Rupee appreciation and rising staff costs are taking away the sheen out of the Indian IT industry. On the other hand, global research firms are predicting a possible threat from China. It's high time, Indian IT companies moved beyond the cost advantage factor, Vikram Gulati,CEO, Intelligroup Inc, tells Sreenivasa RaoDasari.

Q: Do you foresee the cost advantage of India eroding with rupee appreciation?

A: Rupee appreciation definitely will impact revenues and Indian IT companies can no more depend on cost advantage factor alone. Sustaining in the present situation will be a benchmark to measure an IT company's fundamentals. It is value addition that is going to be a key player in the global market. Most of IT companies generally hedge their currency risk in the short-term, but it doesn't work for long. They need to focus on value addition.

Q: What has been the impact of rising salaries on IT revenues?

A: In the growing market, companies have been recruiting techies in large numbers and salary levels are moving northwards. Revenues and people are correlated. In India, widely believed concept for revenue estimation is $100 million on a pool of 1,000 people. When companies come under revenue pressure, they tend to get the same project done by fewer people and this doesn't work. It's high time, Indian IT companies shoud go beyond this. Companies that break the correlation of revenues and people, will only succeed in the next phase. By improving quality system only, productivity should be enhanced.

Q: Do you see China closing in? Reseach groups have been talking about this for some time now.

A: There is no doubt that China is manufacturing major in the world market. But, it will take considerable time for China to gear up in the IT -Industry. I foresee that China may catch up with India in coding part, but not in high end space. China can perform well in mainframes, Java, Cobol, etc. Sophestication is not seen in China talent pool.

Q: Does the new buzzword 'nearshoring' pose any threat to offshoring and outsourcing opportunities?

A: Nearshoring is gaining momentum, but it can't be an alternative to offshoring concept. When we want to work in the same time zone, then only nearshoring comes into the picture. Other key factors such as customer environment, frequent travelling and language will also make nearshoring an unavoidable choice.

Q: How about companies like yours focusing on ERP? Itseems the success rate has been low

A: Before developing ERP applications, an IT company should know the business model and internal infrastructure and working style of customers. Then only customers can take benefit from ERP applications. Sometimes, in enterprise application space, success of the project takes top priority. In such instances, Rol becomes secondary. All ERP projects developed by us are successful because of our standardised practices.

Q: In the wake of globalisation, are SMEs are reeling under threat?

A: Yes, size matters a lot in the global market. At the same time, differentiation is also very important and it is preferred more than size. Relevance and value aspects in customer perception will determine the opportunities for SMEs.