Indian IT outsourcing reaches £30bn

Business is booming - up by almost a third in the least year

The Indian outsourcing industry is continuing to go from strength to strength, despite reports that the sector is suffering from wage inflation and increased competition from rival locations, according to the latest annual report from Indian IT trade association Nasscom.

Indian IT software and services exceeded expectations, growing 31 percent year-on-year to just under $30bn. Offshored services accounted for the bulk of the growth, increasing 33 percent year-on-year to $23.6bn.

The report says the industry enjoyed strong demand for both traditional application development services and newer higher-value application integration and implementation services. Nasscom president Kiran Karnik claimed in a statement that the country was on track to reach its target of earning $60bn from IT exports by 2010.

“With less than 10 percent of the market currently addressed, a large opportunity exists for the sector, which will ensure sustained demand-led growth," Karnik added. "Factors like evolution of the global delivery model, unbundling of large IT outsourcing deals [resulting in a larger share for India], and the large contract values due for renewal over next two years are some of the positive indicators for the sector."

The report also highlights India's leadership position as a location for offshore IT work - it says the country boasts 28 percent of the suitable talent available across all offshore locations.

Some observers have suggested that India’s appeal as an offshore location is being eroded by wage inflation, concerns over staff quality, and the emergence of rival locations, but the impressive growth suggests these fears are largely unfounded. And last month a report from research firm Everest predicted that moving work to India would deliver significant cost advantages for at least the next 30 years.

However, Karnik admitted more had to be done to consolidate India's position as the premier offshore location, and the industry must act to tackle concerns over the quality and skills of graduates and the poor state of infrastructure in the country.