Budget a disappointment for the IT Industry

Group of Technology companies (GTech) have expressed the IT /ITES Industry’s disappointment over the Union budget 2011-12 presented by the Finance Minister. Though the budget is aimed at ensuring the inclusive growth of the Indian economy, GTech felt that Union Government should have considered extending the STPI scheme for a specified period for the IT Industry operating in the tier 2 and tier 3 cities.

Mr. V K Mathews, Chairman GTech said “GTech welcomes the proposals in the budget like changes in the Income Tax Slabs and the proposed implementation plan of the Uniform Direct Tax Code and Goods Services Tax (GST) by April 2012. However the increase in minimum alternate tax from 18 % to 18.5 % and non-extension of STPI scheme would hit the IT companies operating in the state. The Government should have kept the MAT at the levels prevalent internationally at one third of the corporate tax.”

“A sigh of relief for the SMEs was the facilitation to convert smaller firms to limited liability partnerships by not subjecting them to capital gains tax. It is also good to note at this juncture that LLPs are not subjected to MAT when located in an SEZ. On the flip side this will mean that the SMEs will have to ramp up their infrastructure in relatively expensive SEZ spaces quite soon. We were really hoping that at least an investment based tax relief would be provided for the existing STPI units” said Anoop P Ambika, Secretary, GTech.

GTech said that the budget allocation for the Infrastructure, Agriculture and Health sectors would ensure the sustainable growth of the Indian Economy. Appreciating the Finance Minster for fiscal prudence in containing the fiscal deficit to a new target of 4.6 %, GTech felt that this would send a positive signal to Investors on India’s economic outlook.

IT companies forming regional bodies in smaller cities

Not waiting for Nasscom presence, have begun work on spurring investment, common issues and govt lobbying.

Information technology (IT) companies in smaller cities are forming regional associations to attract investments and get their demands fulfilled at the local level, as industry body Nasscom is unable to spread its wings in many such cities.

Smaller companies in places such as Bhubaneswar, Coimbatore, Madurai, Kozhikode, Ahmedabad, Kochi and Thiruvananthapuram have created regional fora to sell their locations and also lobby state governments.

Rooted in small cities, these associations believe the presence of major companies in these regions will boost growth of small and medium enterprises. When it comes to larger and national issues like the STPI scheme extension, they prefer to work with Nasscom.

Said Binu Sankar, CEO of Group of Technology Companies, an industry association in Kerala based out of Technopark in Thiruvanathapuram: “Since Nasscom is not very active here, we work at the local level in promoting the state as an ideal destination and secure funding for 200-odd member companies. For all national issues, we work very closely with Nasscom and support its initiatives.”

Adds R Sivarajah, president, Software Industries Development Association of South Tamil Nadu (Sida), “Our aim is to develop an IT ecosystem in the region. We hope that when the big companies start operations, smaller companies will get businesses from the giants and will help in creating an ecosystem.”

Sida was formed in October 2010, with about 50 small and medium-sized IT companies as members. The association is also trying to make Madurai a regional IT hub, by supporting the smaller companies in the region. It has asked the Electronics Corporation of Tamil Nadu Ltd to provide projects related to south Tamil Nadu to firms located in the region.

Small and mid-sized IT firms located in Bhubaneswar, a growing city for IT and business process outsourcing, have formed an industry body called Confederation of Information Technology Enterprises. According to B K Sahoo, its president, “We are mainly focusing on creating an investment ecosystem in the state and our major focus is small and medium businesses.”

Nasscom acknowledges the trend. “We are seeing more regional fora and associations coming up in these areas and the main reason for it is that we don’t have our reach in many smaller towns. We understand the need for a presence in these developing cities and have started partnering with these small associations by conducting various events,” said Avinash Raghava, regional director, northern region, Nasscom.

IT attraction

With major IT companies scouting for low-cost destinations in tier-II and tier-III cities to expand their operations, to minimise their cost structure, smaller towns are becoming increasingly attractive. A study by Nasscom and A T Kearney, ‘Location roadmap for IT- BPO growth’ have identified 50 major locations, including Ahmedabad, Bhubaneshwar, Coimbatore, Hubli-Dharwad, Bhopal and Goa, among others, as growth drivers for the industry.

