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IT firms need to explore newer areas: McKinsey

Bipin Chandran

India may well be on track to achieve, or even exceed, the $87 billion export target set for 2008 by the Nasscom McKinsey study of 1999, but, according to the latest review of this study by the consultancy major and the software services companies association, the industry needs to review its business strategy and explore newer opportunities.

As per the Nasscom-McKinsey Study 2002, the success of the Indian software saga depends on issues like geo-political stability of the country, consistent policy measures, government's ability to attract foreign direct investments into the country's high tech sector and increasing the reach in various under penetrated markets.

The study, which gives out a detailed roadmap for the software sector, also points out that big companies like TCS, Infosys, Wipro, Satyam and HCL Technologies will have to work out definite business models for the next big leap.

"It is not enough to say that the company wants to become one of the top 10 companies in the world in the next five years.

The companies should have the infrastructure to achieve this and should have long-term relationships with the US companies," Sunil Mehta, vice-president, Nasscom, said. The report said that for the big companies, mergers and acquisitions are going to be the big drivers for the growth.

As far as the small- and medium-scale companies are concerned, the Nasscom-McKinsey study points out that the issue would be whether the companies would like to be in the exports business or not.

"If these companies are serious about the exports business they need to make certain fundamental changes in their business models," Mehta said. As per the Nasscom-McKinsey study, most SME software services companies are techno-entrepreneur run and they need to professionalise the management structure.

The study also suggests that the Indian SMEs need to bring in best corporate practices and venture into partnering and alliances to strengthen the business.

Besides, the study also suggests that the SME companies should look into untapped verticals such as web services to work out a strong business model.

Nasscom-McKinsey report points out that the government should have bilateral agreement with countries and should engage high profile brand manager for the Indian software sector.

The study also identifies markets like Germany, France, Italy and Japan and underpenetrated markets. But the study points out that these markets have tremendous opportunities and penetrating these markets is a uphill task since they have some natural cultural barriers.

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