Tuesday, 10 February 2009

Nasscom sees 15% two-year offshore services growth

(By Anthony Miller). Nasscom, the Indian IT/BPO services trade body, has decided to take a two-year view on its usually conservative forecasts for Indian offshore services growth in light of the “volatile environment”. Nasscom is expecting 16-17% offshore IT/BPO services growth this fiscal year (to March ’09) to $47bn. This should be pretty much a done deal seeing as we are almost at half-past February. As usual, the top-tier players such as TCS and Infosys will probably come in somewhat higher, around 20%. The Indian domestic IT/BPO market is also expected to grow around 20%.

But Nasscom then jumps two years hence and predicts 15% compound growth to March ’11. Given that we are expecting barely double-digit offshore services growth in calendar 2009 (India’s FY10 to March ’10), this is reasonable but probably the upside case, implying a demand pick-up in late calendar 2010. Frankly, our crystal ball gets a bit hazy by then, but it’s not a bad stake in the ground. The mists should clear over the next couple of quarters when we get a better idea how much longer world economies are going to decline.

But whether the growth rate is 15% or 10% - or even 8% - this is faster than we are expecting for the UK IT services sector. We will be publishing our authoritative forecasts next week and they don’t make comfortable reading (but there again, our forecasts rarely do!). In other words, we believe the Indian offshore services players will gain share in global IT services markets – despite any fall-out from the Satyam scandal – although hardly the 30%, 40%, 50% type of growth rates they had been used to up until a year or two ago.

Nasscom’s annual Leadership conference starts tomorrow in Mumbai. There really should be only two main topics for discussion: growth and governance.

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