Industrial Scenario - 2004-05
The Indian software and services market has continued its rapid growth in the last few years, despite the IT meltdown post 2000. Between 2000 and 2005, the industry grew at a compound annual growth rate (CAGR) of 25.5%. During the same period, software and services exports grew at a CAGR of over 29%.
Indian software product exports along with R&D exports are the sunrise segments within the IT industry and are expected to grow very fast in the next few years. R&D and outsourced product development accounted for a modest US$ 2.3 billion in revenues (around 1.3% of the overall global market) last year. Of this, offshore product development exports were $ 710 million in 2003-04, up from $560 million in the previous year. By 2008-10, R&D services and software products exports are expected to generate US$ 8-10 billion.
The drivers for growth of the software industry in general, and the offshore product development segment in particular, are multiple. As competitive pressures increase, clients need to deliver products cheaper and faster.
They are increasingly taking up the outsourcing route to achieve efficiencies, thus driving business to Indian companies that have lower costs and a high level of technological expertise. In fact, US based venture capitalists are even pushing their investee companies to make offshoring to India a part of their business model. India's information security environment is also adding to the comfort level of international customers.
On the flip side, the industry faces two-fold challenges relating to manpower and infrastructure. Additionally, the global economic environment has implications for the Indian software industry. World economic growth accelerated sharply in 2004. Growth in the next couple of years is uncertain thanks to concerns ranging from the high price of oil, a slowdown in China, alarming deficits in the US and a bubble-like real estate market in several developed economies.
We at Persistent recognize the economic challenges faced by the industry and have taken effective steps to address them. We look forward to robust growth in the future.
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