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May 15, 2002 | 1345 IST
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Software sector bouncing back, says STPI official

Subir Roy

The Indian software industry is clearly on a recovery path, feels B V Naidu, director of Software Technology Parks of India's operations in Bangalore.

He expects software exports out of the Bangalore STPI to grow in the current year (2002-03) by 40 per cent, compared to the 33 per cent growth clocked last year.

Units registered with Bangalore STPI account for a fourth of the total software exports through STPI and these in turn account for over 80 per cent of national exports. So Bangalore provides a good sample.

There are clear signs of a revival in volumes though not in rates which are at 70-80 per cent of what they were in 2000-01.

The Indian revival is mainly driven by the greater outsourcing that western companies are having to do because of the downsizing they had undergone during the slowdown of 2001.

The outsourcing compulsion has also led to a vigorous start in the entry of new units in the current financial year, in keeping with the trend established last year. In the first two months (April-May) 19 new units were registered, compared to 110 last year.

The ratio of foreign equity companies in this is even higher at two-thirds (12 out of 19), compared to 60 per cent last year. There are several well know names among the new units getting registered this year like Nokia, SAP (this will be its second unit) and Ariba.

In India business prospects are likely to be better this year for the larger Indian companies, MNCs and IT enabled services units.

Undistinguished companies with less than a hundred professionals will continue to be in trouble. Niche players will survive but just about, anticipates Naidu.

Another good news is that Indian companies are clearly going up the value chain as there is a change in the nature of the outsourcing along with the rise in outsourcing volumes. Work involving greater and greater responsibility is being outsourced.

Transitions are taking place up a typical value chain like the following - application development, maintenance of applications, overall IT management, overall business outsourcing management.

The result of going up the value chain without better price realisation means better value for the customer. This, over time, is likely to improve market share and brand equity.

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