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Technology Industry in India
BACKGROUND: India is the World's back office and in the past many European and North American firms have off shored their back office functions like call centers, accounting, credit card hotlines, insurance record keeping, etc. to primarily South India to the areas around Bangalore and Hyderbad. This sector which is now called business process outsourcing (BPO) is a field in which India leads the world. As China is to manufacturing, India is to BPO. From the early days in building and supporting call centers, India has subsequently moved up the services sector outsourcing feeding chain and is now providing much more advanced service functions like computer software, medical reading of x-rays and many other higher level functions. India's services offshoring sector is the world's largest and fastest growing. It is dominated by IT services, which play a major role in the country's overall economic growth. The IT industry in India is rapidly growing and offers good opportunities for foreign investment. The export of IT and ITeS amount to USD 17.9 billion/year and are growing at 35 percent per year. India’s $23.4 billion outsourcing industry accounts for most of the country’s software and services industry, which makes up nearly 5 percent of gross domestic product. The industry employs 1.2 million workers and is accelerating at more than 30 percent a year. India produces three million college graduates every year, including nearly 400,000 engineers and because of this is one of the best sites to look at for outsourcing computer software and engineering services. India has other attractive qualities beyond low-wage professionals for companies that want to offshore their operations. In 15 years of offshoring, the country has developed a stable of world-class IT services vendors that can save foreign companies the trouble of setting up their own offshore centers. And it has a large supply of qualified talent in areas outside IT, such as R&D, finance and accounting, call centers, and back-office administration. IT Outsourcing Challenges: In early 2006 experts at the annual meeting of Nasscom, India’s outsourcing group, reported India’s outsourcing industry is facing a labor shortage - India’s leadership in global outsourcing may be in jeopardy unless it increases its supply of skilled workers. The supply shortfall is even more acute in mid-level jobs, like software engineers. Research by the McKinsey Global Institute (MGI) shows that India's vast supply of graduates is smaller than it seems once their suitability for employment by multinational companies is considered and local constraints on the supply of talent already exist. For example, in the most popular offshoring locations, such as Bangalore, rising wages and high turnover among engineers, the professionals most in demand for IT services are making India oftentimes a higher price location than Vietnam or Bangladesh and other lower cost labor locations. Even though India is producing many college graduates and engineers every year, most of these people are not suitable for immediate employment with western firms. Most of these students must be put through a “polishing process” of six months or more to improve training, emphasize work environment applications, corporate values, etc. In a country of 1.1 billion people, raw talent is plentiful but not all of it is market-ready. Salaries for software engineers are rising at an average 20% a year, and in some other segments even 50 percent annually, compared with 5 percent annual raises for software engineers in the U.S., China, Vietnam, Thailand and other locations. For India to continue the rapid paced development it has shown over the last three years, India must not only produce more top-quality engineers but also show the world the depth and quality of its talent in other fields plus also demonstrate that this talent can be found in cities beyond Bangalore and Mumbai to better smooth the development process. Private-sector investment, such as modern offices, apartments, and shopping malls in offshoring centers has not been matched by public investment in airports, roads, and utilities. Infrastructure improvements are necessary to enable the millions of people attracted to these locations to live and work more efficiently. In general, the Indian government, both national and local, realizes these challenges and is investing in infrastructure. The problem is that democracies cannot move as quickly as totalitarian states such as China in mandating new infrastructure. India is at least a decade behind China in the coastal regions in terms of infrastructure. Modern areas near New Delhi are being created and in general infrastructure in the north is better than in most areas of the South at this point, but much remains to be done. |
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