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Vipin V. Nair

After long spells of gloom and doom, the IT sector looks like it could begin the new year with some sunshine and colour. Will it capture the elusive butterfly or let it fly?

CONFESSIONS and grudges first: The year 2002 was bland for us, IT journos. As the Indian IT industry kept complaining about the slowdown and its ill effects throughout last year, there was nothing interesting to write about. `Nothing is happening' was our refrain to demanding bosses, since this was what we got to hear from the other end. Those amongst us who revelled in writing negative stuff - layoffs, declining profits, negative forecasts - had their share of fun in 2002 too, like in the previous year.

So, along with the Indian infotech industry, we also sincerely hope that the new year will be a better, much better, one compared to the past two terrible years. After all, pleasant faces give you better stories to report. With an optimistic mind, we now attempt to do a crystal-ball gazing to see what could be in store for the sector in 2003.

Smiles for software

The overall business environment could be friendlier in 2003 for Indian software firms as US-based corporations are in the mood for stepping up outsourcing. During 2002, we saw clear signals of this when large-sized deals were doled out to Indian companies. Many big RFQs (request for quotations) that were floated last year but could not be consummated should come about in this year and our firms might get their share of the pie. Along with the American companies, European firms are expected to step on the outsourcing pedal.

According to the National Association of Software and Service Companies (Nasscom), the billing rates will be stable in 2003 and `no dramatic' changes are expected. Currently, across-the-board billing rates are $22-25 for offshore and $55-60 for onsite software development. Nasscom also projects that the offshore-onsite ratio will remain the same during this year.

Hiring on all fronts

On the personnel front, the software sector is expected to hire with more vigour in 2003. Domestic companies like TCS and multinationals like Oracle and Computer Sciences Corporation have already announced that they are planning to hire hundreds of developers in 2003. Industry experts say that the demand will be for those with some years' experience in the resume, rather than for absolute freshers. Also, senior level people who are veterans in various verticals will continue to be much sought-after in 2003 as our companies are striving to emerge as global players, especially in the consulting business.

As for freshers, the opportunity could lie in the domestic IT market, thanks to large-scale computerisation in Government, banks and corporates.

BPO shining bright

The business process outsourcing (BPO) segment which hogged all the limelight in 2002 will continue its astounding 70-odd per cent growth in the current year too. This sector is also likely to get more mature and diversified, moving away from just answering phone calls and e-mails to handling accounting and finance, engineering and design and HR services. All the software firms who made a beeline to the BPO business last year (remember Wipro's Rs 407-crore acquisition of Spectramind?) would also see their projects taking off. For them, new software deals could come bundled with BPO services. Nasscom says that the banking and financial services sector, pay-roll management, telecom and airlines could be the happening areas for BPO in 2003.

The BPO segment will surely be the largest recruiter in the IT industry in 2003, but here too people with domain-specific skills like accountants will be in demand rather than greenhorns. The HR policies of BPO players are also set to undergo some sea changes as new motivational methods are needed to arrest the problem of large-scale attrition in the sector.

All eyes on Linux

This year, the Linux operating system will not only find its feet in India, it may also just walk into your home. Towards the end of 2002, Linux became a hot issue in the country, especially after the Microsoft Chairman, Bill Gates' high-profile visit. Many State Governments are reportedly planning to endorse Linux in a big way for their e-governance projects. Even personal computer manufacturers, including MNCs such as Compaq, have started giving consumers a cheaper Linux option for home PCs.

Sun out for hardware

Come to think of PCs, this year should be good for the hardware industry too. Falling prices, increasing awareness, demand from children for computers and above all, the multimedia functionality of the PC will drive the growth of the market in 2003. Companies such as HCL Infosystems would come out with low-cost computers based on non-Intel, non-Microsoft products this year to enthuse price-sensitive customers even in small cities to go for a PC. Such products will also find favour with the small and medium enterprises in the country.

Warning clouds

And before we conclude, let's also say that some of the worst fears of the industry may also come true this year. The income-tax concessions that the software exporters enjoyed for long may peter out this year, if the Government accepts the Kelkar Committee report on tax reforms. The Committee has recommended that income-tax benefits to software exporters be withdrawn after the Government signs Totalisation agreements with India's trade partners such as the US. The industry has already decried this, saying that such changes in policies will only hamper the industry's growth.

Also, many experts fear that the industry will witness a phase of consolidation - both in the BPO segment as well as software services - this year. This will result in only the strongest surviving with the small and medium-sized companies going under. This is more possible in the BPO area where companies have just mushroomed. The severe toll that the US slowdown has taken on the small and medium software firms may finally crush many players. Whether such a consolidation is good or bad, if it happens, expect some bloody casualties.

Let's hope for sunny days ahead.

vipin@thehindu.co.in

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