_Friends

_{We have been through a difficult month of August. The bill introduced by Senator Schumer and passed into law this month imposes an additional fee on every new visa and visa renewal application by companies who have less than fifty percent Americans in their workforce in the United States. By itself the additional financial burden does not make any significant dent on the profitability of Indian firms operating in the country, particularly when many of us have a predominantly offshore delivery model and are in the process of localizing the composition of our workforce, not just in the US but in every country in which we operate. However the discriminatory nature of this bill which drives a clear wedge between US multinationals and the Indian firms cannot be ignored and has caused alarm bells to ring! An article in one of the premier US newspapers has argued that this is a case of “no bad idea left behind”, since it will put in question the value of expanding operations in the US, resulting in the loss of potential jobs that were being created at a steady clip post the recession by all Indian companies !}

_{The reality, as always lies between the rhetoric and the unpalatable option of total capitulation. Indian firms can and should continue their aggressive investments in the US – acquisitions, new offices and delivery centers and investments in technologies and methodologies that accelerate global sourcing capabilities. Firms should develop enhanced consulting capabilities in the domains of global customers to enable new enterprise solutions to be designed and delivered to all customer segments. However there is also a need to diversify the geographical footprint of the industry on an accelerated basis to ensure that random and often unpredictable acts of omission or commission that could come in the way of growth of the industry in a specific market does not cause doubts about the ongoing potential of this industry as it continues to champion the cause of global sourcing in the years to come. The rapid growth of China, Australia and South Africa as markets and development bases, the emergence of Brazil and Chile in Latin America and the potential of Saudi Arabia and other strong MENA territories – all these present new growth opportunities that need to be understood and tapped.}

<sub>It is hoped that the Indian Government will use its proximity to the US Administration to educate everybody with the statistics on job creation and enhanced competitiveness of American multinationals and Silicon Valley startups that are the proven contributions of the Indian tech sector. Far from being “chop shops” or “body shops” or even “multinational temp agencies”, which were some of the allegations made in the US Senate, Indian firms, through the focus on quality and innovation are adding value to all firms, industries and states in the US that we are working with. The confidence that all of us have in the resurgence of the US economy and its ability to continue to contribute over thirty percent of global GDP will ensure that there is continuing investments in the US – let us hope for a suppportive environment

Ganesh</sub>

Friends,

It’s been a decade that started with fear, uncertainty and doubt and seems to be ending that way again for the Indian IT and Business Services Sector. But the industry proved the pessimists wrong then by moving up the value chain and enabling multi process outsourcing through innovative processes with the result that the first eight years saw all significant players report CAGRs of over twenty percent plus. The downturn which began over eighteen months ago has seen the inevitable decline in growth numbers and it is to the credit of the industry that growth has continued in both revenues and profits, albeit at a slower clip!

As global economies limp back to positive GDP growth and the high unemployment percentages in the West continue to create protectionist voices that work against outsourcing to other countries, the industry will continue to face the twin pressures of low incremental demand on one hand and persistent demand for “more for less” – higher output from the same offshore resource base and reduced prices while volumes remain near stagnant.

To attain and sustain the level of growth that we have seen in the past, the imperatives for the industry are broadly in three areas- First is the need to explore innovative business models to move from the linear model and dependence on constantly increasing manpower. Investments in intellectual property and hosted applications and platforms and transformed processes where global centres around the world can be seamlessly integrated to deliver value are needed. In addition, revisiting revenue and gain sharing arrangements with customers and charging premium for expertise and result guarantees while developing deeper trust based relationships with customers will enable more sticky relationships to evolve. Second, the services portfolio will have to come under a microscope as a major share of new opportunities will come from new markets where wage arbitrage is not the key driver and a much more consulting led approach will be required to find real solutions to complex business and technology issues. New industry segments like public services, healthcare and education will need integrated solutions to be developed and high end segments like industrial design and clinical research outsourcing will need more investments by incumbent and new players in the industry.

The third and possibly the most significant challenge will be to reduce the industry concentration in the top seven cities which are already bursting at the seams and unable to cope with the pressures on physical, digital and social infrastructure and develop skilled resources all over the country. Industry has to see itself as part of a skills eco-system which enables robust partnerships with academic institutions and Governments at the State and Central levels to build technology enabled learning infrastructures that include young aspirants in every part of the country in the larger talent building effort.

Though the coming year might lead to slower growth in terms of revenues and profits, it will be about with opportunities for all. Let us dream of even bigger dreams for the future and another decade of astounding growth for the industry!

Ganesh

Friends,

So is it a new beginning for our industry - most of the significant firms are getting new business, increments that were held back are now being given and clearly the budgets taht were once frozen are showing signs of a thaw.

The slow period has been good for the industry - it has forced all CEOs to take a hard look at costs and utilisation, the rampant attrition that was affecting predictability and quality has slowed and we are emerging as a more stable industry.

Clearly some of you out there would have been affected adversely but dont lose heart, we are at a new beginning and companies and professionals who focus on results will do even better in the months and years to come

Sincerely

Ganesh

BEGINNING OF THE END ?

NASSCOM announces a 16 % growth for 2008-09 and a single digit growth outlook for the current fiscal year and almost inevitably, predictions of doom have started for the Indian IT sector. Nothing could be further from the truth - it is a tough year for all sectors and all countries folks, but mark my words - the double digit growth will be restored in 2010 and we are still well on track to meet a 100 Billion Dollar goal by 2015.

Not that there are no concern areas - jobs are scarce for the lakhs of young people graduating this year from engineering and IT streams and the situation may improve only marginally next year. Find a good finishing school for technical and soft skills and use the waiting time productively. Your career will be the better for it

Ganesh