Nasscom Cuts IT Sector Growth Forecast to 11%

Industry body says slower growth at Indian back offices of multi-national cos to hit industry OUR BUREAU MUMBAI      Half way into the financial year, information technology industry body the National Association of Software and Services Companies (Nasscom) has scaled down its growth expectations from India's software services sector blaming slower growth at India's back offices of multi-national corporations (MNCs).  Nasscom now expects the industry to grow by at least 11%, against the earlier forecast of 11-14%.  Based on the revised guidance, Nasscom has projected export revenues of $75-77 billion (. 4.1–4.2 lakh crore) in the year to March 31. Including the domestic business, the industry is worth about $100 billion.  "The GICs (global in-house centres or captive units) are going through huge efficiency improvement. They are on a cost-plus model," said Nasscom president Som Mittal.  Currency movements had also adversely impacted revenues reported by captives, which make up about 20-25% of software exports. The mid-year review was necessitated by a tough and uncertain economic environment in the sector's two largest markets — the US and Europe — which together consume about 80% services exported by the sector. Vast divergence in growth among India's top five software services — with some growing fastwhile others lag behind significantly unlike the uniform growth a few years ago — has also taken the wind out of industry sails these past two years.  Infosys, the second largest software services exporter stopped giving out quarterly growth guidance earlier this year, as its management said it was unable to accurately predict near-term spending patterns of its clients. Infosys expects to grow at least 5% during the current fiscal. Another top-tier company Wipro has also been struggling to return to the growth path and has been barely managing at 1-2% sequential growth in the past quarters.  In contrast, both HCL Technologies and largest software services exporter Tata Consultancy Services (TCS) growing at a steady clip and gaining market share. "Growth rate has picked up in September and many companies have indicated that the second half will be better than that of the first half. Based on that, we are pretty confident we will meet the lower end of the guidance," said Nasscom chairman and CEO of TCS, N Chandrasekaran.  Measured in local currency, however, the sector will grow at by about 18-20%. A year marked by wild swings of the rupee has seen a high of about . 52 against the dollar and a low of . 56. In the long term, the industry has good growth prospects, Nasscom said as corporations worldwide seek technology services to improve their processes, and become more efficient. What is helping Indian IT is also a large number of technology outsourcing deals signed nearly a decade ago coming up for renewal now. Such deals, where corporations are looking to reduce the number of smaller deals and service providers, have increased 25% in 2012, according to Nasscom.  ROAD MAP FOR FUTURE  The industry body has set up a committee, headed by Infosys cofounder and chairman emeritus, NR Narayana Murthy, to draw a roadmap for the next ten years.  "Nasscom is the centre of the development of this (IT) industry. We have kicked off an exercise on what infrastructure we must have in Nasscom in order to address the opportunities in core IT, digital solutions, infrastructure, engineering services, business process management," said Chandrasekaran. As compared to a decade ago, when the offshore business model was still establishing itself, the software industry is now several times larger and in many subsegments such as engineering services, which are sizable opportunities on their own.  "There is a huge opportunity ahead and it's time for us to make the necessary investments, initiatives to capture all the opportunities," added Chandrasekaran. The apex industry body is will also appoint a committee to find a replacement for Nasscom president, Som Mittal, whose term in coming to an end this year but who will stay on for another year.  Mittal's term was the most tumultuous in any president's tenure characterised by the global financial meltdown and high unemployment in Indian IT's key markets of US and UK. We have kicked off an exercise on what infrastructure we must have in Nasscom to address the opportunities in core IT, digital solutions, infrastructure, engineering services and business process management      N CHANDRASEKARAN      Chairman, Nasscom