Home India 2009 India’s IT revolution

India’s IT revolution

by david.nunes
Author's PictureIssue:India 2009
Article no.:2
Topic:India’s IT revolution
Author:Rajesh Chharia
Organisation:Internet Service Providers Association of India
PDF size:330KB

About author

Rajesh Chharia is the President of the Internet Service Providers Association of India. He is the founder of M/s CJ Online Pvt. Ltd, the first operational private ISP with a fully digital platform in Ghaziabad; it caters to large educational institutions, corporations, software developers, call centres and business process outsourcers. Mr Chharia began his career in his family’s business which manufactures packaging materials where he served many years as CEO. Mr Chharia is a Member of the Regional Advisory Committee of Central Excise & Service Tax under India’s Ministry of Finance. He has also played a major role in the creation of the National Internet Exchange of India (NIXI) and is presently one of its directors. Mr Chharia is also a founder of Renovau Telecom, which develops and deploys carrier grade multi-play switching systems. Rajesh Chharia is a Postgraduate in Commerce having completed a Bachelor’s degree at Delhi University and his Masters Degree at Meerut University in Commerce with Honours.

Article abstract

The Indian IT industry has become globally competitive primarily because of the liberalization of the telecommunications sector, the intensive development of its ITC infrastructure, government support and the resultant sharp fall, almost 85 per cent in the last decade, in telecom prices. The Indian Institutes of Technology (IIT) produce the skilled English-speaking graduates that drive the BPO/KPO phenomenon. Companies worldwide look to India for rapid, high-quality and low price services. The sector’s financial success has strongly stimulated the country’s economy.

