The Hindu Business Line : We need image makeover for IT, BPO industries

The other wish is STPI extension – i.e., to continue with tax benefits beyond 2009. Particularly, the smaller companies and new industries would benefit.

Mr Lakshmi Narayanan, Vice-Chairman Cognizant Technology

K. Bharat Kumar

Chennai, Dec. 31 The IT software services and BPO industries have had a mixed year 2007. The rupee played spoil sport, but top players reacted quickly in tightening the slack in the system. What does the year ahead look like? And, what would industry leaders want to see happen? Business Line spoke to Mr Lakshmi Narayanan, Vice-Chairman, Cognizant Technology Solutions and Chairman of Nasscom, the software and BPO industries’ apex body. His views:

What are the top three things that you’d like to see happening in IT next year?

First, we need an image makeover for the IT and BPO industries. They have been high growth industries and have provided a lot of jobs and the like.

From traffic jams to crimes in cabs during night shifts, the industry tends to get blamed. Aviation, retail, the hotel industry…. everybody experiences such problems. When it happens in IT, it is highlighted.

We have to highlight that the IT industry creates maximum jobs and has done the maximum for education reform and for education infrastructure. When the government announces that more IIMs and IITs would be established, part of that credit should go to the IT industry. This is the industry that has made inclusive growth possible, be it going into second tier towns, recruiting people from rural areas and bringing into the nearest centre... We have fearlessly talked about lack of roads, power etc.

Every nation should be known for one thing. Israel is known for its defence strength, the US for its financial prowess and Japan for its automotive technology. India should be known for its IT, BPO and its services economy.

In that context, extension of the STPI scheme is crucial. That is, tax benefits ought to be extended at least for the small and medium-sized companies.

Second, we are not too concerned about growth. We will continue to see growth in 2008 and for several years thereafter. Growth might not continue from the same sectors, but lots of things have been added. In the last five years, we have seen the growth of BPO, remote infrastructure management, engineering services and the like. One or two new things would be launched like this consistently. Cognizant is very bullish about analytics. What is consulting to IT is analytics to the BPO industry. It helps you move up the margins chain.

The third issue we are excited about is the global collaborative model that has come about. Large companies can collaborate with teams in different locations – Latin America, China, customer teams across their respective locations, India… we can put together a solution that is better and quicker in a cost effective manner.

Why is it different now? It’s because the technology is available now. The tool we have developed for ourselves is Cognizant 2.0. If and when the supply situation (manpower availability) tightens, you can always harness manpower at locations across the world.

That trend would become mainstay. You would see a lot more opportunities come the India way because of this. The consequence would be that larger Indian companies would work more with smaller companies – in India and abroad - through subcontracting. That would begin to happen.

Any thoughts on the talked about US slowdown?

Even if there is a slowdown there are plenty of alternatives for the industry to continue to grow. In 2007 or even 2006, the growth was good, but even then it could have been better but for manpower supply. In our case, if we had had more people, we could have grown faster. At no point has there been a demand constraint. Now that supply is constantly improving, we have the opportunity to tap a greater proportion of existing demand.

Wish list for the rupee?

(Smiles). Given that generally we are able to use some levers such as utilisation to manage it, and given that there is some talk of the rupee going up to 35 to a dollar, we will be happy if it stays in the range of 39-40 to a dollar.

The other wish is STPI extension – i.e., to continue with tax benefits beyond 2009. Particularly, the smaller companies and new industries would benefit. A lot more entrepreneurial activity would begin. IT and BPO companies would distribute to remote locations. With SEZs, you would need to be in important centres.

There is some noise about overall corporate tax being reduced – that is a good thing, we would want that also, but STPI tax sops should continue. Ideally, the whole industry should get it. If not, then at least the small and medium-sized firms should get it. If we do it, there would be greater growth.

You indicate that supply side (manpower availability) has improved.

We are moving in the positive direction. Large companies are growing faster than last year, even though market demand has not grown as fast. It does not mean that the market has suddenly opened up. This is more a function of supply than of demand. We also consider other parts of the recruitment spectrum. BPO is looking at +2 students while IT industry is taking non-engineering graduates too, and then training them to equip them.

Newer services lend themselves to a different kind of manpower.

With supply of manpower improving, what is your take on wage inflation and attrition for the new year?

That should moderate. The salaries would come to the lower end of the generic band (of 10-15 per cent, which figure is generic to the IT industry). We expect more and more companies to operate at the lower end of the band.

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