New Markets Present IT with Optimism in the Long Run

The Indian IT sector has been the fastest growing industry and has been marking its presence across geographies. In FY 2011-12, the industry’s revenues crossed USD 100 billion.

This year though the global economic turmoil has encumbered the growth of IT firms considering the fact that most of the revenue of these firms comes from the U.S. and from Europe. The drop in demand is visible through lower guidance figures and lesser hiring. This is mentioned in greater detail in our previous article, IT Stocks Look Muted.

However this pace only seems short term looking at the potential for growth. Nasscom President, Mr Som Mittal seemed highly optimistic about the future of the IT sector at Surge 2012, Leveraging IT for Growth, an initiative of Nasscom Emerge. He said the markets remain uncertain but the industry’s fundamentals are strong. On these lines, Mr Natarajan, Vice-Chairman of Nasscom said he was optimistic that the industry has the potential to reach nearly USD 500 billion in a few years.

Firms are increasingly looking at increasing presence in markets other than the U.S. and the UK. Markets like China, Japan, Continental Europe, Latin America, Middle East and Asia are all large growing opportunities and present IT firms with a wide spectrum. Companies need to do a lot to penetrate in these markets and increase the share of revenue that is generated from them.

On the currency front too, rupee depreciation will only cause hindrance in the short term. In the long run, it will only help the industry, believes Mr Mittal.

Nasscom projected 11-14 per cent growth for the sector in FY 2012-13 from its 16-18 per cent projection for FY 2011-12. It will wait for two quarters to decide whether it will revise its guidance figures for FY 2012-13. Market conditions, currency fluctuations and the way companies tackle issues will be the deciding factors. However, as we said earlier, in the long run, the future of the industry looks bright.