IT services, products and technology services have grown by 18.3 per cent to reach Rs 34,800 crore ($7.2 billion) while the IT-enabled services-business process outsourcing (ITES-BPO) segment registered a growth of 59 per cent to reach Rs 11, 300 crore ($2.3 billion).

According to the National Association of Software and Services Companies (Nasscom), Indian software and services exports are projected to achieve a 26-28-per cent growth, clocking a revenue of over $12 billion in 2003-04.

IT services, products and technology services are projected to grow by 17 per cent to reach revenues of over $8.4 billion and the ITES-BPO segment is projected to register a growth of 54 per cent to clock revenues of $3.6 billion during the next year.

Says Nasscom chairman Som Mittal: "Despite the challenges such as the continued technology slowdown in the global market and appreciation of the rupee, the industry has been able to maintain its growth momentum. An encouraging trend is the industry's growth, year on year, in absolute terms, which has gone up from $1.4 billion in FY 2001-02 to $1.9 billion in FY 2002-03."

"We have seen that this year too, the ITES-BPO sector has continued its momentum, growing more than twice the industry average and capturing a quarter of India's total IT software and services exports. With the fundamentals and the value proposition of India as the IT destination being robust, we are optimistic of maintaining the growth trajectory," says Mittal.

Says Nasscom president Kiran Karnik: "The Indian software and services industry is one of the very few sectors worldwide to have witnessed double digit growth and also increase its share of total Indian exports from 4.9 per cent in 1997 to 20.4 per cent in 2002-03. While worldwide IT services growth has been 4 per cent in 2003, the Indian IT services sector has witnessed a 17-per cent growth."

Some of the interesting trends witnessed by the Indian software and service industry in the financial year 2002-03 include:

• Offshore projects grew nearly by 67 per cent while onsite grew only by 7.8 per cent. This has led to the offshore projects contributing 57 per cent to the total software and services exports while the onsite contribution was 43 per cent.
  
• The Americas continue to be the primary market with exports to this geography constituting 71 per cent of total software exports, followed by the UK with 14 per cent, Europe (excluding the UK) with 9 per cent and the rest of the world with 6 per cent.
  
• IT services, products and tech services exports by third-party vendors witnessed a 14-per cent growth.
  
• Captive units have increased their contribution in the total software exports to 32 per cent in 2002-03 from 26 per cent in 2001-02, while the share of third party vendors had gone down from 74 per cent in 2001-02 to 68 per cent in 2002-03. In particular, captive ITES-BPO players have almost doubled their share, growing by a phenomenal 90 per cent.
  
• The encouraging trend is that small and medium enterprises (SME) below Rs 50 crore have also witnessed 19 per cent growth which is above the industry average of 17 per cent in IT services, products and tech services segment. Tier-1 third-party companies and multinational company (MNC) backends in this segment have also grown at 26 per cent and 31 per cent, respectively, which is above the industry average.

Though the banking, financial services and insurance domain (BFSI), manufacturing and telecom still are the main verticals for software and services exports, there has been an increased focus on expanding to new verticals such as retail, utility, telecom service providers and healthcare in the last year.

The industry has expanded its radar to new service lines such as package software implementation, systems integration, R&D engineering and network management as new horizon for robust growth.

According to the survey India has emerged as the most preferred destination for ITES and BPO with revenues growing well above industry average at a rate of 59.2 per cent this year contributing about 24.5 per cent to the total software and service exports.

Says Karnik: "The Indian IT industry is in a transition phase right now. At one end our customers have started giving us mid-sized deals in the range of $30-40 million for medium term, which will act as test cases before the very large-sized deals start to flow in. At the same time, the industry players are also building global delivery capabilities, recruitment and engaging in merger and acquisition activity to be able to handle $100-million sized deals. Hopefully, the Indian IT sector will become a base for large outsourcing deals by 2004. This will give a strong impetus to the growth of the industry."

The Nasscom survey reveals that the growth driver next year will continue to be the ITES-BPO sector. In order to further boost up the ITES sector, Nasscom is also organising Asia's largest ITES-BPO Strategy Summit in Bangalore on 12-13 June 2003, targeted to provide an opportunity for Indian players to interact and share experiences with peers in other countries and global thought leaders in this industry.

Commenting on the anti-outsourcing bills and visa issues, Karnik says: "There will be no immediate impact as these anti-outsourcing bills have just been introduced and will need to pass through various stages in order to become law. Any reduction in the number of visas will have an impact on the industry only in FY 2005-06. The increased trend of more projects moving offshore will also offset impact if any."