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1. A brief History
The Information Technology Industry of India dates back to 1967 when the Tata Group in
collaboration with Burroughs set up the first software zone, SEEPZ in Mumbai. In 1973
SEEPZ became the first software export zone which saw 80% of the software export in
the 1980s. Since then, the IT sector of India has grown by leaps and bounds and has
acquired India a brand name in the IT and ITES (Information Technology Enabled
Services) sector in the global scenario. The major hubs for the IT export sector are
Bangalore, Chennai, Hyderabad, Delhi, Mumbai and Kolkata. Bangalore has earned the
sobriquet, The Silicon Valley of India owing to the maximum IT export (generating 77%
of the net IT export revenue of India). The IT- ITES sector can be broadly classified into
two categories (i) Business Process Outsourcing (BPO) and (ii) Domestic and IT export.
The growth in the BPO sector under the supervision of the IT-ITES sector has been
phenomenal. According to NASSCOM, The IT-BPO sector in India aggregated revenue
of US$ 100 billion in FY 2012, where export and domestic revenue stood at US$ 69.1
billion and US $31.7 billion respectively.The industry is also an employment intensive
sector. The estimated employment generation in the FY 2012 was an expected 230,000
thus providing direct employment to 2.8 million and indirect employment 88.9 million
people all over the country. According to a report prepared by Gartner, the top five
outsourcing companies of India are TCS, Cognizant, Infosys, Wipro and HCL
Technologies.
2. Current statistics
Market size of IT industry in India
India's technology and BPM sector (including hardware) is estimated to have generated US$
108 billion in revenue during FY13.
Market
Policies,
Mergers
&
Inter-organizational
Economic factors
Technology
Resources
Institutional Capacity
development
Higher education and Training centres, Rise
of
new
entrepreneurs,
Government
initiatives,
Supportive
Quality
Certifications
4. Government Regulations
Cloud computing is one of the thrust areas in the national IT and ITeS policy.
In order to benefit from cloud, the Department of Electronics and IT (DeitY) has taken an
ambitious project known as GI Cloud. The GI Cloud is the Indian governments initiative
to enable the government (both Centre and States) to leverage cloud computing for effective
delivery of eServices.
The Government of India has extended tax holidays to the IT sector for software technology
parks of India (STPI) and special economic zones (SEZs). Further, the country is providing
procedural ease and single window clearance for setting up facilities.
In the twelfth Five Year Plan (2012-17), the Department of Information Technology proposes
to strengthen and extend the existing core infrastructure projects to provide more horizontal
connectivity, build redundancy connectivity, undertake energy audits of State Data Centres
(SDCs) etc. The core infrastructure including fibre optic based connectivity will be leveraged
and additional 150,000 Common Service Centres (CSCs) will be setup to create the right
Governance and service delivery ecosystem at the Panchayats.
5. Lead players in the industry
The top five IT companies of India had a golden time during 2012 when the collective
revenue growth of these companies was 13.3% (6 times faster than the global market).
However, not all the top five companies are on the same page as Cognizant overtook Infosys
(2nd ranking supplier of the industry). Cognizants revenue growth of 20% as compared to
Infosyss 6% compelled the latter to break the retirement of Narayan Murthi (founder of
Infosys and former CEO) to envisage some strategic moves to stay at par in the competition.
According to Sid Pai, partner and president of outsourcing advisory, ISGs Asia Pacific
Division, The Indian firms are going to need to mimic the global firms. And that of course
means a margin dilution, so there is a rough patch ahead for these guys. This in short means
that these companies have to entirely revamp their existing model of service providing,
change the old model of charging for services. Besides a fundamental change has come over
the customers interested in buying IT services and a local proximity to the customers is
essential.
6. Challenges faced by the IT sector in India
The IT sector of India needs to discard its old model of service providing and
operations. The old model popularly known as the ADM (Application, Development
and Maintenance) is obsolete. It is imperative that the IT sector resorts to the new
Economic factors:
Stage of business cycle: IT industry is in growth phase and this can seen through
Socio-cultural Factors:
The social factors affecting IT industry ranges from employee right, language barriers,
since there is great availability of both skilled and unskilled labour force.
Immense intellectual capital
Potential employment opportunity for women in this organized sector.
EDUCATION: Large number of universities and institutes.
LABOUR: Indian labour is not only cheap but is technically skilled too.
CAREER: In the year 2006-07, the industry hired approximately 3, 80,000 people.
Out of these, the ITeS sector hired 2, 00,000 people and the rest were taken by IT
sector.
Technological Factors:
Gartner, Inc.
New Inventions and Development:
National optical fiber network (NOFN)
National Knowledge Network
ADHAR (Unique Identification Authority of India) eSeva
Proposed global learning centre of the TCS.
(Changes in) Internet:
Indian Internet Companies with Innovative business model such as Naukri.com,
for conventional
IT services: Application
Development
&
Bargaining Power of Suppliers: The bargaining power for suppliers is very low
and since high-standardization exists, there is little scope of suppliers having any
clout. The suppliers consists of IT Infrastructure providers (Servers, computers
This has been a mixed bag for newer services as well since internal specialization is very
low, most of the work is outsourced. For critical areas, governance has been retained inhouse and this trend seems to have found favour with most large enterprises worldwide.
Broadly speaking the market for conventional services is highly commoditised with
potential for differentiation concentrated around niche expertise in new technologies and
trends (SMAC + Internet of Things) and around non-conventional engagements
(revenue/profit share, risk-reward models). It is unlikely that the market for conventional
services will vanish overnight but the future promises to hold a highly modified view.
Application development is fast morphing into app-development and a large part of
revenues continue to be drawn from conventional services as the need to adapt and
incorporate new technologies and engagement models looms over an IT industry that
needs to reform and re-invent itself rapidly.