Indian IT firms face more challenges in domestic market

 

 Nasscom, India's IT lobby that has weathered many a challenge in the industry's biggest markets overseas, is setting its sights closer to home. For Indian IT firms, the home market has been far more challenging than the US or Europe. 

IT executives often point to dysfunctional policies, a lack of project management and delayed payments as important reasons for conflict in IT contracts with the government, the country's largest spender on technology and related services. Nasscom wants to proactively try to change that, its new president R Chandrasekhar, a long-time bureaucrat, told ET in a recent interview. 

"The procurement policies focus on transparency which is a good thing. But they are not geared for the procurement of services and certainly not the procurement of technology services. That is something we are going to work with the government to address," R Chandrasekhar, said. Cracking the Indian market is of key importance as the Indian IT industry hopes to nearly triple its revenue to $300 billion in 2020, an estimate by Nasscom. 

Emerging markets such as India will be in focus as Nasscom holds its annual India Leadership Forum in Mumbai next week. The Indian IT services market will be worth $11.2 billion (Rs 70,000 crore) this year, according to research firm Gartner. Last year, the government IT market alone was worth $6.4 billion (Rs 40,000 crore) but many Indian players approached the growing segment with caution. 

"Part of the problem is because what the government is buying is technology that is tied to skills. And skills are not always easy to rate and quantify. And IT companies cannot just ignore the government market because that is where the spend is," said Sanjoy Sen, senior director at consultancy Deloitte. 

The way contracts are structured is a major problem, according to Chandrasekhar. "If you are procuring hardware you can say that all payment will be made after the product is delivered but it cannot be like that in services." Services contracts need more flexibility, Chandrasekhar added. 

The upcoming general elections will make implementing changes hard in the next six months, but Nasscom intends to work with the bureaucracy to suggest process-related changes during the election time and work on policy-related changes when the government has been formed, Chandrasekhar added. 

Every decision was facing additional scrutiny and bureaucrats were making the strictest possible interpretation of contracts for fear of attracting allegations of corruption , said an IT industry executive , who works with the government on condition of anonymity. 

The defence ministry, in particular, has slammed the door shut on billions of dollars worth of contracts for software companies wishing to participate in defence offset deals after the AgustaWestland scandal, ET had reported. Chandrasekhar said the government's "draconian" interpretations were leading to Indian firms backing away from contracts and the lack of payments had driven smaller firms to the brink of bankruptcy. 

Deloitte's Sen said that given the prolonged slowdown in the country and the number of e-governance projects underway, the government would likely be more open to looking at ways the procurement could be made easier for IT firms.