Full Article

“The veil has been lifted, now the world knows that India is more than just outsourcing.” India’s successful software model is a good reflection of the skills available in the country. IT, a sector that is now considered an important engine of growth in the Indian economy, has changed India’s growth story. In the last five years we have seen a sea change in IT and telecoms infrastructure. The Indian IT industry has really come of age in the past five years, primarily because of the liberalization of the telecommunications sector and the resultant sharp fall in prices. The drop of almost 85 per cent in the price of telecom services between 1998 and 2008 acted as a “catalyst to growth in external demand for IT and IT enabled services”. The world’s companies beat a path to India for work that meets the three magic criteria of speed, quality and price. The industry’s headline-grabbing financial success has flowed through to thousands of staff, shareholders and investors. The Indian IT industry initially won customers, through outsourcing, because of its low costs, but the customers stayed in India because we consistently deliver ‘better than the best’ quality in the world. There has been steady development in the IT sector over the past decade when Indian players perceived new growth opportunities in terms of technology development and innovative delivery models on par with international standards. Consequently, there has been remarkable growth in new service lines – particularly in IT-enabled services (ITeS) and research and development (R&D) services. Although India lags in primary education, it puts a heavy emphasis on higher education, particularly in its Indian Institutes of Technology (IIT). This leads to the availability of a large number of highly skilled English-speaking graduates who can take advantage of IT opportunities. The Indian information technology sector faced mounting competition from other rivals such as the Philippines, which also had good infrastructure and good English skills – but Indian firms expanded rapidly into both emerging and established markets. India has already made its mark in the global ITES-BPO sector. There is still work to do building India’s physical infrastructure, but India’s business process outsourcing (BPO) success would not have been possible without the great advances already made in the country’s IT infrastructure. These developments are driving fundamental changes in the global IT services scenario. Vendors and customers are redefining the levels of value creation in the industry. India’s success in the past two years India’s software industry is geared to and in tune with our resource endowments. There are many people who work for a fraction of the value they add in dollar markets. They provide services that other countries cannot offer because they lack either the skilled human resources, the engineering education base, the English-speaking workers, the low costs or a combination of these. According to a Nasscom -McKinsey report, the IT industry will grow at a 28 per cent CAGR (compound annual growth rate) to reach US$60 billion in export revenues by 2010. Industry experts project the sector will need approximately 80 million square feet of additional working space over the next five years. The IT/ITES industry will continue its strong growth due to the country’s cost advantages, large English speaking, well educated, workforce and favourable governmental policies that provide a host of fiscal and other incentives to the services sector. Apart from outsourcing, India has benefited from infrastructure development, a primary cause of IT development. Today, India has more than 320 million telephone lines (fixed and mobile). More than ten million new telephones are added each month and broadband connections should easily achieve the target of 20 million by 2010. Undersea cables serve both the east and the west sides of the Indian subcontinent. On the west side, cables land from the Atlantic and cables from the Pacific land on the eastern coast. If the cables from one side are cut, India can still remain connected to the world from the other side; as a result, India is an extremely reliable location for an IT hub. India is now the world’s largest outsourcing provider. It also has the fastest infrastructure development, the largest user base, the highest usage of telecom and the lowest rates. India is now beginning to excel in the development of value added IT services and is among the first in the world in the rollout of Next Generation network services. Public switched video telephone, surveillance, interactive multicasting, rural health services, education and entertainment and other video services are possible because of the growth of India’s advanced high capacity local access class 5 switching infrastructure . India has become such a high lucrative IT market that almost all major telecom equipment vendors and service providers are present in India. In spite of the global meltdown, the Indian IT industry is still on its development path. Even after recession in some of the leading developed economies of the world, the Indian IT Sector has overcome the odds by diversifying its geographic market exposure and by continuing to expand its service portfolio. There has been a steady growth in scale both by Indian service providers and by multinational corporations (MNCs) operating in India. While many of the challenges faced by the sector persist, and are likely to remain in the foreseeable future, Indian IT-BPO’s demonstrated ability to overcome them and continue on its strong growth trajectory reinforces the conviction in its fundamentally strong and sustainable value proposition. India continues to be the nerve-centre for global outsourcing with over two thirds of the Fortune 500 and a majority of the Global 2000 firms leveraging global service delivery now outsourcing from India. Positive market indicators and a strong track record strongly support the optimism of the industry in achieving it target of US$ 60 billion in software and services exports and US$73-75 billion in overall software and services revenues, by 2009-2010*. There has been remarkable growth in the IT and ITES sector of India, with the export revenue growth 28 per cent greater in 2007-08 than in 2006-07. The following advantages mark India’s position in the global IT and BPO industries: a. India’s abundant talent, due to its emphasis on higher education, accounts for around 28 per cent of IT and BPO talent among 28 low-cost countries; b. India’s rapidly growing urban communications infrastructure has fostered the development of IT centres in the country; c. A focus on operational excellence that has delivered cost and quality leadership in offshore service centres; d. A conducive business environment that includes a number of favourable government policies and interventions; and e. Continuous robust growth in the domestic IT sector that provides the enabling infrastructure and develops a broad-based skill base. Graph 2 shows that Indian software and services exports including ITeS-BPO, but excluding hardware, is estimated at US$40.3 billion in 2007-08, as compared to US$31.3 billion in 2006-07, an increase of around 28 per cent. This segment will continue to show robust growth in the future. High offshore delivery and superior execution in multi-location delivery continue to be key differentiators. The broad-based industry structure – IT led by large Indian firms and BPO by a mix of Indian and MNC third-party providers, reflects the depth of the supply-base. In India’s ICT sector, where large players continue to grow, many small and medium enterprises are working hard to stand out. India is the preferred destination for IT-BPO, as it offers a unique amalgamation of attributes. Between 2001 and 2006, India’s share in global sourcing is estimated to have grown from 62 per cent to 65 per cent for IT and 39 per cent to 45 per cent for BPO*. The BPO sector continues to grow strongly and steadily, while India’s KPO (knowledge process outsourcing) growth is starting to accelerate. India is beginning to cater to global KPO needs and its high end processes like valuation research, investment research, patent filing, legal and insurance claims processing, online teaching, media content supply, among others. India’s very highly skilled manpower – including chartered accountants, doctors, MBAs, lawyers, etc. gives the country important advantages in the KPO market. This combined with multilingual capabilities and low costs are helping India emerge as a global winner in the KPO sector The transition from BPO to KPO for the Indian IT sector will not be a difficult task, as the ITeS companies are already well established. Growth of Indian GDP due to IT/ITeS sector The phenomenal growth of the Indian IT software, IT services, and ITeS-BPO sectors has had an immense multiplier effect on national income and employment generation; it has also fostered the proliferation of several ancillary industries. Significantly, IT-ITeS exports from India grew rapidly from US$ 7.7 billion in FY 2002 to US$31.3 billion in FY 2007. Source: NASSCOM The success of Indian IT has highlighted India’s attractiveness as an investment destination. Another important effect of the global sourcing model popularized by the growth of IT-ITeS has been the reversal of the brain drain; Indian citizens, who in the past constrained to go abroad to pursue their careers, as well as young expatriates, now feel motivated to work in India itself.

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