The smaller companies in these cities feel the lack of infrastructure and guidance for start-ups are the major challenges for growth. The organisations are partnering various government administrations to overcome these challenges.

Calicut Forum for IT (Cafit), set up by IT professionals in Kozhikode to promote IT and IT-enabled services, is working with the government of Kerala. It has over 20 members. Serfraz Abdul Gafoor, secretary of Cafit, said, “People from Kozhikode make up a major chunk of the expatriate population in the UAE. We are seeking investments from NRIs to support companies in the city.”

Though Nasscom is taking steps to take IT to rural areas through partnerships and by adding new members, the companies in these places feel it’s very difficult to get Nasscom membership. For that, a company has to share its balance sheet and pay an annual membership fee of around Rs 15,000. Only companies with revenues of over Rs 50 lakh can apply for membership.

“We are planning initiatives through which smaller companies can gain value, or we may even restructure our membership criteria in the future,” said Raghava of Nasscom.

Kerala IT industry to bear the brunt- Hindu article

The Group of Technology Companies (GTECH), a strategic grouping of IT firms in Kerala, has urged the Union Government to extend the Software Technology Parks of India (STPI) scheme by a few more years for small and medium enterprises.

Addressing reporters, GTech president V.K.Mathews and Secretary Anoop Ambika said Kerala would have to bear the brunt if the Centre decided to wind up the scheme by March 2011. “Over 200 small and medium enterprises in the state would lose the existing tax benefit that is being reinvested for development of infrastructure and generating fresh employment. Many of these companies will be forced to shut shop”.

Mr.Mathews said the STPI scheme was introduced to promote exports from India. “IT companies made good use of the scheme to improve efficiency, productivity and profits”. He said extending the scheme to Tier 2 and Tier 3 cities alone would help to broadbase development across the country.

Mr.Anoop said the decision to wind up the STPI scheme was driven solely by the compulsion to step up tax revenue. “The Government should realise that 50 per cent of the expenses of a small company are spent on the payroll, a portion of which goes back to the exchequer as taxes”.

Mr.Mathews said winding up the STPI scheme would force companies to move out to Special Economic Zones. This, he observed, would result in poor utilisation of the existing infrastructure.

Smaller companies beginning to make profit will now find themselves having to pay tax. This will affect their capacity for reinvestment.

GTech is seeking the Prime Minister’s intervention to extend the STPI scheme. One of the problems in mobilising industry associations for the cause is that many of the former STPI beneficiaries have grown out of the ambit of the scheme to become major players.

GTech proposes extending the STPI scheme to SMEs so that they continue to benefit from tax incentives.

As STPI tax breaks end, tech SMEs dial SOS- Economic Times article

THIRUVANANTHAPURAM: Those whose ears are close to the multitude of small and medium sector IT companies in the country can already hear a moan, as the date nears for the end to sops under the Software Technology Parks of India (STPI) scheme. That moan is almost becoming a collective sigh as the days are ticking by towards its close in February.

The STPI scheme, launched in 1991, gave a flat 10-year tax exemption on profits to IT/ITES units, and the STPI centers acted as single-window facilitators in providing services to software exporters and incubation infrastructure to SMEs.

IT industry players say that if the finance minister is not convinced about the need to extend the scheme any further, SME tech companies will be in serious trouble. And the biggest noises for an extension of the scheme is coming from Kerala, where more than 80% of tech companies are in the SME sector, and a number of them are new entities who have not got the 10-year benefit. Kerala’s 300-odd tech companies employ roughly 40,000 staff, and over 70% of the companies have less than 100 staff.

“It is going to severely deplete the investible surplus of SMEs. For the bigger IT companies who are out of the STPI scheme, this may not matter, but if the scheme is ended it would be like saying if you are big you are okay, but if you are small, go away”, says VK Mathews, CMD of Technopark-based IBS.

According to Anoop P Ambika, MD of Kreara Solutions based here, “the government need not take it as a black and white issue. Why not let the SMEs continue to benefit from the scheme according to some norms, so that they are not faced with a crippling cash crunch?”, he asks.

