BANGALORE: According to Nasscom, IT/ ITeS' contribution to the country's GDP has been increasing from 1.2 percent in 1997-98 to 5.2 percent in FY 2006-07, and will continue to increase by 36 percent in 2007-08. Considered to be the drivers of IT/ITeS, starting from huge enterprises to so-called small and medium business (SMB) clients, it goes without saying that the channel community has been a key contributor to this growth and positive outlook.

DQ Channels asked partners about the performance of last fiscal. In a nutshell, the performance of the overall Indian IT industry has been slightly above average, however, the encouraging factor is that this performance doesn't have any major impact on partners.

For few, the business is growing while they claimed it to be static. Every year would have a mixed back of positives and negatives, and 2007-08 was not an exception. The most used phrase of the story would be 'rupee appreciation and dollar depreciation' which solution partners claimed was the biggest reason for the sluggish market. Another reason for the not so buoyant market conditions were high attrition and rising cost of manpower and political uncertainties.

Dollar, the villain

In the last five years, there has been constant 50 percent growth in the overall industry YoY. However, in the last two years, it has been just 30 percent. There are several reasons for this, but rupee appreciation was the biggest reason due to which the overall industry suffered a great drawback.

“What should have been a great year ended on a very discouraging note,” said Ajay Mian, CEO, All E-Technologies, Noida. He felt that the scenario would continue for next two months, and it would be very hard to sustain in the market.

The channel community has been a key contributor to this growth and positive outlook
Echoing his views, Ajay Sawant, Director, Orient Technologies, Mumbai said, “In 2007-08, the industry just had 20 percent growth, and the reason was obviously the dollar depreciation.”

Edward Jeevan, Director, Binary Systems, Bangalore claimed that the market was totally flat but he had a different opinion for this phenomenon. “The high number of entrants into the market was the reason for the slowdown as it created a decline in the quality of service provided to clients. Some of these clients became apprehensive in getting their services from solution providers (SPs), which spoiled the overall growth of the market,” he said.

Sanath Babu, CEO, Sri Durga Computech, Bangalore shared Jeevan's viewpoint. “The lack of quality service providers (SPs) and more entrants were the negatives of 2007-08. Business growth depends on margins. Because of increased competition, we were not able to make margins. The whole year has been just above the average for both industry and Sri Durga,” claimed Sanath Babu.

Not so bad

TO Asokan, VP and Head-Business Operations, Accel Frontline, Chennai felt that '07-08 was a good year for India. “As compared to the other developed countries, last year was good for India. We found customers looking at SLA-based services more often than manpower-based services, which considerably saw a dip,” he claimed.

For few players like B Mukund, CEO, Mukesh Infoserve, Chennai felt that the initial quarters contributed excellently for them. “The first two quarters were excellent for us, and we did a good job during that period. In the very next quarter, there was a sudden sluggishness in the market. However, we grew to an extent of 100 percent as we did good number throughout the year,” claimed Mukund.

According to Rangarajan Sriraman, CEO, Athena Info Consulting, Chennai, “Periodical salary hike took a big toll in the overall industry and this will continue irrespective of the status of overall market.”

SMB, the gold mine

“Considerably, the SMB contributed more to our revenue as they started automating their operations in a huge manner. The growth of SMB is also increasing considerably at a rate of more than 40 percent YoY, which will further increase the revenue for SIs and SPs,” claimed Sawant.

Not many had a different view to that of Sawant. Rangarajan Sriraman, CEO, Athena Info Consulting stressed the concept called 'multi-sourcing', which is gaining a lot of momentum nowadays. “Not every SP has a all the services, and for a perfect automation and management of services, the concept of multisourcing is the only option. Without multisourcing, SMBs could not sustain,” he claimed.

“There has been a great maturity among the SMBs and they have started outsourcing their operations. Even Athena has acquired lots of SMB clients in a short span, rich shows how the industry grows in the shoulder of SMBs,” claims Rangarajan.

“Lots of consolidations has been taking place in the SMB segment, as they started implementing end-to-end IT infrastructure, long time before,” claimed Mukund of Mukesh Infoserve.

Drivers of 2007-08

Implementation of ERPs CRMs, project management solutions, business intelligent solutions, etc have also been the major drivers of growth according to the SPs. Packaged/box software has also contributed a lot, as companies like Binary Systems and Orient Technologies have been seeing a continuous growth in the said segment during '07-08. “One of the greatest positive aspects of last year was that the people started respecting the solutions, which wasn't there during '06-07,” asserted Sawant. “The ASP model was there already and now it has come again. The SaaS model and other on-demand services have slowly started picking up in the market. We too have considerably grown in the box solutions. As a whole, the solutions industry has been a major driver for this year,” said Jeevan of Binary Systems. Networking solutions, computing solutions, storage and power, all have contributed equally to the growth of the industry.

A positive shape

In review of the last FY, none of the SPs have claimed to lose grounds in some area or any loss in their growth, which significantly has given a fair idea that the software and services industry has grown and is growing at a considerable rate besides the existing weak economy and market status. Issues spoken by them were not only with respect to their company, but it reflected the scenario of thousands of companies as well.

Unless there is some great change in the status of global economy, these issues will be a persistent one. If one looks at the developments that have been taking place in terms of mindset of the people in utilizing the technology, and automating and outsourcing their service, one thing that is evident is that last FY has been very encouraging for the SPs and service, and for software industry which has been focusing on the domestic market.