in the sector.

The biggest contribution came from billionaire technology czar Azim Premji, who donated more than Rs 8,000 crore (Rs 80 billion) to his education-focused trust.

His industry peer and the founder of HCL, Shiv Nadar, sold about a 2.5 per cent stake in group company HCL Technologies, while his colleague and HCL Technologies CEO Vineet Nayar sold one million shares in the company to raise about Rs 42.75 crore (Rs 427.5 million) for a non-profit organisation.

On the global front, one saw the launch of the revolutionary 'iPad' from the stable of Apple, which spurred the interest of technogeeks and commoners alike.

The launch also prompted many others like Samsung, Dell and Motorola to join in the 'tablet' race.

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The year 2010 saw numerous acquisitions in the technology space, with companies breaking free from the shackles of recession.

One of the largest acquisitions of the year was by global chip giant Intel, which bought security software firm McAfee for $7.68 billion.

Another major deal was HP's $2.35 billion buy-out of 3PAR in September after a bidding war with Dell.

However, HP inaugurated its buying spree earlier in the year, when it bought ailing smartphone maker Palm for $1.2 billion in April.

Not to be left out, Dell snapped up storage solutions firm Compellent Technologies for $960 million.



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