The Hindu Business Line : The ever-growing impact of IT

THE RAPID growth of ITES-BPO (Information Technology-Enabled Services-Business Process Outsourcing) and the IT industry as a whole is having a deep impact on the socio-economic dynamics of India.

The sector has become the biggest employment generator with the number of jobs added almost doubling every year, and in the bargain has spawned a number of ancillary businesses, such as transportation, real-estate and catering. It has almost single-handedly led to the emergence of a growing class of young consumers with large disposable incomes.

Some of the lesser observed impacts of the IT revolution include the steady reversal of the brain drain, the evolution of e-governance, and the potential it holds for narrowing the digital divide between urban and rural India.

Overview

India has become one of the most favoured destinations for outsourcing and ITES, and is estimated to have achieved an export value of $12.8 billion in 2003-04. India ranks high in several critical parameters including level of government support, quality of the human resource pool, English language skills, cost advantages, project management skills and overall quality control. Additionally, a favourable time zone difference, vis-à-vis North America and Europe, helps organisations achieve 24x7 internal operations and customer service.

Key advantages

Availability of a large pool of high-quality, and cost-effective skilled professionals.

The median age of software professionals is 28.9 years.

Professionals in a variety of areas including software analysts, domain specialists, integration specialists, database administrators, network and information security specialists and communication engineers, data warehousing and semiconductor design engineers.

Sharp process and quality focus — a large number of companies have received SEI-CMM Level 5 certifications.

Strong customer relationships.

Friendly government policies for IT-exports

The impact of connectivity

Communication has paved the way for business opportunities, such as BPO and network management services, as well as new technologies and applications, such as mobile phones and the Internet.

Technology has bridged the gap between the East and West. Filing an FIR (First information Report) online, a call centre for distressed farmers or a medical practitioner prescribing a drug online — IT has made all this happen.

Information and Communication Technology (ICT) presents a whole range of applications for developing countries.

Online

Ticket booking facility at the Indian Railways.

ICT applications in the eSeva, the e-governance project in Andhra Pradesh.

Student counselling.

The e-choupal information services for farmers.

Telemedicine at Apollo Hospitals for facilitating delivery of quality healthcare to people in the remote areas.

Domestic market

Following a relatively weak performance over FY 2001-02 and a marginal recovery in FY 2002-03, the domestic segment of the IT-ITES industry witnessed a rebound in the last fiscal, growing at an annual rate of 30 per cent. Key drivers of growth include banking and telecom sectors, and government verticals. While exports slowed down a bit, the fiscal 2003-04 was the `year of the domestic market' as growth shot up from 9 per cent to 24 per cent.

The IT industry grew 24 per cent (Rs 92,924 crore) in 2003-04 and the domestic market (Rs 33,374 crore) and exports (Rs 59,550 crore) shared the same growth of 24 per cent. To achieve that, exports growth dropped 2 percentage points, while domestic growth jumped an impressive 15 per cent points.

While 2002-03 was the year of recovery, 2003-04 was clearly one of growth in terms of numbers as well as confidence and opportunity.

NASSCOM analysis: IT industry

The IT-ITES industry's contribution to gross domestic product (GDP) has increased from approximately 1.4 per cent in 1998-99 to 3.5 per cent in 2003-04.

The industry includes hardware, peripherals, networking, training, domestic and export market for IT services and software, and ITES-BPO.

The industry registered a growth of 34 per cent in FY 2003-04 earning revenues of $21.5 billion.

IT services and software exports registered a growth of 33 per cent in FY 2003-04 earning $12.8 billion. They are likely to witness 35 per cent growth to reach revenues of $17.3 billion in FY 2004-05.

The IT services and software industry is likely to grow to $22.2 billion, with domestic market revenues of $4.9 billion in FY 2004-05.

Contribution of IT services and services exports to total invisible receipts has been on the rise, indicating the strength of the software sector as the driver of overall foreign exchange reserves.

Technology offshore outsourcing

Technology offshore outsourcing is not just about cost-savings. It is about looking for the best qualified personnel with the minimum cost.

To multinationals, outsourcing is a way of delegating routine functions so as to focus on core areas and help raise the bottomline. Increasingly, outsourcing overseas is no longer a tactical option that can save a few dollars but a strategic necessity for any company that cares about its long-term competitiveness.

Indians do not have to get to the US or the UK to earn the few dollars. The multinationals are directly absorbing students from campuses in India.

(The author is Senior Manager, Business Development Techpoint Solutions India Ltd., Hyderabad.)

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