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Updated: December 8, 2011 20:15 IST

IT sector prepares to move up value chain

T. Nandakumar
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V.K. Mathews, executive council member, NASSCOM. Photo: S. Gopakumar
V.K. Mathews, executive council member, NASSCOM. Photo: S. Gopakumar

With India losing the top slot in voice- based Business Process Outsourcing (BPO) to the Philippines, the domestic IT sector is gearing up to reinvent itself. The National Association of Software and Service Companies (NASSCOM) is spearheading the reorientation drive with the focus on innovation and enhanced employee output.

Talking to The Hindu here on Thursday, V.K. Mathews, executive council member of NASSCOM and chairman, IBS Group, said the stiff competition from aggressive rivals across the world was forcing the domestic IT industry to take a relook at its approach to business. The changes, he hinted, could include retraining the workforce to maximise output with focus on value- added products and services.

The Business Processing Association of the Philippines (BPAP) had declared recently that its call centre business had grown over 20 per cent in 2010, to overtake India.

Mr. Mathews said Indian IT companies could no longer afford an employee intake corresponding to growth. “With wage increase and inflation adding to the cost of IT employment, it has become imperative to increase the value and revenue output per employee. We have to move up the value chain.”

Highlighting the need to provide better services and products, he said it was important to understand customer needs and come up with a business innovation approach.

“The Indian IT sector evolved from body shopping to projects to ODCs. But we are still at the low end of the value chain. We do only what we are told to do. This has to change. We need an innovative approach based on value enhancement that appeals to the customer.”

Value addition, he said, would obviate the need to increase headcount corresponding to business growth. Asked whether this would lead to a reduction in employee intake, he said, “We can continue recruiting as long as there is need for recruitment. We need to grow in value rather than just numbers. In the BPO sector, we have already lost, because of rising costs. We cannot maintain the cost advantage in a globally connected economy”.

Mr. Mathews, who is also vice-chairman of the State council, CII (Confederation of Indian Industry) and chairman of GTECH, the industry body for software companies in Kerala, said the Indian IT industry would have to utilise people better if it was to maintain the momentum of growth. “We need to be innovative. One way of innovation is to promote entrepreneurship.”

Sticking to a success formula, he said, takes the excitement out of the industry. “Our IT service model is driven to death. That is responsible for the lack of excitement. Even for executives, the excitement is gone out, they are bored of doing the same thing. They have to be able to do something they love to do. Innovation and entrepreneurship create excitement”.

Mr. Mathews said entrepreneurship and mentorship were crucial for India's transformation. NASSCOM, he said, had promised to mentor 50 outstanding Akshaya entrepreneurs in Kerala. “Entrepreneurship cannot be taught in a classroom. Nine out of 10 attempts will fail. Society has to be more forgiving. Failure has to be seen as a step to success.”

He said the Eurozone crisis could impact on IT spending in India if it extended over a period of time. He, however, termed the NASSCOM forecast of 17 to 18 per cent growth as realistic.

Terming the government decision to scrap the STPI scheme as a disaster, Mr. Mathews stressed the need for a more supportive tax and regulatory framework for the IT sector. The government, he said, has to take an industry-friendly view and allow the sector to grow.

Keywords: BPO industryNASSCOM

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