Southern IT, ITeS firms begin flight to Philippines

K. V. Kurmanath



Hyderabad, Jan 10: Worst fears of IT industry have come true. India’s preeminence as an information technology (IT) and IT-enabled services (ITeS) hub is under serious threat.

Business chamber Assocham has noticed a major flight of IT and BPO (Business Process Outsourcing) and medium enterprises from Hyderabad and Bangalore to the Philippines.

The industry also faces threat from competing locations such as Vietnam, China, Poland, Hungary, Mexico, Brazil and Egypt.

This trend, however, has not been observed in the National Capital Region and Pune, the other two major IT-ITeS hubs in the country.

“Current developments taking place in the southern part of the nation clearly indicate that India’s prominence as an IT and ITES hub is fast fading away. Numerous firms from Hyderabad are either already in the process of shifting or planning to shift to the Philippines alone. Smaller firms with 15-18 employees are leading this shift,” the chamber has said.

Eco Pulse

In its latest Eco Pulse study on ‘Sustaining India’s IT/ITeS Leadership’, Assocham said multitude of factors have been contributing to this outflow of firms.

Shortage of employees with suitable skill sets, lack of professional ethics, deficient infrastructure, law and order issues and shrinking margins in the light of increasing costs are the major reasons for this trend.

What lures these firms away from India?

“Driving forces are multitude. Ease of doing business, availability of abundant English speaking workforce at lower wages, better infrastructure and government incentives are some of them. It is time for Governments to quickly step in and take remedial measures on war footing to stop the outflow,” Mr D.S. Rawat, Secretary-General of Assocham, said.

The share of IT/ITeS sector in Gross Domestic Product has grown from 1.2 per cent in 1997-1998 to about 6.4 per cent in 2010-2011. Its share of India’s total exports has increased from less than 4 per cent in 1997-1998 to 26 per cent in 2010-2011.

India accounts for 55 per cent of global IT-ITES off-shoring market in 2010 against 49 per cent in 2005.

Look for Plan B

Assocham points out that capacity of Tier-I cities in providing infrastructure has reached its peak. These cities contribute over 90 per cent of all IT revenues. It is high time to develop infrastructure and ecosystem in Tier-II and Tier-III cities to make them alternative locations for the industry.