The Group of Technology Companies (GTech) in Kerala has suggested that the tax exemption scheme be continued under certain conditions, so that the deserving ones benefit. One suggestion is to extend the STPI scheme for companies operating in tier-2 and tier-3 cities, which will also take India’s IT boom to more locations. Another suggestion is to allow a prescribed time limit for tax exemptions for companies that have established recently, so that they too can avail of the scheme for a longer time like many others have enjoyed.

GTech is planning to take Nasscom’s help in taking up the issue with the PM and finance minister, but officials say that they would be personally pushing the issue before the PM. “Many Nasscom members are too big to be concerned with the ending of the STPI scheme, and it is important that we take an active interest in lobbying for all SMEs in the country”, they said.

A positive decision from the centre, they say, will make a significant contribution to the employment levels and overall economy, considering that the Indian IT sector including BPO, KPO and call centers employ close to 1 million hands. While the top 100 firms may contribute 80% of Indian IT exports, GTech officials point out that the remaining companies account for roughly 65% of the employment.

HCL Infosystems signs agreement for R & D Centre in Technopark

Tvm: HCL Infosystems, India’s premier hardware, services and ICT system integration company today acquired the formal possession of 2 acres of land for setting up a state-of-the-art facility in Technopark, Thiruvananthapuram. The Research and Development Centre will be set up at Technopark Phase III which is coming up near the Technopark campus.
An agreement to lease out the land was signed today by V K Bhal, Corporate General Manager, HCL Infosystems with Mervin Alexander, CEO, Technopark in Trivandrum. The new facility has been planned as per the company’s expansion strategy. The centre will be creating job opportunities for around 1,600 professionals over the course of next 9 years. The facility will involve setting up of regional skill development centre, state-of-the-art data centre facility, networking lab, product development lab, software development centre and remote support centre.
Speaking on this occasion, George Paul, Executive VP, HCL Infosystems said, “We commend the vision of the Government of Kerala to fuel investments in igniting the growth of IT sector in the state and are honoured to have got this opportunity to partner in the state’s growth story. This is yet another chapter in the transformation journey of HCL Infosystems as we add more capacity to build a stronger ICT solutions ecosystem.”
Spread over an area of 2 acres, the proposed facility of over 160,000 Sq ft will be built over three phases. The company already has more than 14 centres in India and would be starting the construction process of the new facility soon.
Dr. Ajay Kumar, Principal Secretary IAS (IT); Sheela Thomas IAS, Principal Secretary to CM; Korath Mathew, Director, Akshaya and Binu Sanker, CEO, GTech were among those present on the occasion.
Anil PhilipKerala IT News

STPI scheme closure will hit State hard: Gtech

Our Bureau
Thiruvananthapuram, Dec.7
The predominant presence of small and medium IT companies in the State will make Kerala the hardest hit if the Software Technology Parks of India (STPI) scheme is allowed to expire in March 2011.
The Group of Technology Companies (Gtech), a strategic grouping of IT companies in the State, is seeking the Prime Minister's urgent intervention in the matter, and save hundreds of small and medium businesses from folding up.
Not convinced
Speaking to newspersons here, Mr V. K. Mathews, President, and Mr Anoop Ambika, Secretary, Gtech, said the closure of the STPI scheme would cause an estimated 85 per cent of the 200-odd small and medium companies in the State to close down.
Since most of the erstwhile STPI beneficiaries have since turned big players and overgrown the flagship scheme, Gtech is finding it difficult to mobilise leading industrial bodies to engage the Union Government on their behalf.
While the Union Ministry of Commerce is convinced that there is indeed a case for extending the STPI scheme, the crucial Ministry of Finance has not taken a view perhaps because of the tax implications from the move.
Extension sought
The Gtech suggested that the scheme be extended for another seven years to the SMEs so that they continue to receive tax incentives.
Explaining why SME companies should be allowed to enjoy STPI benefits, Mr Ambika said as much as 50 per cent of the overheads in IT companies are accounted for by payroll expenses. In the traditional sector, this was around 10 per cent only.
For instance, while the steel industry pays 18.9 per cent of total revenue as taxes, IT industry pays 20.1 per cent as taxes even with the STPI incentives that they receive.
This happens because 50 per cent f the expenses of any IT services company is pay roll expenses and 20-30 per cent of the salaries goes back to the Government in the form of income taxes.
While the top 100 firms would be contributing about 80 per cent of total IT industry output in the country, some 4,500 SMEs, despite their 20 per cent contribution, account for almost 65 per cent of total employment.
The National Association for Software and Service Companies (Nasscom) has increasingly been talking about getting Tier 1 and Tier 2 cities under the STPI umbrella, Mr Mathews said. This should be the way to go in Kerala as well.
Asked if pulling the plug off the STPI facility could mean increased focus on Special Economic Zone-led model of development, Mr Mathews said that inconsistencies in policy thinking fail to inspire confidence in the benefits expected to flow from SEZs.
Withdrawal of the STPI scheme would also throw up the larger issue of leaving the built-up infrastructure to rust, Mr Ambika said.

