See IT industry at $1.5 trillion by 2020: NASSCOM study

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  1. Singh

    Singh Phat Cat Administrator

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    The Indian technology sector is set to log into a high growth phase with the addressable market for tech and business services set to expand to 1.5 trillion dollars in 2020 from the current USD 500 billion, that's according to the latest report by The National Association of Software and Services Companies (NASSCOM) – ‘Transform Business, Transform India’ in association with McKinsey. How should the Indian IT industry transform itself to deal with emerging threats?

    Commenting on the same, Pramod Bhasin, CEO, Genpact, and Chairman of NASSCOM, said, there are some significant demographic changes happening around the world, which are irreversible. Bhasin said domestic business opportunity will grow to USD 380-420 billion and China will represent 50%, while India will represent 25% of it.

    Noshir Kaka, Director, McKinsey & Co, said, "We think actually not just domestically in India, but as the BRIC nations as a whole, which constitute one of the largest growth opportunities as always."

    "Even the projection that has been stated by 2020, which is USD 225 million - combining both exports and domestic - is actually not an easy task, Kaka added.

    Here is a verbatim transcript of the exclusive interview with Pramod Bhasin and Noshir Kaka on CNBC-TV18. Also watch the accompanying video.

    Q: Most IT companies at this point are finding it hard to sort of tell you what's going to happen in the next quarter – you are projecting 2020 – but give us the reasons why you are optimistic and bullish and also whether you’re factoring in the fact that the sun will eventually set on the sops that you enjoy currently?

    Bhasin: There are some very significant demographic changes happening around the world, which are irreversible. It doesn’t matter what happens next in quarter. Working population in Japan is going to go down by nine million people. Working population in many other parts of the world – Germany, Italy, America – those demographics are going to change and there will be a shortage of talent. I think that picture is very clear.

    Secondly, as Indian companies globalize, they will be operating from all over the world. So this projection that we are talking about is not just about business done primarily from India, but it is also about Indian companies doing business.

    Q: I want a quick comment on this because I was talking to Narayana Murthy last evening on the show and he was talking about how Indian IT needs to become visa independent given the call and move towards protectionism. How is that going to change the onsite offshore model?

    Bhasin: I think it will change it not just because of the visa issue. It will change because we have to diversify in terms of the new segments that we can grow into – 80% of this new growth is going to come from new segment either geography verticals or type of work that is done. So, BRIC nations – Brazil, Russia, India and China – will be huge markets may be bigger than Europe by 2020.

    Latin America is also a big market. New verticals in healthcare – there is no reason why Indian IT industry and the BPO industry cannot be one of the great solution providers for the healthcare industry, which in such trouble all over the world in terms of its efficiency and productivity. New areas such as clinical research, healthcare as we talked about even in public services, the scope for public services work for our industry is enormous especially in countries like India and China.

    Q: Pramod talked about the new verticals that you could possibly look at in terms of opportunities. But could you also talk to us about the domestic market because one usually hears this that if things are slowing down in the west, why aren’t you looking inwards? Is there enough room to grow substantially domestically?

    Kaka: Absolutely. We think actually not just domestically in India. But as Pramod mentioned, the BRIC nations as a whole, actually constitute one of the largest growth opportunities as always.

    For example, in India very specifically we think that by about 2020 domestic market service in India is worth about USD 50 billion. It could be worth about USD 50 billion, which just to put you in comparison is the size of the total outsourcing market today, as we know out of India.

    It is a very big opportunity. It is needless to say that you are not going to actually get that opportunity unless you fundamentally transform your business model. You cannot achieve that kind of penetration in the domestic market with an international or an onsite-offshore kind of mix because the value levers are fundamentally different.

    Q: There is a large deal brewing of Sun-Oracle. There is some sort of consolidation happening. How do you think that will change the dynamics of how the industry functions both globally and locally?

    Bhasin: I think there will be more consolidation as time goes on. People are forming interesting partnerships.

    Q: You have been saying that you expect more consolidation domestically and it hasn’t happened?

    Bhasin: But I have also been saying it won’t happen now. I have been saying consolidation will happen, but I have always said at every time, pricing is not okay right now. Sellers want 2007 prices and buyers want to pay 2010 prices. So, that match is now closer together. You are going to see more deals in the next six-twelve months because people are more rational about pricing.

    We all know it is going to happen. We are just waiting for either side to settle down and then decide what is rational.

    Q: What can trip the India story at this point? The report talks about the known challenges – infrastructure, lack of talent pool, low cost destination perhaps emerging as competition. But what can trip India’s growth?

    Kaka: Let’s put it very plainly. Even the projection that we have stated by 2020, which is USD 225 million combining both exports and domestic is actually not an easy task. This is not business as usual. If you look at a business as usual scenario, you could actually see an even more constrained market. This requires fundamental initiatives at four-five levels.

    I’ll just talk on two-three that you haven’t mentioned. One is the opening of new markets. Pramod spoke about it. Today if you look at the second largest sector as an opportunity sector for the industry, after BFSI it is actually the public sector. Not many of us have looked at that public sector simply because we have a veil that looks at outsourcing offshoring opportunities and traditionally public sector does not fit into that. But if you look at public sector, healthcare, if you look at China, the SMBs, traditionally we have focused on Fortune 1000, all of those remarkable opportunities. Frankly we aren’t going to get there, as I said, with the current business. So, actually looking at new drivers of growth and business models to service that is fundamental to what the industry can do.

    What NASSCOM can do I think is around establishing India as a global trusted hub and brand. I think we have talked a little bit about it in the past. I think there have been a lot of episodes in the recent past that we actually can comment upon. But I think going forward this whole notion of being a trusted brand will actually be very critical. The government agenda continues to be two-fold. One is, education and infrastructure. That will never change. The second is regulation.

    If you look at our regulation today, a lot of the regulation is around – for example we are governed by the Shops and Establishments Act, which is kind of strange for this kind of institution or this industry.

    Q: So speaking about what the government ought to do because we already talked about what industry needs to do and what NASSCOM as an industry association is doing - sops - that has been the big demand as far as NASSCOM is concerned. We haven’t seen much forward momentum. We have gotten a little bit of a breather. Are you expecting the breather to continue?

    Bhasin: We have been pushing for the breather to continue.

    Q: But are you getting used to the world without sops?

    Bhasin: I think we have been thinking about that and facing upto that for many years. We have all known that the sops will expiry. I think the fact remains that especially for the medium scale enterprise who can’t get into a big SEZ, who can’t afford the cost, who needs to be in a big city - these sops are vital. They need it to continue in this environment where pricing is under pressure. You cannot invest a lot of money. Your profits are under pressure and this is a time when government can really help because the other point I would make to the government is we carry a lot of burden right now. We provide our own energy, we provide our own transportation, we provide our own education and we provide our own security. We would like some help in some areas.

    See IT industry at $1.5 trillion by 2020: NASSCOM study
     
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  3. nitesh

    nitesh Mob Control Manager Stars and Ambassadors

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    This number can become very huge if we think about spending in defense sector and because of new policy of 30% offsets. Defense is the most technology hungry segement. If our companies concentrate on this sector they can get huge orders.
     
  4. Yusuf

    Yusuf GUARDIAN Administrator

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    Wow 1.5 trillion. As much as India's economy right now.
     
  5. Vinod2070

    Vinod2070 मध्यस्थ Stars and Ambassadors

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    Well it is the addressable market. India will not capture 100% of it.

    In fact we will do well to maintain our current share. Thec competition will surely increase in future.
     

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