Information Technology in India

Information Technology in India

 

 

Although India has had significant success in IT services, it has yet to strike gold with IT products and intellectual property

  

IT in India has come a long way since it first appeared in the 1980s, when US technology companies started leveraging the cost arbitrage between US and Indian programmers. The liberalization of certain economic policies that started in 1991 led to the birth of innovative companies, such as Infosys and Wipro. These companies used the “quality route” to grow their business—Indian IT companies followed the five levels of the Software Engineering Institute’s certification more than any other country, including US.

 

The arrival of the Internet and imaginative government policies, such as fast and easy access to international data circuits and tax benefits through Software Technology Parks of India (STPI), led to further growth. Then, by the turn of the century, the IT industry started focusing on what I refer to as EQQ—English language skills for engineers and higher quantities of quality engineers. EQQ gave India an advantage over Ireland (which had fewer programmers), China (which lacked engineers proficient in English), and the Philippines (which lacked qualified programmers). The Y2K phenomenon that led to a global shortage of programmers propelled Indian IT companies into a position of global leadership. By the middle of the last decade, Indian IT had arrived. 

Achievements 

India’s IT industry is growing steadily. Indian IT companies have reached the global stage and are undertaking interesting IT projects.  

Employment and Education 

The IT sector has created jobs for 2.8 million IT professionals and has indirectly employed an additional 8.9 million. The rapid growth of engineering education, with more than 500,000 undergraduate IT engineers graduating per year, feeds into this steadily growing IT industry. 

Business Growth 

For the 2012 financial year (which ended March 2012), annual business crossed US$100 billion in sales revenue, with IT contributing to 7.5 percent of India’s GDP. Furthermore, India had 58 percent of the “global IT services” outsourcing revenue. Indian IT services account for 25 percent of its exports.  

Most Fortune 500 companies outsource some of their work to Indian IT companies, and many (almost all in the top 100) operate either directly or indirectly in India. 

The IT company Tata Consultancy Services reached $10 billion in annual revenue by March 2012, with a healthy bottom line (22 percent). Another company, Infosys (with $7 billion in annual revenue), created the “ACM Infosys Foundation Award for Computing Science” in 2007 to celebrate 25 years of service (awards.acm.org). Fortune magazine recently named Infosys founder NR Narayana Murthy, who is known for his unique way of combining capitalism and socialism, as one of the 12 greatest entrepreneurs of our time.  

E-Governance 

Over the past five years, India has spent billions of dollars on its e-governance project—one of the largest e-governance projects in the world (http://negp.gov.in). 

Moving Up the Value Chain 

 

Al though India has had significant success in IT services (including business-process outsourcing), it has yet to strike gold with IT products (hardware and software) and intellectual property (IP). There are just a handful of success stories, one of which is the Finacle software suite from Infosys. 

Finacle addresses the core banking, e-banking, treasury, wealth management, and customer relationship-management needs of retail, corporate, and universal bank customers (including Islamic banking). Finacle is currently used by 148 banks spread across 75 counties with nearly 400 million accounts and 300 million customers (www.infosys.com/finacle). Gartner has placed it in the “Leaders Quadrant” of its “Magic Quadrant for International Retail Core Banking.” 

Ittiem Systems offers another success story. It creates IP in the digital signal processing (DSP) area for video communications, automotive in fotronics, networking, and media (see www.ittiam.com ). It has been in business for 10 years and its current revenue is $20 million—37 percent of which is generated through IP licensing. Such a revenue model isn’t common in many Indian companies. For the last seven years, Forward Concepts (www.fwdconcepts.com ) has named Ittiam Systems the “World’s Most Preferred DSP IP Supplier.” 

 

 

Indian IT companies must “move up the value chain” in the years to come. Possible strategies might include : 

 

-Producing focused products for either the domestic sector, specific markets (say, emerging or African markets), or global markets;

-Developing technology in emerging areas ( next -generation networking protocols, for example); and

-Creating IP in areas where Indian IT companies have strength or for local markets.

 

      The consumption of IT within India must improve too. In addition to surging exports, IT should improve efficiencies within the Indian industry. Although a lot has yet to be achieved, India successfully transformed its banking through widespread IT adoption. Thanks to the Reserve Bank’s constant push for technology upgrades in the banks, the banking sector saw core banking, ATM, and multichannel banking implemented across all the banks. Efforts are ongoing to get those citizens who aren’t covered by banking (a significant portion of India’s population) covered through “no frill,” inclusive, or mobile banking. 

IT: India’s Tomorrow 

Former Indian Prime Minister Atal Bihari Vajapayee once described IT as “India’s tomorrow.” With the convergence of computing, communications, and electronics, the scope of IT is changing, as are key industries, such as : 

 

-transportation (road, rail, air, sea, and urban transport);

-financial services (banking, insurance and stock trading);

-hospitality (hotels, restaurants, and tourism);

-automotive and aerospace;

-core industries (oil, gas, steel, and mining);

-services (education and healthcare); and

-retail. 

