Date:24/04/2006 URL: http://www.thehindubusinessline.com/2006/04/24/stories/2006042400150800.htm

Back Holes in IT

Big names in the information technology sector have continued to be on the ascendant in terms of sales and profits. In fact, their revenues have been outpacing projections both in absolute terms and percentage rates of increase. As of last year, gross revenues represent 3.3 per cent of GDP (as against 12 per cent for the entire services sector), and the value added in 2002-03 crossed 92 per cent. IT-enabled services have been expanding at an impressive annual compound rate exceeding 30 per cent up to 2004-05. Their contribution to exports earnings and employment has also been spectacular.

So what can go wrong? Would that one could say: Nothing! There are a few holes in the IT which, unless plugged, can spell disaster at some future date. Most firms in the sector look outward, and their dependence on industrial countries, primarily the US, is increasing alarmingly. Out of a total revenue of $22 billion, only $4.8 billion can be sourced to domestic market; it is the exports of software and services ($12 billion) and IT-enabled services and BPO ($5.2 billion) that claim the rest of the cake. This imbalance is too obtrusive to be ignored.

The uglier hole is the complexion of the industry as such. Its reputation is almost wholly derived from services and not products. Indeed, hardly any of the firms which are global brands are associated with any product dominating the market in India or abroad. This is the major reason why India's share in the $180- billion software industry is a measly 0.2 per cent.

Here again, complacency will only put a permanent stamp of techno-coolies on India in this sector. The existence of this hole is due to deficient R&D and want of aggressive efforts at creativity; unwillingness or inability to invest the needed resources in brand-building and marketing; easy pickings in the service business.

Here is a challenge for the IT industry as a whole.

(For Mr Aziz Premji's excuse, visit http://knowledge.wharton.upenn.edu/article/1450.cfm)

B. S. Raghavan