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Lets have a quick quiz, more of the cerebral kind like BBC Mastermind, rather than the popular KBC. What was common to Barack Obama, Richard S Fuld Jr, Ramalinga Raju, Pope Benedict XVI and P Chidambaram, particularly in 2008-09? The answer is they were all movers and shakers of the Indian IT services (and BPO) exports sector which significantly altered its destiny in FY 09. Most of them perpetrated a chain of events that had much longer lasting and deeper implications for the Indian software services industry in the global perspective.

Obama gave an official sanction to anti-outsourcing with his stringent stance (I would want more jobs in Buffalo than Bengaluru); Fuld Jr was the Lehman Brothers CEO when they declared bankruptcy in October 08 (more than anything, Lehman going down signified that the US slowdown would seriously impact Indian IT services firms considering their US BFSI exposure); Ramalinga Raju and his misdemeanors at Satyam are too well-documented (with most agreeing that the full extent of the scam is yet to be revealed); Pope Benedict XVI in his encyclical generally supported globalization but criticized western companies that outsourced business to developing countries; and Chidambaram was the finance minister for most of the period (till 26/11) and he presided over most of the rupee depreciation against the dollar (probably the most significant impact on the sector).

CyberMedia Research    DQ Estimates

The currency fluctuations have led to average growth for the sector over the last two years; but then which other sector can boast of 26% growth in a year of global recession? Exports still remained the mainstay in Indian ITs contribution to the countrys GDP. More heartening to see was the increasing secularization of the sector, as the contribution of the Top20 dipped by four points

In rupee terms (thats what DQ Top20 is all about), the IT services exports market grew 26.1% in FY 09; not bad in a global recessionary economy. And particularly considering its dependence on the US, where economists have certified this as a worse financial crisis than the Great Depression of the 30s. It looks even better compared to FY 08, when even in the face of strong appreciation of the rupee against the dollar, the market had grown only by 25.7%. So, even in status quo, in growth terms, the Indian IT services exports market was not in such a desperate state as predicted by many doomsayers. But, yes, the nearly 40% growth in FY 07, which has been hovering in the mid-20s for the past two consecutive years, would officially result in the labeling of this sector as having been impacted by the slowdown.

The S-word assumes more menacing proportions when viewed in dollar termshere the situation has been absolutely reversed from FY 08. While dollar depreciation meant a 40.2% growth in dollar terms, it has come down to only 9.6% in FY 09. The fickle dollar rupee relation (worse than between two sparring partners) had played havoc with numbers and analyses of the Indian IT services exports for two years running. Its true that most IT vendors take a middle path between these wild fluctuations, as part of their currency adjusted revenue schemes, but even then the verdict does not differ. Indian IT Services has been affected by the slowdownits not just a general statement, but well substantiated by numbers.

CyberMedia Research    DQ Estimates

The turns and twists in the graph show the wildly fluctuating currency exchange in the last two years; it obviously swung the fortunes of Indian IT services exporters too quite drastically from FY 08 to FY 09. The dollar growth dropped from 39.6% in FY 08 to 9.6% in FY09it was the year for most Indian IT services exporters to consolidate their bootomlines

After recording a stupendous growth in the first half of 2008-09, the second half performance for the IT services exports sector was impacted by the global economic downturn. Additional headwinds included cross-currency fluctuations, terror attacks, issues on corporate governance (in the aftermath of the Satyam incident), the US elections, and then Obamas policies. However, most of the adverse impact was in dollar termsthe moment one looks into the picture with rupee-tinted glasses, the picture looks rosy. That after all was the ultimate paradox of the Indian IT services exports sector in FY 09.

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