Areas such as industrial automation and medical electronics are embracing open standards and starting to use commodity hardware. Leading companies in those domains—such as ABB and Siemens—could soon become “IT companies.” Indian IT is thus likely to enjoy steady and sustained growth for at least another decade. 

 

Roadblocks to Continued Growth 

However, the Indian IT industry must overcome some roadblocks to maintain its current rate of growth. 

 

Anti-Outsourcing Sentiment

 

Increasingly, global markets (including in the US) are trying to prevent outsourcing—particularly to “low cost” destinations like India. 

 

 

Employment Changes 

India has seen higher internal costs (mostly wages), reduced productivity, and unionism among its IT employees. The Indian IT industry has had double-digit wage increases for many years, whereas wage increases have been considerably lower elsewhere. For example, the 2012 projected salary increase for India is 12 percent, whereas it’s 9.5 percent for China and 7 percent for the Philippines. 

 

Education 

Universities haven’t been able to graduate large numbers of high quality professionals to take up jobs in the IT industry. There’s an acute shortage of faculty in higher education due to much smaller enrolment in graduate studies compared to undergraduate degrees. In addition, faculty compensation is insufficient. However, things are improving with the start of new Institutes of Information Technology (IITs), Central Universities (including “Innovation Universities,” which focus on new technology and inter/cross-disciplinary research in emerging areas), and capacity increases in existing institutions- along with the recommendations of the Sixth Pay Commission in 2010. 

 

New Business Models 

India must address disruptions in business models. For example, new applications are fundamentally changing how software is produced (in very small groups or by just a single person), delivered (over the “cloud”), and consumed (using appliances like smart phones). 

 

 

Key Projects and Emerging Companies 

Here, I look at some key IT projects and emerging IT companies in India. (For a brief discussion of how I selected these particular projects, see Box.) 

 

 

Aadhar 

Project Aadhar, which started in 2009 and is one of the most ambitious IT projects in the world, aims to provide a unique ID to every citizen (http://uidai.gov.in ). By 2014, using a combination of biometric measures, Aadhar aims to identify every Indian and accept or reject identity claims within a few seconds- for the 1.2 billion Indians spread out across the country. 

 

Flipkart 

In 2007, two IIT graduates, Sachin and Binny Bansal, started Flipkart, an Indian e-commerce store (www.flipkart.com). It’s current annual revenue is almost $100 million, and it’s expected to grow to $1 billion by 2015. Flipkart focuses on:

-ease of use;

-variety (books, stationery, electronics, laptops,  Mobiles & tablets, cloths and recently digital rights.

-management (DRM)-free digital music);

-low prices (books are often sent with no shipping charges); and

-timely delivery. 

Flipkart also address the unusual Indian needs of “cash on delivery” (most of the adult Indian population doesn’t use credit cards) and “credit-card swipe on delivery” (for the younger generation, which uses credit cards but doesn’t trust online Internet commerce). 

 

RedBus 

RedBus provides Internet-based ticketing solutions for small and often unorganized bus operators across the country (www.redbus.in ). Founded by Phanindra Sama, Charan Padmaraju, and Sudhakar Parapuneni—IT professionals from three different parts of India—RedBus currently helps more than 350 operators driving more than 4,500 routes. Millions of RedBus customers can go to any of the 4,500 outlets to buy a ticket, from anywhere to anywhere.  

Over the last three years, RedBus revenues were 5 million, 50 million, and 1 billion rupees, respectively, and it currently has almost 500 employees. In March, Fast Company named it one of the 50 most innovative companies (www.fastcompany.com/most-innovativecompanies/2012/redbus ). Using an unusual model of offering its bus operators the same commission whether they sell 100 or 1,000 tickets has helped RedBus quickly win over the large number of operators who are new not only to Net-based service but also to the “organized sector.”

 

 

TutorVista 

TutorVista, a leading online education company (www.tutorvista.com ), was incubated at the Indian Institute of Information Technology, Bangalore. Its founder, serial entrepreneur Krishnan Ganesh, bet on the Internet in 2005 to help high school students in the US with online tutoring. His unique selling proposition was to offer quality teachers at an affordable price. 

Pearson acquired TutorVista in 2011, and today it has 2,000 teachers across India, the US, the UK, the United Arab Emirates, Australia, China, and South East Asia. The tutors help students in math, physics, chemistry, biology, and English and with test preparation and homework. IT in India has seen amazing growth, thanks to the liberalization of economic policies, conducive government policies, growth in higher education, and the uptake in entrepreneurship. Several countries are attempting to leverage IT for their economic development, and focusing on the key issues of education, policy support, and entrepreneurship is likely to pay rich dividends. Unless Indian education and research (on the supply side), IT companies (on the demand side) , and the government and media (enablers) continue to innovate, India might not be able to sustain its current leadership position in this area.

 

By : Sowmyanarayanan Sadagopan The author is Director, Indian Institute of Information Technology, Bangalore.