IT-BPO industry to see slow growth in FY13

Sector's revenue to cross $100 billion in 2011-12, Nasscom names current economic and political uncertainties as dampener

Sailing through the choppy business environment and gloomy global market conditions, revenues for Indian information technology (IT) and business process outsourcing (BPO) services companies will cross $100 billion mark this financial year.

However, the same pace of growth is unlikely to continue in FY13 with the current political and economic uncertainties acting as the dampener, according to Nasscom.

The apex body of Indian technology companies has forecast a slowdown in software exports in 2012-13 compared to 2011-2012. In FY13, the IT and BPO export revenues is expected to grow at 11-14 per cent, while the domestic revenues are slated to grow by 13-16 per cent, according to Nasscom projection. The silver lining is, despite the challenges in the global market conditions, Indian IT-ITeS (IT enabled services) sector sustained its growth trajectory and met the revenue guidance given by Nasscom last year. India's IT services and BPO exports were predicted to grow 16-18 per cent in 2011-12 to $70 billion.

KEY HIGHLIGHTS

* In 2012-13, export revenues are expected to grow by 11-14% and domestic market by 13-16%

* Indian IT-BPO revenue estimated to cross $100 million in 2011-12 

* In 2011-12, exports are expected to be at $69 bn and domestic market at $32 bn

* Technology spends are expected to grow over 4%

* India’s share in global sourcing was at 58% in 2011, up from 55% in 2010 

* The industry expected to employ over 200,000 employees in 2012-13; currently employing over 2.8 million professional, with over 2,30,000 jobs being added in 2011-12

In its strategic review for 2012, Nasscom estimated the software services and BPO revenues of Indian companies are likely to cross $101 billion this year. Of this, about $69 billion will come from exports, a growth of 16.3 per cent growth over the previous financial year. The domestic IT services revenues expected to grow at 16.7 per cent in year 2012 at $32 billion.

The growth was driven by a number of factors such as new business models, services around disruptive technologies such as cloud, mobility, analytics, social media, and verticalised solutions, said Nasscom.

The industry body also said that India’s share of global sourcing increased to 58 per cent in 2011 from 55 per cent in 2010. The three per cent increase in the global share indicates that India retained its number one position as the world’s leading outsourcing destination for IT-BPO services.

According to Nasscom Chairman Rajendra Pawar, FY13 outlook would be revised further in October, this year. "We will revisit this forecast in October. The mood is worse than the actual business. The current uncertainties are forcing us not to look at the whole year. The environment is still foggy."

This is for the first time Nasscom is going to have a mid-year review of its guidance.

“There will be short-term ups and down,” Nasscom president Som Mittal said, adding “on the long-term, the industry is on track.” The industry can meet the vision 2020 target of touching $225 billion by 2020.

On the challenges for the industry in FY13, Nasscom who’s members includes TCS, Infosys, Wipro, NIIT and others, said a variety of factors such as the elections in the US, leadership changes in euro zone and India's own policy paralysis can act as headwinds.

"There is policy paralysis in India. There is no road map on direct taxes code, goods and services tax and SEZ issues. Also there is increased tax activism," Mittal said, adding that in the Budget he expects some of these issues to be resolved.

On the political front, Mittal said, “Elections in key markets such as the US, France, Russia, and protectionist sentiments and election rhetoric are concerns. Moreover, the wide spread media debate on the euro crisis is affecting business sentiment.” Giving the hiring outlook, Nasscom said there was a strong hiring pipeline of over 100,000 offers. The industry created over 230,000 jobs in fiscal 2012. The IT and BPO industry in India currently employs about 2.8 million people.

On the salary hike front, Nasscom said the wage increase could be in the range of 8-10 per cent in 2012-13 as compared to 10-14 per cent in the current year.

For the year ahead, global technology spending is estimated to grow 4.5 per cent, which is a good sign.