Nasscom stops forecasting industry growth as it makes a philosophical shift
Nasscom’s annual growth projection had become increasingly controversial over the past two years. Tata Consultancy Services said the metric was not relevant to them and several firms had questioned the reason for its continued existence.
The National Association of Software and Services Companies (Nasscom) will stop forecasting the industry’s growth as it makes a ‘philosophical’ shift towards new metrics to estimate future performance.
Nasscom’s annual growth projection had become increasingly controversial over the past two years. Tata Consultancy Services said the metric was not relevant to India’s largest IT services company and several firms had questioned the reason for its continued existence.
“The guidance was taken from an IT-BPM services standpoint. We are trying to change the perception of who we as Nasscom represent and what that guidance represents,” said Rishad Premji, chairman of Nasscom and chief strategy officer at Wipro.
He reiterated that scrapping the target was not related to concerns over growth even as the industry lobby said it was ‘cautiously optimistic’ about FY20 in the face of uncertainties around Brexit, trade wars and weakening financial market sentiment.
“We are not sharing the guidance because it is a good or bad year – it is a philosophical shift,” Premji added.
Nasscom said there would be a more than 9.2% growth in IT services exports in FY19, outstripping its projection of 7-9% growth in constant currency for the year. Analysts at stock broking company Nirmal Bang had forecast growth of 7-9% at best, predicting that macroeconomic uncertainty would hurt prospects. The domestic market is expected to expand 7.9% in constant currency.
Nasscom president Debjani Ghosh said the process is being changed when the industry was performing well. She said Nasscom would continue to put out figures at the end of the year so that there would be a way to measure growth.
“We’re only scrapping the guidance,” Ghosh told ET.
The industry body said it was looking at new metrics, especially around the area of digital technologies.
“We are halfway through the process of working towards digital metrics. It is a question of understanding what companies are doing and then finding a way to standardise this and getting companies to adopt a standardised process,” Ghosh said.
Analysts said it’s logical for Nasscom to not give revenue guidance.
“So, there are a lot of reasons for Nasscom to not have a guidance. A lot of services (are being) delivered by companies (which) are not classically defined IT services (work). There are macroeconomic factors which are playing out,” said Akhilesh Tuteja, partner, technology, at KPMG.
He explained that a shift in the operating model of technology companies has changed the way growth is measured.
“In the past, you could simply have an FTE (full time employee)-based revenue to predict. None of that is relevant as today more than a third of the revenue of IT companies comes from non-FTE-based revenue.”