Many of the top Indian software companies are working on the latestplatform and their quality of service is much higher than competitors in China, Philippines and Eastern Europe. Indian Software companies are insulated from any recession in the domestic industry as over 90 per cent of their revenue is from export to western countries. Apart from volume growth in exports, depreciation of rupee will further enhance profitability. Government measures to provide tax-incentives and preferential treatment for this sector is expected to accelerate growth further. However, the sector has some inherent disadvantages.
Most companies are absolutely dependent on western technology.
Despite large pool of professionals, there is a demand supply gap which is leading to spiralling manpower costs in the Indian IT industry. If this gap persists, it can adversely affect the profitability of the firms. Importantly, this industry faces continuous technological changes andfailure to adopt these changes will mean winding up of shops. In the past one and a half years, the infotech sector has been the most fancied on the bourses. Not surprisingly, these have found favour with a number of fund managers as well.