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Crunch hits India IT outsourcing

April 22, 2009 20:22 IST

The global financial crisis has inflicted at least a year's delay on the Indian IT outsourcing industry's drive to reach its short-term revenue forecasts, with key markets in the US and Europe suffering from the financial downturn.

IT outsourcing has helped propel the Indian economy to growth rates of 9 per cent and was responsible for creating 45 per cent of new jobs in India's cities over the past 10 years.

Companies such as Genpact, Infosys and Tata Consultancy Services have been at the forefront of the country's economic transformation.

But a study by McKinsey, the management consultants, and Nasscom, India's information technology industry lobby, said India's IT outsourcing business would miss its target of hitting revenues of $60bn (Euro 46bn, Pound 41bn) by next year as it faced shrinking clients' budget, pricing pressures and the threat of rising protectionism in the developed world.

The IT outsourcing sector's export revenues are currently about $47bn a year. The study, Perspective 2020, also said the industry could not rely solely on its "low cost" model to survive and needed to become more innovative, breaking into sectors such as energy efficiency, mobile applications and clinical research.

It forecast that the sector's export revenues would climb to $175bn by 2020, in spite of losing market share to increasingly competitive offshore centres such as Costa Rica, the Philippines and China.

Copyright: The Financial Times Limited 2009

James Lamont in New Delhi, FT.com
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