High-value offshore services, including HR, finance and engineering, may be worth a trillion dollars a year to India by 2020

Indian IT trade group Nasscom predicts the country's IT industry will be worth a trillion dollars by 2020 as western economies increasingly exploit next-generation offshore services to tackle skills shortages caused by an aging population.

Speaking at a roundtable event in London yesterday (31 July), B Ramalinga Raju, chairman of both Nasscom and IT services giant Satyam, said the Indian IT industry was on track to be worth $60bn a year by 2010 and could potentially be worth a trillion dollars by 2020. He said high growth rates would be possible as Indian operations expand to offer more high-value and industry-specific services.

Phiroz Vandrevala, executive vice president at Tata Consultancy Services (TCS) and a member of the Nasscom Executive Council, agreed next-generation offshore services would grow. He claimed this was already happening, and western customers were increasingly interested in new infrastructure services. "It was always thought datacentre services would largely be provided on-site, but firms have realised more and more datacentre tasks and other infrastructure services can be handled offshore," he said.

Vandrevala predicted other high-value business processes, such as human resources, finance and legal functions, would also be moved to India. Nasscom president Kiran Karnik added that engineering services at Indian sites - where complex system and product design work is undertaken - are also proving increasingly popular.

This trend for more complex offshore services will be driven by demographic requirements as much as cost concerns, according to Vandrevala. "More and more developed economies do not have [large enough] populations to provide the services they need," he said. "That means they either have to open up borders and move people in - which will not happen - or move services across the border. There will be an evolution of the market - services that today would be inconceivable to offshore will be moved."

However, Nasscom admitted that the success of Indian service centres was being undermined by ongoing infrastructure problems in the country. "There is an absence of assured power, which makes providing 24x7 services more difficult, and an absence of adequate public transport system, which means we have to provide staff with transport to work," said Vandrevala. "These inefficiencies are built into our business model, so if you can get the infrastructure in place you can increase the productivity and profitability of the industry."

Raju admitted there was a problem with infrastructure, but said the government was taking steps to tackle the problem. "We believe the next few years will witness massive infrastructure improvements because the frameworks are in place for the private sector to come in and address the problems," he said. "Private industry can now provide 100 percent of the investment and it has been made far easier to acquire land."