IT Industry in India

Information Technology (IT) industry in India is one of the fastest growing industries. Indian IT industry has built up valuable brand equity for itself in the global markets. IT industry in India comprises of software industry and information technology enabled services (ITES), which also includes business process outsourcing (BPO) industry. India is considered as a pioneer in software development and a favorite destination for IT-enabled services. The origin of IT industry in India can be traced to 1974, when the mainframe manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export programmers for installing system software for a U.S. client. The IT industry originated under unfavorable conditions. Local markets were absent and government policy toward private enterprise was hostile. The industry was begun by Bombay-based conglomerates which entered the business by supplying programmers to global IT firms located overseas. During that time Indian economy was state-controlled and the state remained hostile to the software industry through the 1970s. Import tariffs were high (135% on hardware and 100% on software) and software was not considered an "industry", so that exporters were ineligible for bank finance. Government policy towards IT sector changed when Rajiv Gandhi became Prime Minister in 1984. His New Computer Policy (NCP-1984) consisted of a package of reduced import tariffs on hardware and software (reduced to 60%), recognition of software exports as a "delicensed industry", i.e., henceforth eligible for bank finance and freed from license-permit raj, permission for foreign firms to set up wholly-owned, export-dedicated units and a project to set up a chain of software parks that would offer infrastructure at below-market costs. These policies laid the foundation for the development of a world-class IT industry in India.

Today, Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys, HCL et al are renowned in the global market for their IT prowess. Some of the major factors which played a key role in India's emergence as key global IT player are:

Indian Education System

The Indian education system places strong emphasis on mathematics and science, resulting in a

large number of science and engineering graduates. Mastery over quantitative concepts coupled with English proficiency has resulted in a skill set that has enabled India to reap the benefits of the current international demand for IT.

High Quality Human Resource

Indian programmers are known for their strong technical and analytical skills and their willingness to accommodate clients. India also has one of the largest pools of English-speaking professionals.

Competitive Costs
The cost of software development and other services in India is very competitive as compared to the West.

Infrastructure Scenario
Indian IT industry has also gained immensely from the availability of a robust infrastructure (telecom, power and roads) in the country. In the last few years Indian IT industry has seen tremendous growth. Destinations such as Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several IT parks have come up at Bangalore, Hyderabad, Chennai, Pune, Gurgaon etc.

These parks offer Silicon Valley type infrastructure. In the light of all the factors that have added to the strength of Indian IT industry, it seems that Indian success story is all set to continue.

Progress of IT Industry
According to the NASSCOM- McKinsey report on the IT industry of India, the projected revenue of the IT industry of India for the year 2008 is 87 billion US Dollars. The projected exports or the year 2008, accord to this report, is 50 billion US Dollars Some of the important aspects of the NASSCOM- McKinsey report related to the size of India's IT industry are

There is potential of 3.2 million people being employed in the IT industry of India by the end of 2012. Contribution of software and services to the total GDP of India will be more than 7.5%. FDI (Foreign Direct Investment) of 10.5 billion US Dollars expected in the IT industry by the end of 2011.

45% of total exports from India will be from IT exports. 225 billion US Dollars worth of market capitalization from IT shares. Softwares and services are exported to bout 195 companies from India. North America accounts for 61% of the software exports from India.

Adoption of new liberal policies in India has given birth immense opportunities to its industries. Success story of India's Software Industry is a step in the same

direction.The Software Industry, which is a main component of the Information technology, has brought tremendous success for the emerging economy. India's young aged manpower is

the key behind this success story. Presently there are more than 500 software firms in the country.

Worldwide IT Spending to Grow 5.3 Percent in 2010

Worldwide IT Spending Forecast (Billions of U.S. Dollars) 2009 2009 2010 2010

Spending Growth (%) Spending Growth (%) Computing Hardware 333 Software IT Services Telecom All IT 221 777 1,892 3,223 -12.5 -2.1 -4.0 -3.4 -4.5 353 232 821 1,988 3,394 5.7 5.1 5.7 5.1 5.3

Worldwide software spending is expected to total $232 billion in 2010, a 5.1 percent increase from last year. Gartner analysts said the impact of the recession on the software industry was tempered and not as dramatic as other IT markets. In 2010, the majority of enterprise software markets will see positive growth. The infrastructure market, which includes all the software to build, run and manage an enterprise, is the largest segment in terms of revenue and the fastest-growing through the 2014. The hottest software segments through 2014 include virtualization, security, data integration/data quality and business intelligence. The applications market, which includes personal productivity and packaged enterprise applications, has some of the fastest-growth segments. Web conferencing, team collaboration and enterprise content management are forecast to have doubledigit compound annual growth rates (CAGR), in the face of growing competition surrounding social networking and content. The worldwide IT services industry is forecast to have spending reach $821 billion in 2010, up 5.7 percent from 2009. The industry experienced some growth in reported outsourcing revenue at the close of 2009, an encouraging sign for service providers, which Gartner analysts believe will

spread to consulting and system integration in 2010. India's IT industry caters to both domestic and export markets. Exports contribute around 75% of the total revenue of the IT industry in India. The IT industry can be broadly divided into four segments
Hardware Software ITES-BPO IT-services

