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Software and services exports touch $17 b

Special Correspondent

Employee base crosses one million mark; companies explore newer markets

BANGALORE: Surpassing projections, Indian software and service exports jumped 34.5 per cent to touch $17.2 billion during 2004-05 and is expected to rise by 30-32 per cent during the current fiscal, the National Association of Software and Services Companies (Nasscom) has said.

"The strong broad-based growth witnessed in 2004-05 validates the economics of off-shore outsourcing in the light of global challenges. This is a real bounce-back and is by far the highest growth since the slowdown in 2001," Kiran Karnik, President, Nasscom told reporters here on Thursday.

"The performance of the Indian software and services exports industry once again reinforces our confidence in attaining the projected target of $50 billion in sales by 2009. As the base increases, growing at a rate of 30 plus is tough, but it is achievable," he said.

Despite the rapid growth, Nasscom warned that there was no room for complacency. With competition intensifying from other countries, Indian companies will have to cut costs, among other things, to remain in contention and maintain the growth momentum.

According to S. Ramadorai, Chairman, Nasscom, and CEO and MD of Tata Consultancy Services, pricing trends in BPO are likely to be susceptible to downward pressure, increasing the emphasis on operational excellence to sustain margins. "The en-masse increase in wages in the IT industry year after year is not sustainable. Better productivity and innovation are the key to staying competitive in the face of dropping margins", he said.

Our Chennai Correspondent writes:

The Indian IT-ITES industry has recorded 34.5 per cent growth in exports, clocking revenues of $17.2 billion in the year 2004-05 compared with $12.8 billion in 2003-04.

As per a Nasscom survey, of the total IT-ITES exports in 2004-05, IT software and services grew by 30.5 per cent, registering revenues of $12 billion; while the ITES-BPO segment garnered revenues of $5.2 billion, recording a growth of 44.5 per cent.

Nasscom has projected that Indian IT-ITES exports are likely to grow by 30-32 per cent during 2005-06, fetching $22.5 billion.

The overall Indian IT-ITES industry (including the domestic market) grew by 32 per cent during 2004-05 registering revenues of $22 billion, up from $16.7 billion in 2003-04.

Some of the highlights of the survey include the fact that the industry's employee base crossed the one million mark during 2005.

The study says that the total value of outsourcing to India ($ 17.2 billion in 2004-05) is estimated to be 44 per cent of the worldwide total.

The offshore penetration of Fortune 500 increased by 33 per cent in 2004 (from 300 in 2003 to 400 companies in 2004).

SMEs clock 20 p.c. growth

The vast majority of SMEs in the IT-ITeS industry registered a growth of about 20-22 per cent in revenues.

During 2004-05, revenue from product development and R&D services was $3 billion, up from $2.3 billion in 2003-04. The top four players alone have over 660 clients in the $ 1 million category, up from 441 in 2003-04.

While the U.S. and the U.K. still remain the dominant markets, Indian companies are gaining traction in newer geographies like Japan, Singapore and Germany. While India continues to lead in traditional segments, vendors are also gaining ground in newer services such as packaged software implementation, systems integration, network infrastructure management and IT consulting.

S. Ramadorai, Chairman, Nasscom, has stated that the Indian software and services industry has been able to maintain its growth momentum and consolidate its partnership with overseas customers, adding to their competitiveness.

According to Kiran Karnik, President, Nasscom, the performance of the Indian software and services exports industry has reinforced that the Industry would attain the projected target of $50 billion in 2009.

The year has witnessed greater adoption of the global delivery model, with Indian vendors establishing their presence in high-margin segments, along with a steady growth in traditional service lines in the ITeS-BPO sector.

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