‘Our employees pay tax; we generate employment’

‘Our employees pay tax; we generate employment’

New Delhi:He is the first president of Nasscom who comes from the software world, unlike predecessors Dewang Mehta, who was an accountant, and Kiran Karnik, who joined the tech lobbyist after stints in space research and media.Som Mittal, who takes over the helm at Nasscom—short for National Association of Software and Services Companies—on 1 January currently heads the services business of Hewlett-Packard for the Asia-Pacific and Japan region.

In a recent interview, he talked to Mint about the future of the Indian software industry, the role of Nasscom, and how the trade body is gearing up for political posturing on outsourcing ahead of the US elections next year. Edited excerpts:

Where do you see India’s software industry heading from here?

The aspirations of Indian companies are already changing as they expand their footprint to be global players and not remain offshore players. The business process outsourcing industry is clearly moving to more value-added (services) such as analytics and research. With funding, entrepreneurship will take off further in terms of developing intellectual property. Today, in any product design, 70% of the content has something to do with digitization.

That will drive information technology (IT). We haven’t really started looking at bioinformatics in India. Also, the word offshore will probably go away from the dictionary because today (a customer) is saying, “I have to get this work done and I will get it done from wherever it is." You don’t care what you get done where.

Do large Indian IT companies still need Nasscom?

I think Nasscom is one organization which is a huge uniting force in the industry. Our constituents are many. We have large Indian companies, multinationals and captive customer units as members.

A large number of the issues of the industry are common, irrespective of the kind of companies. I don’t agree that large companies can help themselves. When you address issues such as immigration, visas, taxation and infrastructure, every large or small company needs Nasscom. With the industry, we at Nasscom have also grown and matured.

With the US going to polls next year, there is some concern in the software industry on anti-outsourcing rhetoric from the Democrats. How will Nasscom address these concerns?

In 2001, post the 9/11 attacks in the US, Nasscom took a decision that if we have to play in this global market, we must ensure we play our part in the public policy globally. That is an ongoing initiative and we have taken it through the past US elections. I don’t see the “against" (outsourcing) sentiment; we do not hear the outsourcing word these days.

However, we understand that there is a need for balance and there are needs that every country has—be it socio-political requirements or economic needs. In the last US elections in 2004, unemployment and offshoring became an issue around IT, whereas most of the issues were around manufacturing. If there is need for us to step in and influence to get our viewpoint across, we will do that.

The 10-year Software Technology Park of India (STPI) scheme is likely to expire in 2009, removing tax incentives. Many in the corporate world question the rationale for an industry with revenues of nearly $40 billion (Rs1.57 trillion) Your thoughts?

This industry is 20 years old but really came into being in the last 12-15 years and has not really matured. There are small companies and the back-office industry that are still emerging.

The IT industry has paid back several times over to the government what it has taken in the form of incentives. Our employees have paid taxes and we generate phenomenal employment.

Our growth—40% year-on-year—is the highest. In the global space, the Chinese and the Philippine governments are giving all kinds of sops for three years. We are not saying that the other industries should not be given tax cuts. Every growing industry needs a push.

How much beyond 2009 would be an ideal extension of the STPI scheme and how do you feel about the special economic zones (SEZs) coming up?

I think the extension should mirror the SEZ policy. The success of our industry has been because of the STPI scheme. Not all SEZs are coming up in rural areas and tier III cities, where our industry is slowly moving to. With the introduction of SEZs, some inequalities have come in. SEZs make it difficult for the small industry to survive and we must be sensitive to this segment.

More than 80% of Nasscom’s 1,200 members are small and medium companies.

India’s exports are expected to reach $60 billion, while the domestic market will touch $25 billion by 2010. How do you see the domestic market growing?

The domestic industry is picking up and will mature in the next three-four years. When you look at IT, you only get the benefit if you are connected, and you cannot do that if you are an island. India is spread out but today one can see that the islands are connected. The bottom-up (view) is that companies such as BSNL and Reliance have linked up the entire country. Growth of personal computers and printers is amazing. Small towns are today seeing computers and the youth are using them. The top-down is that the government has realized this benefit. We are working with the railways and defence to help connect India as well as encouraging our own member companies to pay a bigger part in the domestic market.

Do you have a wish list as Nasscom’s new president?

We have all the initiatives we need, the right strategy and direction. To me it’s about execution. I would also like to drive initiatives where the industry starts preparing itself to be truly global.

We will never know where the rupee and dollar will settle ever, but the question is, “Are we ready for it?"