Outsourcing must to remain competitive

The slowing economy could create additional opportunities for the global sourcing industry despite companies being compelled to revisit their spending budgets, notes software body Nasscom’s Strategic Review 2009 report. The advantages of global sourcing, the report argues, will help organisations tide over tough times and maintain competitiveness.

The export revenues of the Indian IT-BPO sector , for instance, are estimated to gross $47.3 billion in FY2009. However, the industry can achieve an export target of $60-62 billion by FY 2011, employing 2.5-3 million professionals directly.

Besides, India currently accounts for just over 4 per cent of worldwide technology related spend. Additionally, growth in global sourcing is estimated to be almost four times that of technology-related spend. Moreover, India currently generates the bulk of its IT-BPO revenues from the US, and the BFSI sector, while accounting for a minuscule part of technology spend in other geographies and verticals.

While the 2009 outlook for global technology related spending is affected by the recessionary environment, a rebound is expected from 2010 onwards. India, with its fundamental advantages, can capture a large share of the opportunities available. The report notes, however, that in order to achieve this goal, the key stakeholders need to work in tandem.

Firms The Indian IT-BPO industry must work with clients to enhance the cost value proposition. This would involve additional investments in building capability across employees, domain knowledge, functional and technical skills, and an increase in their global delivery footprint.

While Indian IT-BPO firms are adept in driving efficiencies through automation and process improvements, the companies need to understand the fact that in the medium to long term, they would need to deliver a more significant impact on client businesses, through solutions that are innovative and transformative in nature. These enhanced, innovative solutions will also enable companies to access new market segments, delivering new service lines, and leading to the creation of in-house IP in emerging technology areas.

Government While policies have effected infrastructural development of leading cities as IT-BPO destinations in India, additional work needs to be done in developing tier 2/3 cities as viable IT-BPO service delivery locations. Efficiencies and the provision of public services—power, local transportation, security, etc., are also critical for the development of this sector.

With enhanced competition from other low cost countries and the current recessive scenario, support is needed from the government to extend the tax incentives under the Software Technology Parks Scheme (STPI). Removal of procedural obstacles -- service tax refunds, taxation of software products, and clarity around transfer pricing norms that are applicable to foreign companies is needed.

Academia Efforts to enhance talent availability and quality need concerted action from all the stakeholders -- the government, academia and the industry. Specific initiatives like Faculty Development Programmes, upgrading the curriculum, setting up research labs, launching internship programme and industry-academia collaboration can help to bridge the employable talent gap.

Industry and Nasscom Efforts towards enhancing information and data security; participation in public private initiatives in technology led development; proactively working with academia to address quality of education and building an integrated delivery model in leading cities alongside tier II-III locations are some of the critical imperatives.