At a time when green shoots are appearing in the global economy and spending on information technology has picked up, Infosys Technologies and Tata Consultancy Services have reinforced the trend by posting better than expected results.
However, Nasscom, the industry association, will revisit its conservative 4-7 per cent growth figures for the IT industry only in December. Nasscom president Som Mittal tells Leslie D'Monte and Kirtika Suneja why it may be too early to leap for joy. And shares his view on a host of related issues such as the rise in value of the rupee against the dollar, hiring trends and the role of IT in e-governance. Edited excerpts:
IT companies have closed many deals and acquired some companies in the past couple of months. Is that enough reason to believe the scenario is improving?
I went to the US recently and saw that hotels and flights were full, like in Europe. So, the momentum is picking up and people are looking at the future, not the past. The discussions have now shifted from the economic downturn to climate change, energy and healthcare. And there is a cross-section of people in the US that is discussing these deals and we ourselves are seeing many more discussions with the CIOs.
The focus has moved from doing 'more with less', yet there lingers a feeling that budgets have not been released. However, it is anticipated that budgets will be released soon. Only 30 per cent of an IT budget goes towards new projects. So, we need to know how we can sustain the remaining 70 per cent.
This is the reason why Indian companies are still getting business and have survived. New deals are coming from continental Europe. The conversations with CIOs are now on transformation and efficiency, because they are changing their business models. So, IT is becoming the driver of that change.
So, will Nasscom be revising its growth numbers upwards this year?
You must remember it was only growth that eluded us, and not business. We have projected 4-7 per cent growth for this year and this comes from existing business. Companies did well on margins but had a flat growth rate. So, we are sticking to our numbers. We will review these only in December.
And the rupee is strengthening against the dollar, which could spoil the party.
It is surely a matter of concern, as we don't know what the companies' hedge position is. There is a business aspect and a bottom-line aspect to this. Nasscom's focus is solely on the top-line and overall business. The industry will learn how to balance bottom-lines and margins. The rupee movement is a part of day-to-day volatility and we need a stable currency for that.
Do you see an increase in hiring trends by the IT sector?
There are a few dynamics involved in the hiring process. The large Indian companies made campus offers of about 80,000 for this year's batch and they are honouring this. The rest are lateral (experienced hands) hires. Also, the attrition is at 9-10 per cent right now.
The other dynamic relates to the fact that because there was a bench (a laid-off pool of surplus hands), replacement hiring was not happening. But now people are replacing attrition gaps, else business suffers because you miss deadlines. Maybe not in thousands but nonetheless it's happening for the multinationals, captives and Indian firms. Also, many people joined for a master's course during the downturn and entrepreneurship also didn't stop during that time.
Post the slowdown, have you sensed India's image improving in the global scheme of things?
Definitely. All companies have increased their presence in India and a large number are holding their board meetings here, because India is an important offshore and domestic location. India is important in terms of the growing domestic market and talent. Look at the amount of analytics and research work done from here.
Many countries have a crunch on the technical manpower, so the domestic opportunity is in creating demand and not only in catering to existing demand.
Any other related trend?
Yes. In the next 5-10 years, I see tier-II, III structures emerging in many IT companies that already do more than 90 per cent of the work themselves. We need to develop such an ecosystem and domestic business will drive it, as it needs local solutions. Moreover, large companies don't have that geographical spread in India. Hence, partnerships with local players will happen and deal sizes would go up.
Would all this entail a change in business models?
Sure. There has been a 6-7 per cent shift in fixed prices in two years, implying that vendors have started taking ownership. Another 5-6 per cent shift has been seen from onsite to offshore. This means customers are giving vendors the flexibility to take ownership.
They no longer want to monitor the daily happenings by having projects onsite (on the client's campus) or nearshore (in a location close to the client's headquarters). The saving in this onsite-offshore shift is almost 50 per cent. Also, more and more investments are happening in R&D.
If that's the case, there's not too much noise about Indian IT companies filing patents.
We at Nasscom are looking at monitoring of patents, as many companies now have to declare their patents in India. A lot of patents are being filed by Indians and work is being done here. So, we need to create a culture to capture this development.
Are the benefits of the e-governance projects showing on Indian IT companies?
In the e-governance space, there are three markets - PSU-kind of investments, governments computerising their own work, and things that touch the citizen directly, like government to business (G2B) and government to citizen (G2C) projects. These are at various levels and coordination is key in these. It will take some time for the benefits of these projects to trickle down.
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