The year that went by - a Nasscom perspective

BANGALORE: The year 2001-02 was one of challenges, with a host of global events impacting the ICT sector. Events such as September 11 (terrorist attacks in the US), escalating Indo-Pak tensions, the Godhra incident, all sent shock waves across the Indian economy. The overall ICT business was also affected by the global economic downturn, which lead to IT budget slashes among customers, and a loss in revenues for the worldwide software and services community. These set backs proved to be a turning point for the Indian IT industry, which learnt from these experiences and matured over the past 12 months.

• Oversupply of skilled labour as compared to earlier years

• Decline in Billing rates from 1999-2000 levels. Rates fell by almost 25 percent, stabilizing around June, 2002 to $ 22-25 for Offshore and $55-60 for Onsite work

• Focus on Business Continuity and Business Intelligence

• Strategic shift in the Recruitment policies of corporates: Hiring was based on just in time requirements. Selection criteria emphasized more on softer skills such as trust, adaptability to the respective organization culture rather than having a qualification as the main criteria. Employee referrals and direct appointments channels became the choice as opposed to the 90’s era hiring through placement /recruitment consultants

TRENDS 2002

• Management Practices--reviewed and changed with respect to hiring and marketing, expansion. There was a considerable increase in hiring, especially at the senior management level, with individuals having 20-25 years of experience. This is expected to continue with the requirements of the Industry maturing — requiring people who can scale up the activity, know the issues and can tackle hands on. Indian companies growingly set up offices abroad and hired local talent

• India's global recognition as an offshore hub and key destination for IT projects: Indian companies witnessed a second wave of opportunity, as global majors outsourced work to the country based on its strong value proposition of high productivity and quality at competitive costs

• Indian companies also displayed capability of handling end-to-end large sized contracts--Wipro and TCS won the Lehman Brothers' order (estimated at $70 million)

• Overall, there was a rise in the number of fixed price, multi-year contracts, with large players bagging high value global projects (Wipro-lattice deal, United Utilities with TCS, TRW deal with Satyam and General Electric deal with Patni)

• Indian software companies moved up the value chain and began offering new service lines such as package software implementation, systems integration, network management and R&D services.



• The geographic mix of software exports shifted with many Indian IT companies targeting regions apart from the USA, such as Europe, Asia Pacific and Latin America



• Some SME players grew more than industry average last year.



• The country also built up its credentials as a BPO center for vendors: India emerged as the most preferred destination for BPO and almost every Fortune 100 CEO is looking at outsourcing operations to India·



• Global majors such as Intel, Cadence, ST Microelectronics stepped up their investments in India in the Chip design and R&D segments

A PEEK INTO 2003

Despite the challenging environment, the IT Service industry clocked a healthy growth of 22 percent while the ITES sector blazed forward at 71 percent in FY02.

• Billing rates to be stable, with no dramatic changes·



• The Offshore:Onsite ratio is expected to be the same with not much changes with respect to IT services·



• BPO sector is expected to hire personnel with more domain specific skill sets such as business analysts with programming skills rather than freshers.



• HR Policy for IT Services industry to witness further changes. New ways of employee retention and motivation rather than just escalating the salary will be observed·



• Activities in the BPO sector, expected to be more varied from just answering calls (voice) to answering of e-mails (internet) to back office operations.



• In the ITES sector, opportunities for Indian companies will exist across a wide area of services such Customer Interaction, Finance and Accounting, Engineering and Design and HR Services, GIS and Animation.



• Employment opportunities for freshers expected to open up in the Domestic Market, Hardware sales, E-Governance and corporate sector due to the increased emphasis and increased spending in above areas.



• BPO sector to witness growth and provide opportunity especially with respect to the following: BFSI sector; Pay Roll Management; Telecom; Airlines etc.



• Indian companies will aggressively target under-penetrated verticals such retail, manufacturing, telecom service providers, airlines and healthcare for the next wave of growth.



• Going forward, Indian vendors will pitch for large contracts with IT outsourcing being bundled with BPO or with system integration

NASSCOM RESEARCH

NASSCOM recently conducted a research on the domestic market for Linux and examined the emerging trends and issues facing the providers and the users of Linux.

• Influenced by the usage of Linux by large IT users in the overseas market, and cajoled by its cost reduction and bottom line benefits, Indian corporates, government and the PSU users are showing willingness to try Linux



• A number of E governance projects under implementation and on the anvil are either experiencing or intending to use Linux.

• The low cost Linux advantage can best be exploited by the fast growing SME sector



• Virtually all leading IT vendors in India have developed products for the Linux platform and are making these available for customers in the country. Some of these vendors include Oracle, HP, IBM, Wipro etc.



• The Linux movement in India has gathered momentum thanks to the arrival of Red Hat (distributor of the most popular variant of Linux) in the country. The company is making available Red Hat Linux, bringing the benefits of the OS to India’s enterprise customers and the country’s software development community



• Lack of regional language, "localized" software has been one of the major impediments to the growth of the Indian domestic market. The openness of Linux allows this to be overcome



• Linux can be localized in Indian languages. This will be used to spark off an Indian language software revolution in the country

According to Nasscom, Linux has the potential to grow into a leading OS in India, co-existing with the other established players in this market. As the OS matures and moves up the evolutionary cycle, it is likely to garner larger and larger support among the IT user segments. As of now, Linux still has challenges to overcome and turf to gain.