Kochi to host India ICT Summit 2010

Special Correspondent

Thiruvananthapuram: Over 400 delegates, including politicians, government officials, leaders from the private sector, trade associations and the media, are expected to attend the 2010 edition of the India ICT Summit to be held at Hotel Le Meridien, Kochi, on December 14 and 15.

Organised by the Confederation of Indian Industry, the summit is a high profile ICT event with several eminent national and international industry stalwarts slated to speak in six different sessions. The theme of the event is ‘Changing Role of India – Partnering for Transformation.'

“This is an extremely relevant topic, signifying a major challenge faced by the IT Industry in India today. Kerala, with its large pool of educated youth, should be able to play a major role in the next wave of outsourcing by global enterprises,” said V.K. Mathews, convener, CII Kerala ICT Panel & Chairman India ICT Summit 2010.

The summit will have over 25 eminent personalities and thought leaders from India and abroad discussing topics, including international business opportunities for Indian IT companies post recession, the use of technology to transform global businesses and how the industry should prepare for the second wave of outsourcing.

The event will be inaugurated by V. Narayanasamy, Minister of State, Planning & Parliamentary Affairs. Some of the key speakers included Shashi Tharoor, MP, Andrew Simkin Consul General, U.S., Ajith Singh, Consul General, Singapore, Mike Nithavrianakis Deputy High Commissioner, U.K., Hans Burkhard Sauerteig Consul General, Germany, Dr. P Prabakaran Chief Secretary, Government of Kerala and Kris Gopalakrishnan, CEO, Infosys.

The U.K. is the partner country for the event and the government of Kerala is the partner State.

Details of the event are available on www.indiaitsummit.com.

IT firms look at Europe

T. Nandakumar

GTech team for Nordic region

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Scandinavian countries not wary of outsourcing

IT market in Nordic region worth $10-12 billion: report

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Thiruvananthapuram: Nearly 20 IT companies in Kerala specialising in cyber security, bioinformatics, three dimensional imaging, embedded systems, ERP systems, Web based applications, wireless technologies and solid waste management could soon have business partners in the Nordic region of Europe, thanks to an initiative launched by the Group of Technology Companies (GTech), a strategic grouping of IT/ ITES companies in the State.

Efforts are on to organise a business delegation to work out partnership deals with companies in Sweden, Denmark, Norway and Finland. The team is expected to visit the region sometime in March 2011. The delegation would also hold talks with Nordic government officials and representatives of industry associations.

GTech had zeroed in on the Scandinavian countries primarily because of their outward looking economies that are not wary of the outsourcing model of doing business. The new approach represents a move to tap fresh business opportunities and reduce dependence on the U.S. market.

According to V.K. Mathews, president, GTech, and chairman and CEO, IBS Group, the decision to engage stakeholders in the Nordic region is part of a ‘market connect' strategy aimed at helping domestic companies, especially small and medium enterprises, to touch base with new markets and potential customers.

“Nearly 20 IT companies in Kerala are participating in this initiative. The profiles of these companies with their domain competencies have been forwarded to the government agencies of Denmark and Sweden. They would do the match making in consultation with GTech. We would also hard sell the State of Kerala to potential investors in both Denmark and Sweden,” he said.

