STPI Chennai software exports rise 63%

CHENNAI: Tamil Nadu has registered software exports to the tune of Rs 3,116

crore for the fiscal year 2000-2001, despite the slowdown in the US economy. The

figures represent a 63 per cent increase over the Rs 1,914 crore-export during

the previous fiscal.

Out of the Rs 3,116 crore registered, nearly Rs 2,956 crore has been

contributed by the Software Technology Park of India (STPI) Chennai’s 440

exporting units. The remaining Rs 160 crore has been contributed by seven

companies in the Madras Export Processing Zone. This apart, hardware exports

have also grown to Rs 576 crore this fiscal, taking the state’s total software

and hardware export to Rs 3692 crore.

Application software, which had accounted for Rs 1,222 crore last fiscal, was

the only segment that did not witness growth, this year. The segment clocked

only Rs 1,162 crore this fiscal. Consultancy services leaped to Rs 739 crore

from Rs 470 crore, while system software revenue jumped from Rs 139 crore to Rs

626 crore.

Under IT enabled services, call centers made its presence felt for the first

time by registering Rs 5 crore while medical transcription continued its growth

clocking Rs 21 crore this fiscal. Data entry and data processing still dominated

the IT-enabled services by contributing Rs 203 crore of the total Rs 265 crore.

Web applications rose steadily to Rs 121 crore from a mere Rs 9.26 crore last

year. Software products and packets accounted for Rs 43 crore this fiscal.

Pondicherry, which comes under Chennai STPI's jurisdiction, also accounted for

Rs 2.15 crore with export revenues from four of its nine software units.

Coimbatore, another emerging hub of software activity in Tamil Nadu, has clocked

Rs 20.47 crore from its 66 exporting units.

The figures suggest that the downturn in the US has not affected the state

and the revenue will go up the next fiscal, at least according to STPI, Chennai

director Rajalakshmi. Expressing optimism about the future for the state’s

software she said: "We are expecting a growth of 60-65 percent next fiscal.

The economic slowdown in the US might affect the high-end technology firms, but

not software companies engaged in service activities, which form the major chunk

of revenue for the software firms in Tamil Nadu. Moreover, new markets are

opening in Europe."

Cognizant Technology Solutions’ COO and president Lakshmi Narayanan, feels

STPI will continue to maintain high growth in IT and related services. "The

growth will come from new firm that commenced operations in the last 12 to 18

months, particularly, from those that have taken up business process

outsourcing. I think firms in the professional services or staff augmentation

mode will be affected first, followed by product companies. The top 20 software

service companies that work with large clients on a relationship mode will

continue to grow above industry average. It is also a good opportunity for

IT-enabled services as much of the back-office operations would get outsourced

as it is considered to be less risky. For software companies, it's a good time

as we will find more of applications outsourcing happening."

But Polaris Software Labs executive director, Govind Singhal differs in his

opinion and believes an adverse impact is inevitable. "The US slowdown is

bound to have some impact on the software export figures. However, companies

operating in niche segments of the export market will continue to be insulated,

at least partially, from the slump. The BFSI segment as a whole, would remain

insulated to a large extent and would perhaps be the last to be hit by the US

downturn. In general, we believe that those operating heavily in the e-space

would be face the brunt of the slowdown."

Polaris' total revenue for the fiscal 2001 stood at Rs.269.67. The total

revenue for the fiscal 2000 was Rs 150.72 crore.

Concurring with his view, DSQ Software head of corporate communications C R

Kannan, says: "The slowdown is likely to impact those in the e-business and

the few who have forayed into telecom and networking sector. However,

application solutions, legacy application and maintenance will continue to grow

which are our areas of expertise."

In a recent survey conducted by Morgan Stanley, nearly 225 Chief Information

Officers of US firms had identified five priority areas such as consulting

services, wireless initiatives, Windows 2000 upgrade, new customized software

development and Microsoft Office upgrade which would probably face cost cuts.

The survey spelt bad news for Indian firms, as most CIOs were also not keen in

developing customized applications.

"Even if we rally around and find sufficient markets in the Europe and

Asia Pacific, the software exports cannot grow at the same level as last

year," feels Kannan.

However, Govind Singhal, doesn't think so. "There has been a natural and

gradual shift in our regional business focus. The revenue contribution from the

European markets have been growing this fiscal from 15.95% in Q1 to 23.76% in

Q4. This increase shows that Polaris has not put all its eggs in the US basket

and is increasing its foraying into new market with intention of widening its

revenue horizons."

But the survey also provided some consolation for Indian firms. The CIOs were

against cutting back on the outsourcing of legacy applications, which form a

major source of revenue for Indian firms after maintenance projects. Areas that

were unlikely to face investment cuts were customer application network

equipment, e-commerce initiatives, and database software and security software.