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Playing the numbers game
Have you ever actually tried working out the specifics
of the math? There’s this grand plan for the Indian software
industry, the ‘Big Picture’ up in lights on the marquee,
flashing 50 billion dollars software and services exports for 2008
(57 billion in fact, if you go by the letter of the second Nasscom-McKinsey
Report, released June 2002, and which everyone including Nasscom
has conveniently, and wisely, forgotten). Today, five fiscal years
away from D-Day, we’re at around $12.2 billion overall (Rs
55,510 crore) for 2003-04, according to Nasscom estimates. That
represents a year-on-year growth of 20.5 percent. To reach the target
of $57 billion in 2008-09, we’d need to grow at a compounded
annual growth rate (CAGR) of 36 percent; or if you prefer a nice
round $50 billion, the CAGR stands at 32.4 percent. Tough, isn’t
it?
But hang on, it gets curiouser. The mix of ingredients in the exports pie has
altered dramatically. A break-up reveals that the software side of things—let’s
call it ITS—grew a mere 12.5 percent (estimated) over the last fiscal.
But the saviour—a veritable godsend for the industry, for the country and
especially for Nasscom—has been ITeS-BPO; some respectability in overall
growth was brought about only by a healthy spurt in IT-enabled Services (or
Business Process Outsourcing as it’s now more popularly called), all of
45 percent higher and no sign whatsoever of abatement any time soon. So there’s
that remix in the making. While we had an 80:20 ratio for ITS:ITeS in FY02,
that’s now changed to 70:30. Further, it’s evident that ITS growth
rates are unlikely to ramp up hugely from what they are now. And hopefully,
ITeS will continue to grow at current rates for the next five years.
Let’s be charitable and fix the ITS growth rate at 15 percent and the ITeS
growth rate at 50 percent, constant through the next five years. Where will
that lead us to? $45 billion or thereabouts, for fiscal 2008-09. But guess what—ITeS
would then account for 60 percent of the revenues! This essentially throws all
existing manpower calculations, skill-set requirements, education priorities
and even business expansion models out the window.
Not that such a thing has never happened before. For evidence that prediction
can be a hazardous business, one need look no farther than Nasscom’s superbly
produced annual ‘Strategic Review of the IT Industry in India’. In
the chapter titled ‘Knowledge Professionals’, the 2003 edition grandly
states: “Indian IT services industry is headed for a potential shortfall
of 235,000 people by 2008…” Scary, until you read the same chapter
in the 2004 edition: “Nasscom estimates that the supply of IT professionals
will outstrip demand by 48,000 in 2008.” Wow! In just one year, some new
age Indian Rope Trick seems to have magically made the shortfall disappear.
Perhaps there’s some perfectly logical hidden reason that I missed, but
all I could attribute the anomaly to was an incorrect figure of ‘current
pool of professionals’ used in the calculation.
Yes, the math needs to be done very carefully indeed, as governments, corporations
and even individuals use the final figures to make serious strategic decisions
with far-reaching implications. One person from the government who seems to
have done his math carefully is Vivek Harinarain, IT Secretary of Tamil Nadu.
At the interesting discussion on the ‘City attractiveness of key states
for IT & ITeS-BPO industry’ at the Nasscom 2004 conference, using simple
arithmetic, he eloquently explained how difficult it would be for Tamil Nadu
to merely retain the estimated 17 percent share of the IT exports pie it enjoys
now, by 2008. The human resource requirement at that juncture boggles the mind
and Harinarain is quite aware that the concern is not going to be about availability
of engineers then—rather, it’s the hordes of employable graduates
required for the ITeS sector that’s worrisome.
The keyword here is ‘employable’, and as the industry
representatives on the panel with Harinarain pointed out, that pool is quickly
drying up. With a reassuring lack of linguistic jingoism, Tamil Nadu and other
progressive states are falling over each other in their
enthusiasm to tackle this problem and attract BPO outfits to their cities.
The panel deliberated on a forthcoming Nasscom-KPMG study that looks at the
attractiveness of key locations in the country for ITeS-BPO. Thirteen cities/clusters
were covered in the study and all indications are that we’re going to need
many many more such attractive destinations if we’re to come anywhere close
to the revenue targets. There’s a need to augment or revamp the education
system right from Class VII to prepare for 2008 and beyond, and get other states
to emulate the leaders and develop Tier 2 and Tier 3 towns and niche destinations
based on regional or locational strengths.
The urgency and importance of these concerns cannot be overemphasised. Yet,
media attention is almost exclusively focused on the BPO backlash and on news
of a couple of companies reversing their decisions to locate call centres offshore.
No doubt these issues are important too, but in the process, the real problems
of ramping up back home are often just glossed over. The coming offshoring boom
is almost upon us. If we can get our act together and exploit it totally, then
winning the numbers game should be as easy as 1-2-3.
Val Souza, Editor
valsouza@expresscomputeronline.com
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