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IT/BPO sector: India's growth engine

November 01, 2004 18:34 IST

The Indian IT sector, which is doing exceedingly well going by the July-Sept quarter results, can sustain the momentum in the coming quarters as Indian IT firms enter new markets and gain business, experts say.

The current "boom" cannot be compared to the dotcom period of the late 90s as the bulk of the work offshored to India is normal business, making it more sustainable, they told PTI.

Outsourcing and India: Complete Coverage

The Big Three -- TCS, Infosys and Wipro led the way for Indian IT sector during the last quarter by posting net profits growth of over 50 per cent and hiring more than 14,000 people, giving indications that the software sector is going through one of its most successful phases in recent times.

Sensing the trend, Nasscom, India's premier trade association of software firms, said the software export target of 30-32 per cent growth for this fiscal will be achievable.

"India is gaining share from other parts of the world. Clearly, the pie is not expanding at the rate at which the Indian IT services industry is growing, but we are gaining market share," explained R Chandrasekharan, managing director of Nasdaq-listed Cognizant Technology Solutions.

Buoyed by the trend, Cognizant, a fast growing IT firm, announced earlier last week that it was expanding Indian operations by investing an additional $34 million, taking the total investment for India to $76 million.

National Association of Software and Service Companies president Kiran Karnik said the association was confident that the target of $12.5 billion software exports for this fiscal will be achieved. "Half-year results have been extremely good," he said.

Business process outsourcing is another segment that is scripting its own success story, similar to the software sector. BPO along with software sector is expected to be the biggest employment creators in the coming quarters.

"The BPO segment will continue to experience healthy growth and consequently the employment opportunities are bound to see significant rise," said Venkat Tadanki, co-founder and chief executive officer Secova e-Services Inc, a BPO firm.

"The growth, coupled with the churn in the market, will result in a buoyant employment market for the next few years," he said.

Other leading IT firms including Hexaware Technologies, Satyam Computers, Polaris, i-flex, Patni Computers too have reported higher growth during the last quarter as they sign up clients in new markets.

Experts also said there were no similarities between the current growth phase of software/BPO sectors and the boom-and-bust dot-com phase of late 90s.

"As opposed to the newer business models and the resultant opportunities that were created during the dotcom boom, today, the bulk of the work coming to India is the business-as-usual stuff," said Cognizant's Chandrasekaran.

According to Tadanki "companies during the dotcom boom were focused on 'eye-balls' and 'clicks' rather than hard business parameters such as revenues and profits."

If the current trend continues in the Oct-Dec quarter as well, analysts expect the Nasscom to revise the software exports target further upwards for the fiscal.

"It is a real possibility," said an analyst with a research firm.



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