Indian outsourcer clocks 35 per cent Asia Pacific growth

Recession might be badly affecting most sectors of the economy but for Indian outsourcers, it's another story.

Take the case of Tata Consultancy Services Limited (TCS), the IT services, business solutions and outsourcing arm of the Indian conglomerate, Tata Group. It recorded overall revenue growth of 23 per cent year on year on consolidated revenues of US $6 billion for the fiscal year ended 31 March 2009.

In the Asia Pacific region, despite having a small base of less than 5 per cent (TCS Asia Pacific, excluding India, contributes 4.7 per cent of TCS overall revenues), the company's growth in the same period has been even better than the global average.

"We have been growing quite fast in Asia and till the beginning of the year (year end is March 2009), we grew by about 35 per cent," Girija Pande, EVP and Head, TCS Asia Pacific, told MIS Asia. "This is of course lower than our average growth of 40 per cent that we have done in the last five years."

TCS Asia Pacific, headquartered in Singapore, was established in 2001. It has offices in 12 Asia Pacific countries including China, Australia, Japan, Malaysia, and the Philippines. It employs over 5,700 (including Japan) people in the region.

Despite last year's good showing, Pande is wary of the growing downturn in the market. "This year, I can start seeing some slowdown because many of the economies in Asia have been hit quite badly," he said. "Other than India and China, many other markets are showing negative growth. You can imagine the companies who are operating here are also affected and their IT spends have been cut back."

But the situation is not that hopeless. According to Pande, the turnaround for TCS could well be round the corner.

"I am hoping that actually we will start growing again. We have a very strong pipeline. We have reputation across the region. We have about 700 customers across the region, very high profile names. By second quarter (June to September 2009) we should be able to be running back, starting to grow in the same pace (as before)."

Outlook for the Indian outsourcing industry

Pande admits that the slowdown has somewhat arrested the growth of the Indian software industry but he still sees the industry moving only in a positive trajectory in the coming years.

"If you look at where the Indian industry is, it grew at about 16-17 per cent and for year ending March 2009, we clocked US$47 billion of exports," he said. "That's not a small number by any standards. Indian industry earlier used to grow at 25 to 30 per cent. This time it grew by 16-17 per cent. In the next two years, if we look ahead, a recent National Association of Software and Service Companies (Nasscom)-McKinsey study is forecasting the revenue by March 2011 to be US$60 to $62 billion. The industry has slowed down compared to the past but it will grow from $47 to $60-62 billion."

Why is it that India will continue to grow? "There are a couple of key reasons," he argues. "Number one is that India has both scale and skill. Some countries have scale and do not have skill (and vice versa). Indian companies, like TCS, have been in the industry for about 40 years. It has established name and reputation across the globe.