BRIC will account for 40% of global growth by 2020

In an attempt to explain some of the challenges faced by the export-oriented IT industry in India, city-based management consultant Sachin Bhide is pursuing PhD from the University of Pune (UoP) studying the change in composition and direction of exports by IT companies in Pune.

After reading about the growth of IT industry in India as part of his research, Bhide speaks about why IT companies export to some specific geography and what they export.

“My research is based on assumptions that Indian IT companies are in the process of change in export direction (geographic location), in order to explore new markets for its products and services,” said Bhide, who is also the founder of the Business Book Readers’ Club (BBRC) and secretary of the Institute of Management Consultants of India (IMCI), Pune chapter.

“The IT companies in India need to go global to avail of opportunities and generate revenue in different global market regions, rather than focusing on particular market regions,” said Bhide.

His research mentions that the share of Asian countries (excluding Japan) in global GDP is likely to rise from 10% in 1998 to 21% in 2020.

With reference to the recent Ernst and Young report, his paper states that the next decade will see Brazil, Russia, India and China (BRIC) contributing 40% of the global growth while the US would account for around 14%.

Looking at history, Bhide said that Indian IT companies started by getting Y2K (millennium bug) projects, along with application development and maintenance work.

“This triggered more work for outsourced product development (OPD) services from India. Later, companies started getting high-end work like analytics and engineering services. The Indian IT players started with cost advantage benefit and then factors like productivity, quality and focus on high-end services played a major role in moving up the value chain,” he added.

Talking about the impact of IT industries on exports, Bhide said, “IT exports contributed to 14% of India’s total earnings in 2009, which is more than that of gems & jewellery and textiles combined. It is estimated that by 2020, IT industry may account for 18-20% of India’s export.”

“The global economic slowdown of 2008 had affected the Indian IT industry. To insure themselves against future aftershocks, our IT companies must explore markets like Latin America and the potentially lucrative domestic market, rather than the US or European countries,” said Bhide.