According to Nasscom, IT/ ITeS' contribution to the country's GDP has been
increasing from 1.2 percent in 1997-98 to 5.2 percent in FY 2006-07, and will
continue to increase by 36 percent in 2007-08. Considered to be the drivers of
IT/ITeS, starting from huge enterprises to so-called small and medium business (SMB)
clients, it goes without saying that the channel community has been a key
contributor to this growth and positive outlook.
On the threshold of FY, DQ Channels asked partners about the performance of
last fiscal. In a nutshell, the performance of the overall Indian IT industry
has been slightly above average, however, the encouraging factor is that this
performance doesn't have any major impact on partners.
For few, the business is growing while they claimed it to be static. Every
year would have a mixed back of positives and negatives, and 2007-08 was not an
exception. The most used phrase of the story would be 'rupee appreciation and
dollar depreciation' which solution partners claimed was the biggest reason for
the sluggish market. Another reason for the not so buoyant market conditions
were high attrition and rising cost of manpower and political uncertainties.
Dollar, the villain
In the last five years, there has been constant 50 percent growth in the
overall industry YoY. However, in the last two years, it has been just 30
percent. There are several reasons for this, but rupee appreciation was the
biggest reason due to which the overall industry suffered a great drawback.
“What should have been a great year ended on a very discouraging note,” said
Ajay Mian, CEO, All E-Technologies, Noida. He felt that the scenario would
continue for next two months, and it would be very hard to sustain in the
market.
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| The channel
community has been a key contributor to this growth and positive outlook |
Echoing his views, Ajay Sawant, Director, Orient Technologies, Mumbai said,
“In 2007-08, the industry just had 20 percent growth, and the reason was
obviously the dollar depreciation.”
Edward Jeevan, Director, Binary Systems, Bangalore claimed that the market
was totally flat but he had a different opinion for this phenomenon. “The high
number of entrants into the market was the reason for the slowdown as it created
a decline in the quality of service provided to clients. Some of these clients
became apprehensive in getting their services from solution providers (SPs),
which spoiled the overall growth of the market,” he said.
Sanath Babu, CEO, Sri Durga Computech, Bangalore shared Jeevan's viewpoint.
“The lack of quality service providers (SPs) and more entrants were the
negatives of 2007-08. Business growth depends on margins. Because of increased
competition, we were not able to make margins. The whole year has been just
above the average for both industry and Sri Durga,” claimed Sanath Babu.
Not so bad
TO Asokan, VP and Head-Business Operations, Accel Frontline, Chennai felt
that '07-08 was a good year for India. “As compared to the other developed
countries, last year was good for India. We found customers looking at SLA-based
services more often than manpower-based services, which considerably saw a dip,”
he claimed.
For few players like
B Mukund, CEO, Mukesh Infoserve, Chennai felt that the initial quarters
contributed excellently for them. “The first two quarters were excellent for us,
and we did a good job during that period. In the very next quarter, there was a
sudden sluggishness in the market. However, we grew to an extent of 100 percent
as we did good number throughout the year,” claimed Mukund.
According to Rangarajan Sriraman, CEO, Athena Info Consulting, Chennai,
“Periodical salary hike took a big toll in the overall industry and this will
continue irrespective of the status of overall market.”
SMB, the gold mine
“Considerably, the SMB contributed more to our revenue as they started
automating their operations in a huge manner. The growth of SMB is also
increasing considerably at a rate of more than 40 percent YoY, which will
further increase the revenue for SIs and SPs,” claimed Sawant.
Not many had a different view to that of Sawant. Rangarajan Sriraman, CEO,
Athena Info Consulting stressed the concept called 'multi-sourcing', which is
gaining a lot of momentum nowadays. “Not every SP has a all the services, and
for a perfect automation and management of services, the concept of
multisourcing is the only option. Without multisourcing, SMBs could not
sustain,” he claimed.
“There has been a great maturity among the SMBs and they have started
outsourcing their operations. Even Athena has acquired lots of SMB clients in a
short span, rich shows how the industry grows in the shoulder of SMBs,” claims
Rangarajan.
“Lots of consolidations has been taking place in the SMB segment, as they
started implementing end-to-end IT infrastructure, long time before,” claimed
Mukund of Mukesh Infoserve.
Drivers of 2007-08
Implementation of ERPs CRMs, project management solutions, business
intelligent solutions, etc have also been the major drivers of growth according
to the SPs. Packaged/box software has also contributed a lot, as companies like
Binary Systems and Orient Technologies have been seeing a continuous growth in
the said segment during '07-08. “One of the greatest positive aspects of last
year was that the people started respecting the solutions, which wasn't there
during '06-07,” asserted Sawant. “The ASP model was there already and now it has
come again. The SaaS model and other on-demand services have slowly started
picking up in the market. We too have considerably grown in the box solutions.
As a whole, the solutions industry has been a major driver for this year,” said
Jeevan of Binary Systems. Networking solutions, computing solutions, storage and
power, all have contributed equally to the growth of the industry.
A positive shape
In review of the last FY, none of the SPs have claimed to lose grounds in
some area or any loss in their growth, which significantly has given a fair idea
that the software and services industry has grown and is growing at a
considerable rate besides the existing weak economy and market status. Issues
spoken by them were not only with respect to their company, but it reflected the
scenario of thousands of companies as well.
Unless there is some great change in the status of global economy, these
issues will be a persistent one. If one looks at the developments that have been
taking place in terms of mindset of the people in utilizing the technology, and
automating and outsourcing their service, one thing that is evident is that last
FY has been very encouraging for the SPs and service, and for software industry
which has been focusing on the domestic market.
NR SETHURAMAN
sethuramannr@cybermedia.co.in