Mr Rajendra S. Pawar, Chairman of Nasscom (National Association of Software and Services Companies) and NIIT group, is an optimist to the core. Despite headwinds globally, he strongly feels that the Indian IT-BPO industry has the bandwidth and depth to reach the target of $225 billion by 2020. Excerpts from an interaction with him at the Nasscom Leadership Forum.
From very high growth rates of over 20 per cent, the IT-BPO industry is forecasting a CAGR of 13 per cent for the decade. Is it because of slowdown?
The industry had witnessed a CAGR of 17 per cent during the five-year period of 2007-12 despite turmoil in the US and in European Union. For the next eight years, we are forecasting a CAGR of 13 per cent to get to the targeted $225 billion by 2020 from $101-billion we achieved this year.
The high growth rates we achieved in the early phases were largely due to the lower base. As we matured and attain a critical figure of $100 billion, it may not be possible to sustain that kind of growth rates. Smaller companies that have started their operations still could do that. But overall, we are looking at 13 per cent.
Where is this additional $125 billion going to come from? Which are the new markets the Indian IT-BPO industry is looking at?
We expect that about 80 per cent of all incremental business from now and 2020 would be coming from new areas – from new geographies, new verticals and from new business models such as cloud-based offerings.
Indian companies are serving some 70 countries now. Though most of revenues are coming from 10-15 countries, there are a lot of opportunities opening up in the remaining countries.
We have good hedging on that as more and more countries are embracing technological solutions. The slice and dice of global markets are changing.
If you see, growth of business in emerging markets is 1.4 times that of mature geographies. This went up to $7 billion this year from $6 billion last year as operating centres globally went up to 560 from 520.
Who are going to drive this growth?
As of now, 95 per cent of industry's revenues are coming from 1,300 companies in the association. This, however, is going to change. What you are seeing from outside is a homogeneous, monolithic industry. But those seeing from within are witnessing a qualitative, big change.
Smaller companies and fledgling start-ups are taking roots. As of now, they contribute just $2 billion in the overall kitty of $100 billion. It is just a fraction. These are going to make a huge impact as we move ahead to 2020. Their contribution would be much higher. This segment will need to contribute at least a quarter of the industry's revenues by 2020.
What is the outlook for this financial year?
We have conservatively pegged growth rate at 11-14 per cent for 2012-13. But we are confident of doing better towards the end of the year. We will revisit and review this figure in October as we see the US economy getting better and domestic market improving sharply. There is a lot of headroom for growth as our overall size in the global IT market is much bigger.
To cite some numbers, domestic market has doubled to Rs 1,53,300 crore in 2011-12 from Rs 81,300 crore in 2008. The good news is that domestic demand for IT services comprised 38 per cent of this and hardware chipping in with 40 per cent.
On forecast of fewer additions to workforce…
The industry added 2.30 lakh people last year. But we are forecasting only 2 lakh inductions this year. Perhaps because of the lower growth rate we forecast for the industry. But what we should look at is a qualitative underlying change that is happening. Small and big companies from India are buying firms abroad. We are buying because we are aspiring to offer newer value propositions by acquiring high quality workforce there.