Slowing software exports

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Updated: February 6, 2016 10:09:25 AM

The projections are lower than the 12.3% that it expects for the current fiscal, which is at the lower end of the original guidance of 12-14%

software reu LDespite the slowing, IT-BPM export revenues exceeded 0 billion for the first time to touch 8 billion, a 10.3% growth over the billion achieved in FY15. (Reuters)

The National Association of Software and Services Companies (Nasscom) has tempered its projections for Indian IT exports growth during FY17 at 10-12% in constant currency terms—the slowest rate of growth in the past six years, and at the bottom-end of double-digit growth.

The projections are lower than the 12.3% that it expects for the current fiscal, which is at the lower end of the original guidance of 12-14%. Much of it is due to the fact that during 2015, the global IT-BPM (business process manufacturing) industry grew a mere 0.4% in dollar terms, to $1.2 trillion.

The slowdown is on the back of global economic growth slowing down to 2.4% in 2015. The uncertain global macro-economic environment marked by volatility in equity and investment markets, currency fluctuations and political instability in global markets have led to the lower growth estimates. Domestic IT-BPM revenues are expected to rise 11-13% to R1,560-1,590 billion in FY2017 from R1,410 billion this fiscal.

Despite the slowing, IT-BPM export revenues exceeded $100 billion for the first time to touch $108 billion, a 10.3% growth over the $98 billion achieved in FY15. Meanwhile, India’s share of the global outsourcing market rose marginally to 56% from 55% in 2015.

While growth has slowed, industry is confident of hitting the 2025 target of $350 billion in exports as global enterprise technology spend is estimated to touch $ 4 trillion by then—80% of the incremental tech spending will be in digital. Digital already accounts for 11-14% of export revenues of the IT industry and is growing at 1.5x of traditional business. India already has a pool of 250,000 digitally skilled employees against just 30,000 in 2010. In the future, revenues may not be the real indicators of the industry’s capability.

Factors such as investment, digital solutions portfolio and valuations would also need to be considered for assessing the industry. Start-ups and e-commerce will be the other drivers for technology.

This fiscal itself, e-commerce accounted for $17 billion and is growing at 20%, boosting digital growth. The IT industry needs to transform its business models and capabilities to strengthen its position in future.

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