Indian ITES companies to tap greener pastures

NEW DELHI: India's relatively low-margin information technology

enabled services (ITES) firms now are tapping new, higher-margin industries in a

bid to maintain the sector's blistering growth, the top software body said on

Monday. But for the nation's huge export-oriented software industry,

neighbouring China is looming as a formidable competitor, Kiran Karnik,

president of National Association of Software and Service Companies (NASSCOM),

told a news conference.

Scores of global firms such as General Electric have used India's advantage

of a huge workforce of low-cost English-speaking programmers to outsource work

to the country that is delivered through phones, computers and the Internet.

"I do see individual companies and certainly individual persons moving up

the value chain," Karnik said, singling out telemarketing, bioinformatics

and microbiology as areas where Indian firms could use their expertise to boost

growth.

The $1.5 billion ITES sector, growth engine for the $10.1 billion software

industry, spans call centre services and back office operations such as

accounting and payroll. Its sales grew 67 percent in the year to March 2002 and

are expected to grow at over 60 percent this year.

Karnik said to sustain growth the sector was trying to get overseas firms to

outsource work in higher-margin areas such as bioinfomatics where technology is

used to cut research costs -- even as it maintains its core strengths in call

centres. "We should continue with call centres. We've a huge cost

advantage, we have the ability, the people and we have the need," he said,

adding ITES employees would need to increase their "soft skills" to

get higher-margin jobs.

"To do telemarketing successfully...the guy has to feel you're somebody

next door. You have to establish not just the accent but the kind of idiom and

the familiarity required." The industry -- pegged to grow $543 billion

globally by 2004 -- was responsible for roughly half the 92,000 jobs created in

the Indian software sector last year.

Increasing Competition

But Karnik said the software industry, viewed as India's best hope of

creating thousands of high-paying jobs and earning needed foreign currency,

could see China emerging as a big rival as it offers many of the same advantages

as India, plus a lot more.

"Their infrastructure is superior to ours and it's going to be like this

at least the next decade. Their roads are better (and the) power situation is

better," Karnik said. "So three-four years from now I would worry

about China as a competitor." China, the only country with more people than

India's billion-plus population, is already a global economic giant and is fast

catching up with its neighbor’s competitive skills.

He said the events of September 11 and India's military standoff with

Pakistan had resulted in the industry paying more attention to disaster

management and diversifying its markets. But he said India was much better

placed at handling event risks than many other nations because of its inherent

ability to overcome the regular crises that occur.

"I stress this to customers from abroad -- the Indian mindset is more

geared to contingencies than you are," he said. "It maybe a psyche

that comes from 3,000 years of having to face a drought every three years."

This year, India has been hit by the worst drought in more than a decade,

officials say.

© Reuters