RIYADH, 15 August 2004 — India is considered the IT powerhouse of the globe. This is emphasized by the fact that 220 of the Fortune 500 companies outsource their software from India. Add to this the fact that 80 Indian firms meet the world’s 117 SEI CMM Level-5 quality standard the beeline for IT and IT related work to India is no surprise.
Software and services exports reached $12.2 billion in 2003-04 increasing by 30.5 percent from $9.6 billion in 2002-03. The exports in 2004-05 are expected to increase by 30 percent reaching $ 16.3 billion. India’s IT and IT-enabled services exports go to 133 countries. Indian IT companies train people in 55 countries. NIIT and APTECH have 200 training centers in China.
It is also home to the largest pool of IT manpower in the world. It is estimated that there are 150,000 IT professionals in Bangalore as against 120,000 in Silicon Valley. India’s IT market reached a turn over of $12 billion in 2003. The Indian IT sector employs 650,000 people and this is likely to reach two million by 2014. IT companies are expected to account for 8-10 percent of GDP by 2008 from 1.4 percent in 2001.
The top five Indian companies account for 32 percent of total software exports. Turnover of the top three companies namely Tata Consultancies, Infosys and WIPRO, are over $1 billion each. There were 70 companies with exports of over $20 million in 2002-3. India continued to expand its presence in two of the 10 major IT services lines. Custom application development and maintenance and applications outsourcing accounted for nearly 88 percent of total software exports in 2003-04. During 2002-03, the financial services sector accounted for the largest share of Indian software and services exports. IT spending by US banks is expected to touch $60 billion by 2007.
During the last decade, the country has emerged as the “services hub of the world”; drawing multinational organizations to either set up captive operations or outsources processes to third party service providers. While until now, the Indian software and services sector has been focusing on the IT services opportunity, over the past few years, it has been the ITES segment that has shown the highest momentum of future promise.
India’s value proposition is based on its low cost-high quality model, which gives it an edge over other emerging ITES-BPO destinations.
In addition, a high quality, pool of knowledge workers who have English speaking and relevant domain skills give India an edge over other offshore outsourcing locations. There are 2.46 million graduates, produced by about 253 universities and 13,150 colleges. This graduate base includes engineering degree holders, engineering diploma holders, and students from the arts, commerce and science disciplines.
Business analysts the world over have declared the ITES-BPO market to be one of the fastest growing segments within the IT industry. The global ITES/IT services market has grown from $1,184 billion in 2002 to $1,322 billion in 2003 and is expected to achieve a turnover of around $2,497 by 2008-09 and $3,3991 billion by 2012.
NASSCOM has identified IT Enabled Services (ITES) and Business Process Outsourcing (BPO) segment as the major opportunity areas with financial services and healthcare expected to witness strong growth. Offshore contact centers are expected be the fastest growing segment and high-end services such as equity research support, insurance claims processing and technology research and development will see rapid expansion over the next few years.
The ITES / BPO segment grew by a rapid fire 52.3 percent during 2003-04 reaching $ 3.6 billion. ITES/IT services sector is expected to generate revenues of $62 billion by 2008-09 and $148 billion by 2012, at a CAGR of 35 percent over the 2003-12 period, according to NASSCOM-KPMG estimates. Surveys by NASSCOM show that the ITES-BPO market employed around 245,500 professionals during 2003-04, up from 42,000 in 1999-00. In comparison, the software exports sector created jobs for 260,000 professionals during 2003-04, up from 110,000 in 1999-00.
The outsourcing includes a wide range of services including design, architecture, management, legal services, accounting and drug development and the Indian BPOs are moving up in the value chain. Indian companies offer contract research in development of new molecules and clinical research trials, medical image processing and diagnostics. Multinationals giants have realized the value proposition to bring their BPO operations to India. For instance, the BPO operations of GE capital in India save the company $340 million a year. AT Kearney Report of 30 March 2004 says that India tops the “2004 Offshore Location Attractiveness Index” by a wide margin, ranked not only for cost advantages, but also for the depth and breadth of off-shoring experience and people skills. In 2002-4 Indian companies have acquired a dozen call center and BPO companies in US and Europe.
It is not just the low-cost which is driving India’s exports.
Quality of some Indian products has come to be recognized globally. India now has far more SEI CMM Level 5 companies than any other country in the world including the US. As of December 2003, India has 65 companies at SEI CMM Level 5. The Software Engineering Institute of the Carnegie Mellon University, Pittsburg, US, gives this certification. Over 275 Indian software and ITES-BPO companies have acquired quality certifications and about 80 more companies are in pipeline. Many leading Indian BPO companies have received recognized quality certifications such as COPC. Six Sigma, a data-driven methodology, based on systematic process improvement and variation reduction through the application of powerful statistical tools, has also been adopted by a significant number of ITES-BPO organizations. The government has established a separate Ministry of Information technology. It is primarily responsible for all policy matters relating to information technology and promotion of knowledge-based enterprises, Internet, e-commerce and IT related education.