The Indian IT industry that had taken a quantum leap, post liberalisation two decades ago, has matured over the years. Besides technology and domain expertise, cost has been a major factor in making India a software services powerhouse. But, for how long would India be able to sustain its competitive advantage when China and other markets are already making large strides to challenge its dominance in the sector? Changing dynamics of the macro-economic environment and the anti-outsourcing wave in the US continue to haunt the Indian IT sector. Nasscom president Som Mittal discusses the issues challenging the industry and lots more in an exclusive interview with FE's Ayushman Baruah. Excerpts:
Given that India faces stiff competition from China and other Asian markets like Philippines and Vietnam, for how long will it have an edge over these? What competitive advantage should India have to sustain its growth?
India has an advantage in terms of maturity, scale, robust process and customer confidence. However, we cannot afford to be complacent. India must focus on offering more value added services, build deep customer relationships and leverage innovation. We have to remain cost competitive as several companies already have outcome-based pricing. In several cases, these new emerging countries also serve as sites for business continuity programme. India needs to keep customers assured that it is a destination worth trusting. When work gets disrupted due to 'bandh' calls etc, it raises concerns.
Is Nasscom seeing any new shoots that keep India ahead? What potential does the domestic market hold?
Of late, our discussions with customers have been beyond outsourcing and offshoring. We have now shifted our focus to transform their business models and get countrywide increased efficiencies. There are new verticals like utilities and healthcare. Markets like West Asia and Latin America are still under penetrated. With regards to the domestic market, there are three broad segments: corporations, individuals/ small businesses and the government. The corporate spending in IT by corporations is increasing as they become more global. The scope to penetrate the other two segments is much higher. We estimate the government spend to be a big driver that is expected to reach $5 billion by 2011.
With changing dynamics in macro economic environment, do you see the number of applications for H-1B visas rising this fiscal?
This is a fairly complex issue. In the US or anywhere, jobs can be classified into two categories: temporary work that includes short-term assignments, and permanent jobs like account managers, system architects, etc. A lot of Indians work in the US on a temporary basis, mainly on application development and testing. Owing to talent availability issues in the US, maximum number of H-1 B visas applied for constituted applicants for temporary jobs. Now, the ability of Indian companies to hire locals is increasing. Hence, the need for H1-B visas may be lower. However, if the US economy turns robust, hiring by companies would go up, thus increasing the demand for visas.
Nasscom visited the US to meet members of the Obama administration in response to the anti-outsourcing wave in the US last year. What was the outcome of those meetings?
Given the sheer size of the market, the US is evidently where our focus lies. However, we continue to visit all markets to share our perspective. We spend a lot of time with law makers, executives, industry leaders and various think tanks in the US to prove how we can add value to them. With regards to the anti-outsourcing wave in the US last year, Nasscom believes that India adds to the competitiveness of the US market. Global sourcing —be it in manufacturing or services—has added to the US ability to grow as an economy. For example, the cost of a Barbie doll today is actually lower than what it was 50 years ago (accounting for inflation). This could not have been possible if talent and material was not procured from the most competitive locations. Many more such examples can be found in global markets.
How do you see the Indian software industry growing in the coming years?
Last year, revenue from exports of software and BPO services has grown 5.5% to $50 billion. Engineering services crossed the $10-billion mark. For FY 2010-11, export revenue is expected to grow 13-15% and the domestic revenue by 17-18%. Total revenue from the sector has the potential to touch $225 billion by 2020 and 50% of the total would come from currently untapped verticals like the public sector, healthcare, media and utilities and places such as the West Asia, China and Japan. This would have the potential to create 30 million jobs of which 10 million would be direct jobs. Nasscom has also projected that by 2020, 50% of the new entrants in workforce would be women.
What percentage of graduating software engineers are actually industry ready? How can this number increase?
Fresh graduates today are bright and trainable. However, in most of the cases they are not industry ready. This pressurises the industry to provide enormous training and re-skilling facilities. As an industry which is people-dependent and global, we need to equip our students with the relevant subject matter expertise and soft skills. Students are expected to have some basic knowledge but in most of the cases this is not happening. In our education system, neither the content nor the delivery is adequate. Education must be made relevant at the outset. The government is trying to make several changes, the impact of which would be felt in some time. Till then, we need the ecosystem of training institutes, schools and additional intervention (besides the in-house training) to keep things rolling.