In April, Ganesh Natarajan, deputy chairman & managing director of Zensar, was elected chairman of software body Nasscom for the financial year 2008-09. His appointment came at a time when the fortunes of the IT industry were dipping; the rupee was violently fluctuating against the dollar; and the US sub-prime crisis was looming large. Moreover, analysts were predicting a dip in IT and banking, financial and insurance services spends which could impact outsourcing in a major way. In an interview with Leslie D'Monte, the Nasscom chairman put matters in perspective. Excerpts:

Given the slowdown in the US economy and the sub-prime crisis, is Nasscom still bullish on the future of this sector?

Very much. The addressable market, as Nasscom figures reveal, is huge. And it is in times such as these that foreign companies outsource more work. That said, we agree that companies come to India for cost advantages. They stay for quality, but we can retain them only if we innovate.

This is precisely what Indian IT firms are doing. For instance, almost 40 per cent of the work done by Indian IT firms today is based on templates. This helps in the reuse of assets, codes, etc.  Indian IT firms are also hiring younger people, and utilisation is being pushed upwards.

But there are more hurdles to be overcome. For instance, the extension of the STPI scheme...

True. The cost of doing business is increasing in India. Other governments offer more tax incentives which may compel IT firms to move a significant part of their business to other low-cost and friendly countries.

We continue to believe that extension of Software Technology Parks of India (STPI) benefits will help the industry, especially smaller players. On an average, the sector's profits will dip by around 3 per cent if the scheme is not continued, and that can be disastrous for small companies.

We have suggested alternatives like turnover cut-offs for the scheme, and virtual (benefits without physical boundaries) special economic zones (SEZs) since not more than 15 per cent of companies have moved part of their businesses to SEZs.

Nasscom has often highlighted the `unemployability' of today's workforce. Will the steps taken by you suffice?

Our educational apparatus has failed to deliver what the industry needs. For a solution, the German model is a good one. Germany has introduced a dual system of vocational education, a process that we have much to learn from.

The US is also getting strict about H1-B visas...

We spent seven days at Capitol Hill, and met all the senators concerned. We impressed upon them the fact that while the H1-B numbers look huge, the visas acquired by Indian IT firms comprise only 10 per  cent of the total number. Of course, there's no general consensus but it appears the comprehensive Immigration Bill will pass muster. However, it's aimed more at illegal immigrants .

What about the demand for separating the BPO sector from the IT industry?