US recession is an opportunity for Indian IT sector

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By Amir Jamali
It is quite evident from newspapers articles and remarks by IT industry stalwarts, that the slowdown in the US economy, especially in the IT sector, has left Indian software and service providers in a fix – at least for the time being.

However, this could turn out to be a great opportunity as the US companies will try to shift from on-site to offshore development, and Indian IT industry can grab these opportunities.

A survey conducted by the Confederation of Indian Industry among its IT sector members pointed out that the slowdown in US economy will have a rather favourable impact on exports of Indian software as well as the services sector because the US corporates are looking to cut cost will find outsourcing their work to India attractive.

In the survey, the respondent felt that in the medium and long term, the slowdown offered a great opportunity for moving projects to India i.e. from on-site to offshore.The survey also pointed out that bigger Indian companies engaged in maintenance work will not be seriously affected.

The other comfort for the industry is that the India has been focussing more on IT services rather than product.

There are other facts as well which can provide cushion to the IT industry. For instance, approximately 20% of software exports revenues for India are realised from segments such as remote maintenance and this segment continues to grow for offshore outsourcing at more than 50% and about 36% of software exports revenues, in 2000-2001,were generated from eBanking and financial and insurance industry where no slowdown or reduction of business is expected.

It is also the time when Indian IT companies must look at other markets, while trying to at least keep the 60% share in the US market, which stood at $3.7 billion of the $6.2 billion Indian software exports in 2000-2001.

The new important market for Indian software exporters could be Europe which, according to market researcher Gartner, will be around $3 trillion by 2004. Wireless Internet, eCommerce and ASP markets have more potential in Europeans market.

Next comes the markets of Australia and Japan. The IT spending in both these countries is expected to grow more than 6.5% and 10% respectively, in the IDC study. Embedded software is in great demand in the Japanese market.

The other potential markets could be of Hong Kong, Korea, China and Latin America. The Middle East and Africa, the present relatively small, is expected to grow substantially two years down the line.

The worst affected by the US recession are the software professionals having H1B visa. A large number of these professionals are working for “Body Shoppers” which are hit drastically and almost out of business atleast for the time being.

India received 43% of the H1B visas that was issued by the Immigration and Naturalisation Services (INS). But the main problem being faced by layoffs victims,who were working on H1B, is the time periods of 10 days within which they will have to get a new sponsor else leave the country.

The Indian IT minister as well as the Information Technology Association of America (ITAA) should take up this issue with INS as large number of people agrees that these professionals should be given a more reasonable time to find a new job.

A study conducted by the ITAA shown that the demand for IT employees will decrease by 44% over last year. The study also predicts that employers will seek people to fill 9,00,000 IT positions this year made available by the creation of new positions and employee departure which is down from 1.6 million jobs in 2000.

But, at the same time, ITAA also predicts that 4,25,000 of the 9,00,000 positions will go unfilled, which is better than last year when 8,50,000 were left vacant. The study also shows that the demand for jobs in technical writing, digital media, database development and web development gone down.

What has increased is the need for people in enterprise systems and network design.

Amir Jamali is an Oracle consultant with UEC Sail Information Technology Ltd (email: [email protected])

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