Financial Daily from THE HINDU group of publications
Tuesday, Jan 03, 2006
Financial Daily from THE HINDU group of publications Tuesday, Jan 03, 2006 |
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Exports & Imports Info-Tech - Software Innovation can help add $20 b to IT exports: Nasscom V. Rishi Kumar
Hyderabad , Jan. 2 INDIA could potentially accelerate the overall IT exports by a whopping $15 billion-20 billion by the year 2010, if it focuses on multi-dimensional innovation, according to National Association of Software and Services Companies (Nasscom). The Vice-President of Nasscom, Mr Sunil Mehta, told Business Line that this innovation would cut across business models, knowledge and research areas, intellectual property creation and scaling up the value chain within the existing services streams both in software as also business process outsourcing (BPO). Mr Mehta said "look at a scenario where cost is the only competitive advantage. Lately, it is felt that a mere cost arbitrage will not help. "For instance, if an outsourcer is taking advantage of Indian companies and saving about 50 per cent, it expects this to come down by at least 10 per cent next year." The areas that have been overlooked relate to the implications that innovation can bring about in cost savings. This is important as countries in the Eastern Europe are closing up in some areas. This in fact is beyond innovation that is traditionally identified with IP creation. "Take the case of a pharma company with a turnover of $10 billion. If an Indian company can help them save up to $200 million to $300 million in terms of their R&D spend, it would be a compelling proposition. "This could be in areas such as clinical trails, data management and analysis. This involves cross-functional disciplines and opens up new segments. We expect such deals to grow," he explained. In the case of high-end business process outsourcing, there is need for operational excellence. This is something that top 4-5 companies are anyway addressing. The challenge is to ensure that all players in the industry take to such practices. For instance, if a company can handle a particular process for Rs 6,000, and another does the same with Rs 3,000, this is a classic case of how innovation can make a difference. "The other key issue relates to expectation setting. Companies have gone into the mindset of providing services at lower cost. "Increasingly, this differentiator will diminish between one company and another, where innovative approaches to solutions will make a difference," he said. "The global IT and IT ES industry is estimated at $300 billion and India accounts for $17 billion of that. "We have barely tapped the huge potential out there, Mr Mehta said.
Domestic market
Commensurate with the growth projections, the domestic market is set for growth. As opposed to $4.8 billion last year, it is projected to touch $7billion this year and reach $18 billion -20 billion by 2010. Interestingly, a lot of Indian companies are adopting the model followed by their counterparts in US and Europe, of outsourcing their non-core functions across areas of manufacturing, banking and finance and insurance sectors. Broadband is poised to take off and is expected to spur growth. With broadband penetration and improved telecom connectivity, as against 8 per cent of the overall domestic business generated from tier II cities, this is projected to grow to about 18 to 20 per cent over the next 4-5 years, Mr Mehta said.
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