NEW DELHI: India's offshore IT and BPO industries are on track to achieve $60 billion in export revenue by 2010, according to the NASSCOM-McKinsey Report 2005.

NASSCOM-McKinsey report says India's offshore IT, BPO industry are on track for a significant growth, but it requires more graduates Export growth can further be accelerated through innovation and such extensive innovation could generate an additional $15-20 billion in revenues over the next five-ten years.

The offshore IT and BPO industries are expected to grow at a CAGR of 28 percent over the next five years, with IT growing at 25 percent CAGR and BPO at 37 percent.

The report states that India's offshore IT and BPO industries have tapped only 10 percent of the total addressable market for global offshoring, which is above $300 billion. Hence, a lot of potential for growth still exists.

The report also said that significant growth will come from emerging service lines and sectors.

Offshore IT and BPO industries can spur India's economic future and according to McKinsey & Company partner Noshir Kaka, it can contribute to seven percent of India's GDP by 2010.

He added, “The offshore IT and BPO industries can account for over 44 percent of export growth over the next five years and the growth in the industries is expected to create 2.3 million direct jobs and over 6.5 million indirect jobs by 2010.”

McKinsey & Company partner Jayant Sinha said, “India has 28 percent of the world's labor pool of knowledge workers. To achieve the goal of $60 billion revenue by 2010, an additional 5,00,000 suitable graduates beyond projected supply are needed in the next five years.”

To achieve this end, the report suggested the government to set up focused-education-zones to improve quality of higher education, pilot “industry-owned” and government facilitated integrated skill development and certification program for BPO and decentralize higher education in stages and shift to a largely demand-based funding system.

For India's offshore IT and BPO industries to grow at the projected rate, massive urban infrastructure build-outs are imperative. The report suggests that 10-12 integrated towns should be developed with associated urban infrastructure including international airports, roads and land development.

For the trade development, government should accelerate efforts to ensure free trade in services through Mode 4 negotiations at the WTO and through trade agreements with select countries.

The report also suggests four winning approaches that are likely to emerge for companies. The first is global champions, whose revenues are likely to exceed $10 billion and would offer multiple service lines and integrated solutions. These would focus on global 500 companies and would employ around 100,000 people.

The IT Specialist, with global revenues likely to exceed $2 billion and would focus on three-four industry specific application or horizontal application. Delivery centers may span in India and one or two other low-cost locations.

The third winning approach likely to emerge would be ADM (Applications Development & Maintenance) factory, which will probably employ over 50,000 developers in India and China and generate revenue in excess of $2-3 billion. This would be one of the top three global low-cost providers of ADM services through a 'lean' operating environment.

The fourth approach is that of a Specialist BPO. Three types of specialized BPO providers appear possible under this. These include platform-based service providers, process automation and process reengineering companies and vertical contractors.

According to the report, these four winning approaches will emerge over the next three to five years requiring companies to make deliberate choice about their business approach.

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