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`Managing growth is big challenge in IT sector'

Our Bureau

NEW DELHI, Aug. 28

INDIAN infotech companies must scale up their infrastructure rapidly, not only within India, but globally too, if they are to achieve an annual growth of 50 per cent or above. And in order to do this, they need to tap global capital markets for mobilisin g funds. This will again call for more transparency within the corporate system and better investor-friendly attitude, says Mr. N. R. Narayana Murthy, Chairman and Chief Executive Officer of Infosys Technologies.

``Managing growth is a big challenge,'' admitted Mr. Murthy, during a brief interaction with mediapersons in the Capital today. Excerpts:

On the performance of Indian information technology industry:

The IT industry has been receiving attention since 1996 for some very valid reasons. For the first time, we have an industry where India has a competitive advantage. Between 1978 and 1991, the growth of the IT industry was only 5-10 per cent. Since the l iberalisation in 1991, we have been achieving a compounded annual growth of 50 per cent. Thus, the IT industry has become a shining example of all the good things that came along with liberalisation. Another reason is the high quality jobs that the indus try provided and its contribution to our exports.

On the challenges that lie ahead:

As per estimates, we are likely to touch about $6 billions in software exports by the end of this fiscal. And, we are targeting $50 billions by 2008. We have many challenges here. The first is to generate adequate brainy manpower. Today, we have two lakh people, and by 2008, we need two millions. Hence, we have to look at a larger domain of people; we need to tap degree holders in other subjects such as physics, chemistry and even economics to meet this demand.

Moreover, institutes and engineering colleges need to scale up their intake considerably. We have to put in place a mechanism whereby we can make one domain knowledge compatible with the other. That is a big challenge.

If you want to grow at 50 per cent annually, that is going to take tremendous efforts of managing profits. Companies will have to beef up infrastructure, manpower etc by at least 35-40 per cent annually. Not only should Indian firms build up infrastructu re domestically, they have to do this on a global scale.

As we have become more offshore-focussed, we have become more capital-intensive. Today, we have to invest Rs. 3 lakhs in infrastructure whenever a new person joins. At this rate, we will need a capital outlay of $3 billions annually to create physical an d technological infrastructure every year. That kind of capital is not available in India; we need to tap the global capital. For that, we need to become more investor-friendly and transparent. Overall, managing growth is a big challenge in itself.

On the industry-Government relationship:

The relationship between the Government and the IT industry has always been extremely positive. Right from the 90's, the Government has taken a pro-active role. Today, the Ministry of Information Technology is also going in the right way by doing things like enacting the IT law etc.

On the feasibility of carrying on with software services rather than focussing on products:

Opportunities for software services are increasing today. No matter what package is used, all companies will have to build their infrastructure around it and they also need to have certain customisation. I believe, software services will be in demand for another 10 years and there is considerable opportunities for us. At this point, the most important thing is that we need to create jobs for our educated youth. We will worry about the other issues later.

On the need to have overseas development centres:

Today, Infosys has proximity development centres in California, Boston and a global development centre in Toronto, Canada. Now, we are planning another proximity development centre in the UK, which will be operational by October-November this year. Why w e need such centres is that the software activity is split into two; one being carried out at the customer's site and the other through offshore. Today, about 20-35 per cent of onsite development takes place in certain cases. Hence, the need for overseas development centres.

On braindrain:

This is not a big issue and there is no need to get worried about it. We are producing 3-4 million graduates in science and definitely we can make use of them. My view is that we need to be open about some of our smart people going abroad and creating a brand equity for India.

`Govt not an obstacle for acquisitions'

ASKED about Infosys' proposal to the Finance Ministry seeking blanket approval for overseas acquisitions, Mr. Murthy said the Government had not shot down the same.

``We can now go in for acquisitions worth 10 times our export earnings. We were told that whenever we want to exceed that limit, we will be given permission on a merit basis,'' he said, adding that the ``Government is not a bottleneck in acquisitions.''

Reacting to the dilution of the Export Earners' Foreign Currency Account (EEFC), Mr. Murthy said the move would not have any impact on Infosys as the company was more focussed on offshore software development. ``This will impact those companies who are i nto onsite development as they need dollars to meet their overseas expenditure,'' he said.