India's outsourcing revenue buoyant, says Nasscom

The country’s IT services and BPO exports are estimated to be US$59 billion in this fiscal year

India’s outsourcing industry has witnessed a rebound in growth, according to the National Association of Software and Service Companies (Nasscom), a trade body.

The country’s exports from IT and BPO (business process outsourcing) services will grow by 18.7 percent to US$59 billion in the current fiscal year ending March 31, Nasscom said on Wednesday.

The revenue figure includes exports by Indian outsourcers, as well as by Indian subsidiaries of multinational companies who use their Indian operations to service their own and their clients’ requirements. The U.S. and Europe accounts for most of these exports.

A return of discretionary spending by customers, and new business models that encouraged first time buyers were some of the key drivers for the performance of the industry in the current fiscal year, Nasscom said.

Nasscom however expects exports growth to slow down to between 16 to 18 percent in the Indian fiscal year to March 31, 2012.

Indian outsourcers benefited in the current fiscal year from pent-up demand, arising from expenditure that was postponed during the recession, said Jimit Arora, research director at Everest Group. The growth rates may fall a little in the coming months as the industry gets back to normal growth without the benefit of pent-up demand, he added.

Growth in exports in the next fiscal year is likely to be 16 percent, Arora said.

Top Indian outsourcers like Tata Consultancy Services and Infosys Technologies reported strong growth in revenue for the quarter ended Dec. 31, indicating that the industry is on the rebound.

The domestic market for outsourced services also is likely to grow by 16 percent in the current fiscal year to 787 billion Indian rupees ($17 billion), Nasscom said.

India will add 240,000 staff in IT services and BPO by March 31, taking the total employment in the sector to 2.54 million.

The surge in demand for offshore outsourcing is however pushing up costs in India, as Indian outsourcers and Indian operations of multinational service companies like IBM and Accenture vie for staff. Staff costs, and attrition rates are on the increase, analysts said.

The indications are that hiring in the next fiscal year will continue at the same momentum, Arora said. Some companies may try to contain costs by hiring from the campus, he said. Large companies are also now equipped to train campus recruits, and get them on the job quickly, he added.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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