IT Inc saw revival of business fortunes in 2010

Nasscom said the Indian IT-BPO industry is well-poised to reach the US$70 billion-mark by the end of the current fiscal.

The year started on a positive note, with software majors like Tata Consultancy Services (TCS) and Infosys posting good profits, contrary to early indications of a drop in revenues.

As the year progressed, core markets like the US — along with emerging vertical and geographic segments — witnessed a significant pick-up in demand, resulting in a 5.5 per cent jump in overall industry revenue.

With the government projected to spend Rs 25,000 crore this fiscal on information technology initiatives, it has emerged as one of the biggest growth verticals for the domestic IT-BPO sector, Nasscom said.

As a result, over the next two years, the domestic IT-BPO services segment is expected to grow from US$12.8 billion in FY’2009 to US$16.7 billion in FY’2011, translating into a CAGR of 14 per cent, it added.

Meanwhile, the products industry is expected to grow by over 11 per cent in the same period. The sector also witnessed a turnaround in terms of hiring. A year ago, software companies had not only frozen hiring, but had also slashed jobs as a result of the slowdown in demand. However, as the year began, industry players gave a positive outlook on the hiring scenario in the country, as well as in other offshore centres.

The country’s largest software vendor, TCS, plans to hire over 50,000 employees this fiscal — much higher than the guidance it had given in the previous financial year — while Infosys expects to add about 20,000 people by March, 2011.

According to analysts, with attrition levels hovering around 18-20 per cent, the Indian IT industry is expected to hire about two lakh employees over the next one year.

However, one of the adverse impacts of the global recession was the rise of protectionist sentiments across major markets like the US and Europe.

 In August, the US House of Representatives passed a Bill that effected a steep hike in visa fees for skilled workers. The move was aimed at raising US$600 million to beef up security along the US-Mexico border, but would also result in US$200 million in additional visa costs for Indian companies every year. In addition, the US state of Ohio has also banned outsourcing of government IT and back office projects to offshore locations.

Currency fluctuation and a significant drop in new orders from the European region, the second largest market for Indian IT players, added to the woes of the IT companies.

Rising costs also posed a tough challenge, something that might continue in the year ahead. It gains relevance as other countries like Vietnam and Philippines have emerged as strong competitors to Indian players with their cost-effective structures. Forex fluctuation has dented India’s competitiveness and “steps need to be taken to address India’s increased risk perception,” Nasscom said.