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Mr Phiroz Vandrevala, Nasscom Chairman (right), and Mr Kiran Karnik, Nasscom President, at a press conference held in Mumbai on Monday.

MUMBAI, Feb. 4

SOFTWARE exports have recorded a 25-per cent growth, generating revenues worth Rs 9,100 crore for the third quarter ended December 2001 compared to Rs 7,270 crore in the corresponding period last year, according to a survey released by the National Association of Software and Services Companies (Nasscom).

Announcing the figures at a press conference held here, Mr Phiroz Vandrevala, Chairman, Nasscom, said, "The quarter-on-quarter growth is marginal at two per cent, in line with our expectations. However, the industry has shown resilience given the current market scenario and registered a 31-per cent growth in the first three quarters of 2001-02.''

He added, "The US economy has actually recorded a growth in the third quarter leading to an optimistic outlook for the industry on the whole. In the past few weeks I have observed that deals that were not closing in the last three quarters are now being closed. Also, more people are evaluating IT spends on a return on investment basis.''

Reflecting on the past year, Mr Vandrevala said that 2001 was a challenging year with a global economic slowdown resulting in a relatively flat IT spending. "Also, during the year there was considerable pressure on prices for many generic onsite skills, highlighting the fact that strong resilient business models will have to be more offshore-focused. Trading on a demand-supply mismatch cannot provide a sustained business model.''

On the delivery model front, he said the contribution of offshore business to overall export revenues was expected to exceed that of onsite during 2001-02. Business Process outsourcing is the fastest-growing segment in the industry and is expected to record higher growth than the industry average in the next couple of years.

According to the Nasscom survey, onsite revenues which contributed Rs 9,850 crore to the total export revenues in 1999-00 increased to Rs 15,900 crore in 2000-01. The offshore revenues, however, had almost doubled from Rs 5,950 crore to Rs 10,950 crore during the same period.

"For 2001-02, the projected revenues from offshore business stand at Rs 18,000 crore while onsite would contribute Rs 17, 500 crore ,'' he said.

The year 2002, he said, would be challenging but much better for the industry. "The positives would include a positive Q4 growth in the US, possibility of a strong recovery from Q3 and signs of a bottoming out in tech and semiconductor industries. Also, studies reveal that offshore business would increase; a Merrill Lynch study indicates that the proportion of IT spend outsourced to India would increase to 15 per cent in the next two years.''

Challenges for the industry would be flat IT budgets, poor visibility on customer spend even on a q-o-q basis, intense pricing pressures and slower customer ramp-up, he said. Also, request for proposals (RFPs) would be out, sales cycles would be longer and CIOs would be under pressure to justify spends.

Emerging business opportunities identified by Nasscom include embedded software development, broadband networking solutions, multimedia content management, bioinformatics as well as healthcare.

Mr Vandrevala added, "Nasscom's forecast for the growth of industry remains unchanged. It is the fastest growing sector in India accounting for 16 per cent of the country's overall exports; 5,00,000 jobs and about $1.6 billion in investments.''

Meanwhile, the association plans to release a white paper on the Chinese market by April this year.

"This position paper will provide all the facts and figures about China required for Indian companies for due diligence.

Today, individual companies are going to China based on company-specific motives; we hope to provide information which can be used for industry initiatives.''

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