'Software exports can touch $44bn'

Indian software services exports (excluding BPO-ITES) have the potential to go up from the $9 billion likely to be registered in the current financial year to $44 billion in the next five to ten years (depending on how quickly Indian companies adopt new strategies), according to a study made by CRIS INFAC, the research subsidiary of Crisil, the rating and information services agency.

As the Nasscom-McKinsey report forecasts IT services exports of $28-30 billion in four years' time, by 2008, this is an independent estimate which is somewhat at variance with the Nasscom-McKinsey projections.

Sachin Mathur, head of research, while reluctant to comment on another study's figures, said that the CRIS INFAC projection was more conservative than that of Nasscom-McKinsey.

The study, which characterizes the Indian software Industry as currently non-differentiated, is likely to lose five percentage points in margins, if it does not change.

However, if the main players in the industry change their offering into differentiated solutions, there is likely to be a net gain in margins of almost one per cent (95 basis points).

The six percentage point rise in margins will come from, among others, a two percentage point rise in productivity. On the volume front, however, Indian firms have nothing to fear even if they leave their business model unchanged.

Over the next few years, while Indian companies will acquire a solutions focus, the global majors will be acquiring offshore capabilities.

Along with acquiring a solutions capabilities, Indian software companies which wish to remain in the reckoning will have to offer newer and more value added services like infrastructure management and package implementation.

Clients will reduce the number of their software vendors, deal sizes will go up and there will be a consolidation in the Indian industry.

To survive and prosper, the more forward looking Indian companies will have to go in for mixed local and Indian hiring, and spend more on selling and marketing.