A senior delegation of the government investment promotion agencies in the Nordic region had visited Technopark and Infopark recently to hold discussions with the companies and to create a structural framework for deeper engagement.

The agencies involved were Invest in Denmark, Invest in Sweden and Innovation Norway. “We hope to forge some business alliances on the return visit,” Mr. Mathews added.

According to a recent study published by NASSCOM, the IT Services market in the Nordic region is worth $10-12 billion and is growing at a compounded annual growth rate of 5 per cent.

Apart from being open to off-shoring, the other factors that favour the region include high IT adoption, easy acceptance of English and large public spending on IT. Similar to Kerala, SMEs comprise 65 per cent of the industry in the Nordic region.

GTech Delegation to visit Bavaria to explore ventures

Tvm: A delegation from IT Companies in Kerala represented by the Group of Technology Companies (GTech) would soon be visiting Bavaria to explore and enhance cooperation. Kerala and Bavaria also reinforced their economic and trade relations in Trivandrum and reverberated the need to develop stronger and deeper relations especially on the IT front.

These were the highlights of the session on Explore Bavaria: New Business Opportunities organised by GTech in partnership with the Bavarian ministry of Economic Affairs, Infrastructure, Transport and Technology at Technopark, Trivandrum today. A similar session was held at Infopark Kochi yesterday.

Making a presentation, John Kottayil, Executive Director, State of Bavaria - India Office said, “Some 65 Indian companies including TCS, HCL, iGate, Wipro and NeST (from Kerala) have already set up their offices or manufacturing units in Bavaria with an investment of more than USD 900 million. Bavaria, the largest German state, is virtually at the centre of Europe and provides a gateway for Indian businessmen to explore the EU market”. Inviting investors to the 19 manufacturing clusters in the state, all assistances were provided to potential investors. Bavaria is the heart of the hi-tech industry in Germany in the areas such as IT, electronics, aerospace, automobiles, mechanical Engineering and telecommunications.

Anoop P Ambika, Secretary, GTech said that the Kerala with its core strength in the Information Technology sector is well positioned to tap the market opportunities in the state of Bavaria. He also requested the Bavarian Authorities to facilitate partnerships and joint venture projects for the small and medium Enterprises from the state.

Friedrich Rahn, Deputy Consul General of the Federal Republic of Germany in Bangalore and Mervin Alexander, CEO, Technopark also spoke about exploring new opportunities in Bavaria and vice-versa.

Bavaria explores business opportunities from Kerala IT Cos

Kochi: As part of an initiative to help IT Companies in Kerala identify new business opportunities, the Group of Technology Companies (GTech) in partnership with the Bavarian Ministry of Economic Affairs, Infrastructure, Transport and Technology organised a session on ‘Explore Bavaria: New Business Opportunities’ at Infopark Kochi today.

The second session in this series would be organised at Technopark Trivandrum on October 15, 2010. Friedrich Rahn, Deputy Consul General of the Federal Republic of Germany in Bangalore and John Kottayil, Executive Director of Invest in Bavaris, State of Bavaria - India Office are attending these sessions. While Friedrich Rahn gave an overview of the Economic & Business scene in Germany, John Kottayil spoke about the Market Opportunities in Bavaria for IT Companies.

Talking to Kerala IT News, Binu Sankar, CEO, GTech said, “This is an initiative of GTech to promote the Small and Medium IT Companies in Kerala to a larger audience. These sessions would help the companies in Infopark and Technopark in exploring new business opportunities and joint venture projects in Bavaria.

CEO’s and representatives from 25 companies in Infopark attended the session today. “The response to the session today was very good and we had a very interactive session. We expect a similar response at Technopark also”, he added.

Bavaria ranks among the most powerful economies in Europe. Bavaria, with its gross domestic product (GDP) of 445 billion Euros, is ahead of 21 of the 27 member-countries of the EU. Bavaria, the largest state of the Federal Republic of Germany and also the No.1 high tech location in Germany, is the Technology, Engineering and Automobile hub of Europe.