The industry is in an expansion mode right now, with dozens of new offshore IT services vendors emerging everyday, the industry has a high probability of being subjected to the 80:20 rule in not too distant a future. In perhaps another ten years, 80 percent of all outsourced offshore development work will be done by 20 percent of all vendors, a small number of high quality, trusted vendors. Only a few select countries and only the most professional companies in those countries will emerge as winners. India will definitely be the country of choice for offshore software development. India is among the three countries that have built supercomputers on their own. The other two are USA and Japan. India is among six countries that launch satellites and do so even for Germany and Belgium. India's INSAT is among the world's largest domestic satellite communication systems. India has the third largest telecommunications network among the emerging economies, and it is among the top ten networks of the world.

The IT industry of India got a major boost from the liberalization of the Indian economy. India's software exports have grown at an annual average rate of more than 50% since 1991. The structure of the IT industry is quite different from other industries in the Indian economy. The IT industry of India is hugely dependant on skilled manpower. Primarily a knowledge based industry, the IT industry of India has reordered significant success due to the huge availability of skilled personnel in India.industry structure in the IT sector has four major categories. These are

IT services IT enabled services

 Software products Hardware

IT services IT services constitute a major part of the IT industry of India. IT services include client, server and web based services. Opportunities in the IT services sector exist in the areas of consulting services, management services, internet services and application maintenance. The major users of IT services are

Government Banking Financial services Retail and distribution Manufacturing The services which make extensive use of information and telecommunication technologies are categorized as IT enabled services. Some of the important services covered by the ITES sector in India are Customer-interaction services including call-centers Back-office services Revenue accounting Data entry and data conversion HR services Transcription and translation services Content development and animation Remote education, Data search GIS Market research Network consultancy

Software products
Software products are among the most highly exported products from India. The software industry in India originated in the 1970s and grew at a significant pace in the last ten years. Between 1996-1997 and 2002-2003, the Indian software industry grew more than five times from 2630 crores to 13200 crores. During the same period software and service exports from India grew by almost twelve times.

Hardware
The hardware sector of the It industry focuses on the manufacturing and assembling of computer hardware. The consumption of computer hardware is high in the domestic market. Due to the rise in the number of IT companies, sales of desktops, laptops, servers, routers, etc have been on the rise in recent years. Many domestic and multi-national; companies have invested in the computer

hardware market in India. Another categorization in the structure of India's IT industry is related to the market. There are two major market classifications - the domestic market and the export market. The export market, dominates the IT industry accounting for 75% of the revenue. The size of India's IT industry has grown significantly over the years. The size of this sunshine industry of India grew from 150 million US Dollars to 50 billion US Dollars between 1990-1991 and 2006-2007. The growth of the IT industry has been very high in the last few years. The size of the Information Technology industry of India was 5.7 billion US Dollars in 1999-2000. After the turn of the century the industry experienced exponential growth to reach the 50 billion mark by 2006-2007.

Challenges before Indian IT Industry

At present there are a number of challenges that are facing the information technology industry of India. One of the major challenges for the Indian information technology industry was to keep maintaining its excellent performance standards. The experts are however of the opinion that there are certain things that need to be done in order to make sure that India can maintain its status as one of the leading information technology destinations of the world. The first step that needs to be taken is to create an environment for innovation that could be carried for a long time. The innovation needs to be done in three areas that are connected to the information technology industry of India such as business models, ecosystems and knowledge. The information

technology sector of India also has to spread the range of its activities and also look at the opportunities in other countries. The improvement however, also needs to be qualitative rather than just being quantitative. The skill level of the information technology professionals is one area that needs improvement and presents a considerable amount of challenge before the Indian information technology industry. The Indian information technology industry also needs to co-ordinate with the academic circles as well as other industries in India for better performance and improved productivity. The experts are of the opinion that the business process outsourcing service providers in India need to change their operations to a way that is more oriented to the knowledge process outsourcing. One of the most important crises facing the Indian information technology industry concerns the human resources aspect. The problems with outsourcing in countries like the United States of America are posing problems for the Indian information technology industry as well.