"IT is a process of creative destruction"

HYDERABAD: IT has made its presence strongly felt in every field. But, the world is still unclear on whether the present outsourcing boom is a boon or a bane, and if the booming IT industry just means software exports or if domestic consumption is scaling up. In an attempt to answer these doubts, Nasscom president Kiran Karnik draws a clear line of explanation on where the IT industry is heading in the near future.

In a freewheeling interview with Sunitha Natti of CyberMedia News, he gives a complete picture of the domestic market, BPO as a career option, and the industry projections in totality.






The Indian IT industry witnessed large growth only in software exports. How can we improve domestic consumption?


The true benefits of IT could only be visible with the improved domestic market. To ensure this, three things have to be taken care of. The first among those certainly is facilitating IT usage within the government. Some states have been doing well, while other states have not done at all. So there's a lot of scope to do more.

Secondly, there's a need to reduce the costs of IT use. Also, it's a matter of serious concern that the Karnataka government had increased sales tax on PCs. This is counterproductive because it will affect IT penetration. At a time when we are trying to increase PC penetration, it doesn't make any logical sense.

Finally, use of IT within the industry. From a broad, policy point of view, we are suggesting that the Indian government bring in more competition and deregulation in major sectors. For instance, the textile industry would see good growth with the end of quote regime. Use of IT, with applications like supply chain management is helpful. We are suggesting to the government to encourage such companies by facilitating capital expenditure.






What are the projections for the domestic market, and exports?


Software industry is presently contributing three percent to the GDP. We predict this will touch eight percent by 2009. Exports alone would reach $50 billion by 2009, a four-fold increase as compared to last year. Besides, domestic market would contribute $20 billion - $25 billion by 2009.

Growth in the domestic market should reach 30 percent. It can happen with strong policy initiatives, necessary changes on the tax front, and much more use of IT. And probably two months form now, the reduction of taxes and duties on IT hardware is likely. A 10 percent reduction can double the market, only if no counter waiving is being imposed to make up the reduction. And with the WTO-ITO regime bringing in zero percent custom duty, costs should be comparatively lower thereby, increasing PC penetration.






Do countries largely benefit from SMEs? If so, how would the thrust for SMEs in IT be looked at?


IT is one sector what we call the process of creative destruction, where new companies continuously come up and certain companies fall by the way side. That's a good thing. We are not looking for any specific protection to the small and emerging companies, because we feel this is a natural process for the market. However, we have in the past, suggested to the government to encourage companies especially with innovation and new ideas. Venture capitalists can support emerging companies with newer ideas.

Also we have requested the government to create a fund for making patents. Patenting is necessary but very expensive. The government should provide financial assistance for SMEs as it is important for the country to own the IP. Equally, there is unintentional but actual discrimination for SMEs in government tenders. We recommended the state governments to devise some method where there would be a level playing field for all.






If the cliché 'software follows hardware' is anything to go by, to what extent can hardware manufacturing boost the IT industry?


For exports, it doesn't really matter. But, for the domestic market this is something that is essential. Of course, imports would be helpful, but sustenance would come from a strong hardware base within the country. To exemplify, mobile industry is a classic example. Value-added services are happening that are driven by software.





Are BPO jobs just an iconic fad or career-oriented?


Definitely, it's a career opportunity. But unfortunately it's projected from a short time career perspective. We are now actively promoting this as a long-term career prospect. In the broadest terms, it is the customer service industry and from career growth too, there are numerous opportunities.


Above all, presently we are just tapping two percent to three percent of the total BPO market. And by 2009, we project that the BPO industry alone will generate about $20 billion - $24 billion revenue from the present $3.6 billion.





Do you foresee any manpower shortage in the near future?


We are concerned. While the overall numbers are good, employable people with right skills are in short supply in specific segments. We already are seeing a deficit in VLSI design, embedded software, etc. In reality, you may not see a gap in numbers but yes, we are worried about the gap in the quality and that's where we are taking necessary steps to ensure that the industry doesn't lose the ground on this front.





How important is branding necessary for tier-two cities?


We are optimistic that the industry is now moving out of the big metros. Metros have been good with great source of human resources and we would like the industry to go to smaller towns, which can be an even better source of talent. Infrastructure has to accelerate so as to be ahead of demand.