The last one year’s efforts of the IT companies in India in terms of increasing utilisation rates, effective use of the onsite-offshore model and new engagement models, have resulted in better margins despite the drop in the revenues. However, going forward, IT companies have to depend on volumes picking up, to see growth as there is little room for improving the utilisation rate, Som Mittal, president of industry body Nasscom, said here on Tuesday.
The utilisation levels, he said, have reached a point of inflection “where you will get only marginal returns’ now on. “In the last two years, our onsite-offshore volumes shifted 4 percentage points, our fixed price contracts have risen 6-7 percentage points and utilisations have gone up 3-4 points. This means companies have been able to manage their resources better. But our industry comes to a point where you can’t get more returns beyond a point — you need to get your pipeline back,” Mittal told Business Standard on the sidelines of the Nasscom diversity summit. He said the industry expects to see good growth once volumes picked up. “Our industry is transaction volume determined, and if that returns we will see an even higher growth.”
The IT industry in India has seen a flat to very marginal growth in the first half of the present fiscal. In the second half, Nasscom expects the industry to grow 4-7 per cent in dollar terms. Mittal said, though volumes are yet to pick up, customers are no more asking for pricing reductions They want to know how IT can play a major role in driving transformation within the company so as to help them get cost efficiencies. All these indicate that IT would play a big role driving economic recovery. “Now all these will be driven by IT. That means we will probably lead economic growth instead of following the economic recovery. I think that is what will drive growth of the IT industry in coming days,” he added.
On the visa restrictions in the US, the Nasscom chief said the number of visas, which used to get exhausted in the first week, was now spread over several months. This indicates that the demand for US visas from global companies is a factor for demand. “That’s proving a point that artificial caps don’t determine the requirements. Requirements are determined by market opportunities.” He, however, said the unemployment rate in the US, which is still around 10 per cent, is a cause for concern.
The Indian IT services companies use H1B visas for sending temporary workforce to the US to finish the temporary works. For all other functions, said Nasscom, Indian IT companies, including Infosys, Wipro and TCS, have started recruiting locals because of their easy availability now. “This is an opportunity for Indian companies to hire Americans and they are doing this a lot more now as they are aplenty. If in the past when we made offers, everybody competed for the same resource. So our hit rates were much lower,” Mittal said.
Earlier, Nasscom proposed to the US government to consider ‘service visas’ to people visiting US for a short-period in connection with the trade. Nasscom says, the US government has responded to this positively. The US Congress is reportedly planning to effect a comprehensive reforms on immigration, “instead of looking at it on a piecemeal basis”. The Bill is expected to be tabled in February and March next year. “We expect this to be a more balanced Bill,” said Mittal.