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V. Rishi Kumar

Mr Kiran Karnik

HYDERABAD, Nov. 10

THE Indian software services industry has performed creditability. Indications show that the software services industry will be able to achieve the projected growth rate of 30 per cent.

Meanwhile, the IT-enabled services (ITES) segment has begun to blossom and may record a growth of about 60 per cent this year. However, a few regulatory issues need to be addressed to boost the sector.

The President of National Association of Software and Services Companies (Nasscom), Mr Kiran Karnik, spoke to Business Line about the progress made by the sector despite trying times over the last year or so, the problems faced by small and medium enterprises in the space and the need for a policy framework to boost the hardware sector. Excerpts.

What is the industry outlook?

The industry has registered a positive growth of about 30 per cent despite the hardship faced due to the general slowdown and our projections of a 30 per cent growth are on track. Though we have not yet put together half-yearly consolidated performance, we are confident of achieving this.

As we had anticipated, ITES and business process outsourcing (BPO) companies have registered a growth of about 60 per cent and this is picking up further. With the India brand well established, outsourcing has come to stay as companies abroad are keen on ensuring return on investments.

It appears small and medium IT firms are in trouble?

In the software services about 55 per cent of the overall business is accounted for by a few big firms and the rest by small and medium enterprises. The performance of SMEs in this space has been mixed.

While some of the small firms, who have carved a niche in specific space, have done remarkably well, others are finding the going tough. Particularly, the medium-sized firms are not doing well.

Therefore, Nasscom is now working out ways to ensure how best we can help them tide over the current situation. Towards this end, we are planning events overseas like the recent one at Italy where firms, which do not have adequate finances to tap those markets, can use the Nasscom platform to build relationships.

While the geo-political risks have been now put behind and things are looking up, investments from two of our major markets — the US and the UK — are cautious and extremely focussed to a few already existing players. It is difficult for a new entrant to make a mark in this space. Therefore, we are looking at other markets.

How do you boost growth?

The hardware sector and telecom access need to be supported by the Government with flexible policy framework which helps cut down on existing duties. This will help bring a spin-off effect on the industry in general. We are interacting with the Government seeking some relief so that the domestic market can be boosted, as it is growing at just about 15 per cent. If this happens, there will be huge opportunity for small and medium companies to leverage this space. E-governance is one area, which can spur a lot of activity and here is where SMEs can benefit. Look at what duty relief has done to the television industry. The competition has brought down the prices significantly. We need to do this to the hardware sector as well. If we can provide good PCs at sub Rs 15,000 price, PCs will just proliferate.

Take the case of the telecom sector, all that the Government did was to bring in more players. Just about four years ago, a minute call from a mobile phone used to cost Rs 16. It is now down to about Rs 2. Therefore, we are keen that the hardware sector is boosted with say a three-year tax moratorium.

The other area we need to consciously support is the growth of industry in regional languages. Though much is talked about regional language software, there is hardly any development in this area. Unless we boost this, it will be difficult to bring all round development. The Government has got to increase competition and this will change the industry.

Look at the potential e-governance holds in the country. If we encourage the Government-business interaction, this will boost e-commerce and automatically provide opportunity for many local firms and also bring significant savings to the Government, eliminating middlemen.

Though we find there is rush to get into the ITES space, not all of them will be able to succeed. From early indications, it is clear that all captive units are doing well and those who have carved a niche in a specific area are fine. Rest of them will find it tough. The only way forward for such firms is to collaborate, work together and scale up.

Though the overall industry will certainly grow at about 30 per cent this year, the growth will not be uniform. Nasscom is keen that the SME sector does not get impacted adversely and our endeavour has been to see if we can boost their performance.

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