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What's next for India's outsourcing industry?

Stephanie Overby | Jan. 8, 2014
CIO.com talked to Som Mittal, departing president of India's National Association of Software and Services Companies, about immigration policy and protectionist politics in the U.S., political and economic instability at home, and what the future holds for the Indian IT services industry.

Our industry has helped to create more than 280,000 American jobs. We've contributed more than $15 billion in tax and social security revenues. And we're helping the U.S. become even more competitive. If you look at the business model for IBM or Accenture, it's no different than those embraced by Indian IT service providers. We need to do a better job educating our stakeholders in the U.S. on these facts.

CIO.com: How will political and economic instability in India — slowing growth, rising inflation, weakening exchange rates, corruption and cronyism, geopolitical unrest — impact the overall economy in general and the services sector specifically?
Mittal: We are going through a transition. The services sector has been growing quite well. It's actually the industrial sector that has impacted growth. We had some issues related to policy paralysis largely in the manufacturing sector because of coalition politics here. However, if you look at the last two or three years, our IT industry grew at about 12 to 14 percent, and we expect that to continue in coming years. Hiring continues.

Some of the problems our sector was facing related to the tax regime, which we've been able to resolve. A lot of U.S. companies were having problems with transfer pricing assessments. But in the last twelve months, a lot of that has been resolved, too, and things are looking up.

We have elections coming in May, but I don't think the direction will change regardless of who is elected.

Mittal: We need to work harder to communicate our value proposition. But our IT providers are differentiating themselves by focusing on verticals. They're doing far more platform-based delivery. They're building up domain expertise where they had previously been focused on technical expertise. It's become about how technology can help the business.

CIO.com: Will the country be moving more aggressively into other industries that are not so dependent on U.S. corporate spending?
Mittal: We're doing more and more work in Europe. We're seeing a lot of traction in Latin America. We've seen Japanese companies who had been resisting offshore outsourcing starting to embrace it.

The U.S. customer base is large and will continue to grow. It currently accounts for 61 percent of our work and I don't seeing it shrinking to less than half. But there is a major shift happening as other geographies that had underinvested come to the table. Besides IT services and business process management, we're seeing growth in engineering services and embedded software.

We're seeing changes happen here in India as the country is setting up a very large fiber optic network that will offer broadband connectivity to 250,000 villages in the next two years. We already have 900 million people on voice and we're gradually moving them to data.

 

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