Even as outsourcing demand from Europe revives after the debt crisis, data protection regulations in the region governing trans-border data flows could hurt the $108 billion Indian IT-ITeS industry, sectoral body Nasscom said.
"Challenges that I see are the US Immigration Bill and the data security in Europe. These are areas that we are working on...I had gone (there) in September and had conversations with EU."
"...security in Europe has the potential of going into directions which will not be conducive for (those) countries as well as our (IT) industry. They will get hurt and we will also get hurt," Nasscom President R Chandrasekhar told reporters on the sidelines of the 3rd annual Action for India forum.
He added that engagement is a continuous process and Nasscom is in talks with concerned authorities across the globe on issues facing the industry.
The EU Data Protection Directive governs trans-border data flows and lays down conditions for transferring of personal data of EU citizens outside the region.
These legal instruments, together with the enforcement mechanisms across member countries, put too much obligations on businesses. Because of this, they are often considered as unfriendly to businesses especially small and medium-sized service providers.
According to a Nasscom-DSCI (Data Security Council of India) survey, there is a significant opportunity loss for the IT-BPO industry on the account of data transfer related issues as clients hesitate to offshore work to India because of stringent data protection requirements in the EU.
Nasscom and DSCI, along with Department of Commerce (DoC) and Department of Electronics & Information Technology (DeitY), have been working on this trans-border data flow issue between EU and India.
Europe, which accounts for close to 20 per cent of the Indian IT exports, is witnessing a revival in demand for outsourcing services following the debt crisis.
While growth is returning to traditional markets like the UK, newer markets like Germany are also opening up.
Interestingly, Nasscom expects growing demand for outsourcing services from Europe to drive the sector in 2014, even though North America accounts for the lion's share of the industry's IT exports.
The Immigration bill in the US, which proposes higher visa fees and enhanced audit by US agencies, is also a challenge that the industry is carefully monitoring.
Talking about the year ahead, Chandrasekhar said FY'15 would be good as demand increases from markets like Germany and Japan.