» Business » A GREAT year for Indian IT

A GREAT year for Indian IT

By Anjanaa Daas & Mukesh Jagota
December 24, 2005 13:01 IST
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Resurgent software exports, lucrative global deals, huge investments, acquisition, a quite burial to the outsourcing outcry and low-cost computers marked the year 2005 for the information technology industry, which also had its share of blots that threatened to mar the booming business process outsourcing story.

The Indian software and services export is estimated at Rs 78,230 crore ($17.2 billion) in 2004-05, as compared to Rs 58,240 crore ($12.8 billion) in 2003-04, an increase of 34 per cent.

This segment will continue to show robust growth in future also. IT exports are likely to grow by 30-32 per cent in dollar terms during 2005-06.

The production of the Indian electronics and IT industry is estimated at Rs 148,360 crore (Rs 1483.60 billion) during 2004-05, as compared to Rs 118,290 crore (Rs 1182.90 billion) during the year 2003-04, a growth of 25.4 per cent, according to government estimates.

Export revenues from ITeS-BPO grew from $2.5 billion in year 2002-03 to $3.6 billion in years 2003-04 and $5.1 billion in the year 2004-05.

The number of professionals employed in India by IT and ITeS sectors is estimated at 1,045,000 as of March 2005.

According to the latest Nasscom-McKinsey survey, which predicts that IT and ITeS would add 7 per cent to India's GDP by 2010 along with creation of 8.8 million new jobs, the export revenue from the sector is projected to more than treble to $60 billion by 2010.

At present, the sector contributes about 3 per cent to the GDP and employs 700,000 people. Hiring in the sector continued unabated and looks to increase in the coming years - a sign of vigorous growth.

TCS, Wipro and Infosys plan to raise their workforce by over a third in the next 12 months by hiring 50,000 employees.

However, a shortage of skilled workers will be staring the Indian industry, particularly the BPO sector, in the face in the next decade, the Nasscom-McKinsey report said.

If these targets are achieved, the IT sector would also account for over 44 per cent of the export growth over the next five years, compared with 12 per cent now, it said.

The Nasscom-McKinsey report predicts that IT and ITeS sector would add 7 per cent to India's GDP by 2010 along with creation of 8.8 million new jobs.

While the offshore IT solutions business will grow at 25 per cent to touch 35 billion USD in export revenues, the BPO business will witness a CAGR of 37 per cent to account for $25 billion of the projected $60 billion.

The report, however, did not include the domestic market and product technology business, which would together account for another 20 billion USD in revenues by 2010.

The year also saw India's stand-alone software product story coming to an end. i-flex, with a respected banking software product - Flexcube - was acquired by business software leader Oracle Corp in a $900 million deal.

Indian companies like TCS and Infosys also chased a few acquisitions both in the IT and BPO space. TCS acquired a Chilean company Comicrom, a financial services software company, for $23 million.

The Comicrom deal followed TCS' October acquisition of FNS, an Australian financial software developer, for $26 million.

The attraction of overseas listing continued. Following the footsteps of Infosys, Wipro and Satyam, software firm Patni Computer Systems became the fourth Indian software firm to be listed on the US stock markets.

The year also served as a period of focus for big-ticket investments. The worlds' largest software company Microsoft announced a $1.7 billion investment in the country for R&D, education, governance and productivity.

Its chairman Bill Gates, who visited India in November for the fourth time in the last five years, also announced increasing India headcount to 7,000 from the current 4,000.

Even if Maran's dream of bringing an Intel chip assembly or manufacturing facility to India did not materialise, the chip major did compensate for the same by announcing over $1 billion investments for R&D, including a $250 million Intel Venture Capital Fund to finance Indian IT-start-ups.

What if it did not get Intel to set up a chip plant, India managed to get Intel's rival AMD to do so.

Maran brought in NRI consortium SemiIndia and chips major AMD together to set up a $3 billion USD semiconductor fab plant in the country. It may be interesting to know that the US chip-maker has never earlier licensed its proprietary chip-making technology to any third party manufacturer.

Another US based software major EMC announced an investment of $250 million in five years for its storage software solutions in Bangalore.

Cisco announced an investment of $1.1 billion in India. Flextronics, the world's largest contract manufacturer of electronics products, will invest $100 million on a telecom hardware unit.

Infosys and TCS landed a part of the $2.2 billion deal from Dutch bank ABN Amro. While the TCS share was $260 million, Infosys got orders worth $150 million. "This is the single largest ever order and a landmark deal," both the companies said.

The other Indian company Patni Computers also had a share in the pie along with Accenture. TCS bagged a $847 million back office outsourcing from British insurance and pension firm spread over 12 years.

India's sunrise BPO sector was again in limelight but unfortunately for wrong reasons. An employee of a Gurgaon- based Internet search firm was caught selling confidential information of customers of British banks, which was allegedly sourced from a call centre.

The year also saw the vision of a below Rs 10,000 personal computer becoming a reality. The first to launch such a PC was lesser known Kolkata-based firm Xenitis. It was followed by a PC of one of the top players in the business - HCL Infosystems.

In the first quarter of 2005-06, sales of personal computers touched 10.1 lakh units as against 9.29 lakh units sold in the same period of the previous year.

With these kind of numbers Manufacturers Association of Information Technology expects the PC sales to cross 42.5 lakh units in fiscal 2005-06 as against 3.3 lakh in 2004-05.

The last word on India's software success remains to be spoken.


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Anjanaa Daas & Mukesh Jagota
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