Pramod Bhasin interview – with NDTV – offshore to grow 13-15%
SOURCE: MoneyControl
DATE: April 9th, 2009
Pramod Bhasin, Chairman, Nasscom, and President and CEO of Genpact, said the growth rate for IT industry would be about 16% for 2008-09. “For the next two years, it might be around 13-15%. We will come out with our annual numbers for 2009-10, for which we will do our estimates in May and release them in June. It will be lower that what I believe but it will still be a growth number,” he added.
Here is a verbatim transcript of the exclusive interview with Pramod Bhasin on CNBC-TV18.
Q: How good or bad is the environment for the mid-sized technology companies in terms of orders, those who just depend on one or two clients because we have seen many US clients just flip of the cliff so to speak in terms of recruitment costs, margins etc, if you could shed some light for the middle part of the market rather than just the top three or four?
A: The market has impacted everyone. I don’t think it’s a matter of whether you are middle or large. Clearly it will impact those who have less money to invest in a bigger sales force and collect more dollars in revenues etc and therefore the mid-tier companies get hit harder. Input costs are dropping cost of recruitment and salaries are dropping. Therefore there is room within the margins to save money and become far more productive. One of the only benefits you can think of part of this whole recessionary environment is that companies are having a chance to change their business models perhaps to say in many ways and lower their cost to a different level. This is because perhaps the old levels of pricing etc may not come back. So its tough out there and no question about it. The industry will still grow though and that’s the important point. I would like to make is despite the mayhem out there and this is one industry which we believe will still grow both in the short and the medium term and the medium to long term potential remains very high.
Q: There was one very disturbing piece of news over the last 48 hours Sallie Mae shipped back 1400 jobs from India and some from Philippines as well, is this a start of a trend, are we going to see contraction in BPO?
A: Not at all; Sallie Mae is a unique animal in terms of its corporate ownership, how it gets funded and the role it has to play. it is much more a political animal and a governmental led animal than 99% of the private sector who are the people that we serve. So they have done this for their own purpose I guess have to satisfy their political masters perhaps. The thought of spending an extra USD 300 million or so at this point in time to take those jobs back in a time when you are rubbing through a recession and your balance sheet and P&L are weak is not something that I think many private companies can contemplate. So I don’t think it’s a trend at all and it’s an isolated incident. If you look at what that company consist of, it becomes apparent to what they might be doing by into some of this pressure.
Q: Political ownership is spreading into a lot of private ownership, most of the banks; the Citi and the Bank of America are practically public ally or governmentally owned, you think the protectionist bug will not come there?
A: There are two different things hapenning which we could be careful of calling at all protectionists. Every country in the world is worried about people loosing jobs. We as an industry and as a country have to be extremely sensitive to that. You can imagine what India’s response would have been if India’s unemployment rate doubled in over the period of six to nine months. That’s a natural outcome and that will reflect in lower growth rates and that will reflect in additional capacity within the US and that can be used to serve their needs.
The other side is real protectionism with laws and regulations etc, the chances of real protectionism are low, the chances about people being concerned about unemployment and job creations in the US will apply to many companies across the board, it will reflect in lower growth.
Q: You don’t expect rules and laws to get institutionalized in protectionism?
A: I don’t; and also for the private sector where they have got government ownership we must remember most of these companies have massive international operations. Citibank I don’t know the numbers well but makes as much money overseas as it does internally. So this construct to happen where they don’t do any more outsourcing or they don’t use worldwide intellectual capacity where its available to make more efficient. I do think its not going to happen as easily as the Sallie Mae incident suggests.
Q: Its not just IT, many real estate companies in India projecting that you will grow at a really fast pace, make tonnes of IT parks, all of them are going a begging, many students go into technology hoping that they will get a job with a tech firm, my question to you is that how long it will take for us to get back to where we were in April to August or April to July last year, how long will it take for us to absorb all this real estate absorb all these people, its not so much whether you are growing now but to going good you were growing at a pace 7-8 months ago?
A: Yes and this is an important point, real estate frankly is having a lot of overbuilding and I don’t know and it tends to go in cyclical ways all the time. This is not a new phenomenon unfortunately in the real estate industry and it tends to go to from boom to bust.,Tthe shopping malls that we first opened up and now everybody opened a shopping mall and now we have too many, the same thing has happened in IT parks etc and they have grown exponentially to a point. Lets remember that big companies who are the biggest users of real estate tend to do their own thing, we tend to buy our own land and build our own SEZs etc.
Q: I just wanted to get your estimate on what kind of growth rates do you see in terms of revenues for the IT industry, perhaps a number and if you compare it with what we were doing six or nine months ago?
A: For 2008-09 what we have said the growth rate would be about 16% and for the next two years it might be around 13-15%. We will come out with these annual numbers for 2009-10, we will do estimates in May and come out with them in June. It will be lower that what I believe but it will still be a growth number. Therefore for employees and students this is still a net hirer and despite the environment, our industry remains net higher and will remain that way. When will this come back to the former levels and frankly we think the bottom has been reached across the world and this is a very personal view. I think, the world and governments have acted fast and physical stimulus has really happened and I think it has reached bottom. I think its on the way up and it will be a gradual slow upward movement. So it could take us a year and a half or two years to get there but I think we have hit bottom at this point in time.
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