IT-BPO sector will grow by 19% in current fiscal, says Nasscom

NEW DELHI: Buoyed by steady recovery in demand for technology services, the Indian IT-BPO sector is estimated to have grown 19% in 2010-11 to $76 billion in revenues, software industry lobby Nasscom said on Wednesday.

“Pent-up demand for IT-BPO services and return of discretionary spending in the market were the key drivers for the industry performance,” Nasscom president Som Mittal told reporters.

Exports continued to be the mainstay of the industry with revenues of $59 billion, growing at 18.7%. Domestic market, on the other hand, grew 16%, to aggregate rs 78,700 crore (about $17 billion).

For FY12, the software and services growth is expected to grow at 16-18% with $68-70 billion in revenues. The domestic market is estimated to grow by 15-17% with revenues of Rs 90,000-92,000 crore (about $19-20 billion).

“Increased technology adoption across government, corporates and small businesses for providing citizen services, enhanced internal controls and customer service led to an increase in outsourcing within the domestic market,” Mittal said.

However, the slow economic recovery in the US and uncertainty in the European region has forced the body to present a conservative outlook of 16-18% growth in exports for 2011-12.

Wage inflation and high attrition is also a cause of concern for firms. “High wage inflation and attrition is killing the industry’s productivity. Even before a person has completed his training he is lured by large IT majors by giving them a raise,” said Nucleus Software CEO Vishnu Dussad.

The attrition rate has doubled to 30% for many firms.
Within exports, IT services segment was the fastest growing segment (at 22.7%) aggregating revenues of $33.5 billion.

BPO export segment grew by 14% to reach $14.1 billion in FY11.

“Number of transactions in the BPO segment fell as a result of lower retail, mortgage and consumer sales, across the globe last year. We expect it to rebound,” said Mittal. Locations like Philippines overtook India this year in the voice BPO sales, adding 30% year on year growth.

Nasscom had earlier projected exports growth at 13-15% and 15-17% for the domestic market for the financial year 2010-11.

Direct employment is expected to reach nearly 2.54 million, an addition of 2.40 lakh employees in 2010-11. Asked about the headcount addition in the fiscal 2011-12, Mittal said, “it should be in the same proportion as this fiscal.”
Engineering design and products development segments generated revenues of $11.3 billion in FY11, growing 13.4%.