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Nasscom India Leadership Forum 2012: Protectionism, revenue growth in focus

Goutam Das     February 13, 2012
Goutam Das
Stars of the Indian information technology (IT) industry, buyers of their services, analysts and investors will come together for three days at the Nasscom Leadership Summit in Mumbai, the yearly showpiece event of the country's software services industry lobby.

The summit opens on Valentine's Day - ironically, there is no love lost between the industry and some politicians in the United States who, ahead of the presidential elections late in 2012, are telling its electorate that Indian IT firms are a bunch of job snatchers.

President Barack Obama wants to end tax breaks for companies that outsource jobs abroad. Vice President Joe Biden mimicked an Indian call centre agent's accent during a speech. Some senators like Charles Schumer think companies like Infosys are little else than "chop shops" - a place where stolen cars are dismantled and parts sold.

Growing protectionism is not the only hurdle that Nasscom's annual event is faced with. It is being held at a time when revenue growth is slowing in the industry's primary revenue-generating regions of North America and Europe.

Do Indian companies have a strategy to combat the two? The summit may provide some answers.

Some strands are emerging. Slower growth in developed countries could force Indian IT firms to expand in emerging markets. Companies are eyeing Africa, for instance. But given the geo-political risks in many of the continent's countries, it is unlikely that the pace of expansion would be significant enough to make good the slowdown in North America and Europe. The other big emerging giant, China, still remains a mystery to Indian IT.

While protectionism is nothing new for the IT industry, political rhetoric is likely to impact the sentiment of customers in the short-term. To counter, many Indian firms have announced plans to hire more onsite. But hiring such resources - more expensive even if the number of such hires may not be high - can hurt margins.  

For now, Nasscom and the Indian IT industry doesn't really have any solid options before it. It should send a bouquet of red roses to Obama and sit tight.

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