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The sunrise IT and ITeS sectors grew rapidly as companies hired at a crazy pace and outlined massive expansion plans in the SEZ frenzy, but a few incidents of data theft threatened to harm India's reputation as a safe outsourcing destination during 2006.
While corporates were busy bagging outsourcing deals and recruiting in droves, the most visible face of IT industry - Infosys founder N R Narayana Murthy - finally called it a day.
Meanwhile, the Government also worked in tandem to put in policies for attracting global giants such as Intel and Cisco in chip making as well as IT and electronic hardware.
Strong demand over the past few years has placed India among the fastest growing IT markets in the Asia-Pacific region. The software and BPO industry has been growing at an average of 25-30 per cent during the last few years. At this pace, it looks all set to achieve $60 billion in exports alone by 2010 from just $13 billion in 2003-04.
Rising exports and domestic demand prompted IT and BPO companies to hire thousands of professionals. In fact, the big four - TCS, Infosys, Wipro and Satyam - are estimated to have hired more than 55,000 this year or over 200 per day!
And they were not alone. Global giants such as IBM and Accenture also ramped up their workforce in India.
At present, the IT industry employs about four lakh people and the ITeS sector another six lakh. The figure could double in the next three-four years going by the trend.
But this rapid hiring raised alarm bells, with top HR officials, NASSCOM and even the Government expressing concern over the shortage of trained manpower that the sector could face in the next two-three years.
The Government's concerns emanated from the big expansion plans outlined by companies big and small under the new Special Economic Zones policy. This was especially because the SEZ policy offered huge tax sops and the Software Technology Parks of India scheme will expire within three years.
While the SEZ policy attracted companies from all sectors, software industry took the lead. So much so, that of the 237 proposals given final clearance so far, 148 are for setting up IT SEZs. Further, of the 160-odd proposals given in-principle nod, about half are from this sector.
According to the Commerce Ministry, estimates given by all the IT SEZ developers suggest that these zones would require an additional 12.5 lakh professionals over the next three-four years. In fact, the rush has forced the ministry to restrict the number of IT SEZs.
The companies also bagged a number of outsourcing deals. Most notably, Tech Mahindra, which got a one billion dollar contract from British telecom giant BT.
India's top software exporter TCS signed a $65 million contract with UK-based Somerfield and a 120 million Australian dollar deal with Qantas airlines, among others.
Satyam, the fourth-largest IT exporter, also bagged a 71 million Australian dollar pie of the Qantas contract, while HCL Technologies, the fifth-largest, signed a $200 million contract with Skandia UK.
In an otherwise bullish scenario, the only dark cloud was data theft from a few call centres, including at HSBC's India office. This raised serious concerns among foreign investors, so much so that Prime Minister Manmohan Singh had to assure them during his visit to UK in October that India was a safe outsourcing destination.
Besides data theft, other factors such as rising costs and high attrition also forced a few companies such as Acme TelePower and British energy firm Powergen to close their BPO operations in India.
However, various studies by research firms still indicate that India will maintain its low-cost IT skills leverage in the offshore outsourcing market for another 20-30 years, though growth may slow down amid concerns of security breach.
True to Singh's words, the Government recently moved a bill in the Parliament to amend the Information Technology Act. The bill seeks to amend some provisions of the IT Act, Indian Penal Code and Code of Criminal Procedure to prevent cyber crimes, data theft, empower the Government and tighten other sections related to breach of confidentiality and privacy.
On its part, IT industry body Nasscom initiated the process of creating a national registry of all the employees in the BPO companies. It also launched a competence assessment programme to meet the rising demand of software professionals.
With a view to make India a preferred place for high technology IT products, the Government is also preparing a Fab Policy to attract global chip makers such as Intel and AMD for setting up semiconductor manufacturing units in India. The semiconductor market in the country is expected to grow to $36.3 billion by 2015 from just two billion dollar now.
The Government is also working on a Policy for IT Hardware and Electronics to lure companies such as Samsung, Siemens, LG and Motorola to establish manufacturing units.
All in all, 2006 was a great year for the IT and ITeS industry and the sector is set to continue its rapid growth in the years to come, provided it keeps getting the right talent and ensures that India remains a safe, low-cost and efficient destination for outsourcing back-office work.
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