IT Industry: great prospects ahead - II

By Nirupam Bajpai and Navi Radjou

THE ENGINE of growth of the booming Indian information technology (IT) sector is the software industry, which has grown at an average annual rate of 60 per cent between 1992 and 1999. The industry, which today employs 1.6 lakh professionals, has zoomed from a mere $ 20 million 10 years ago to $ 4 billion in 1998-99, of which $ 2.6 billion came from exports. The industry contributed to 8 per cent of the country's total merchandise exports. It has also achieved a worldwide reputation for quality: many local software firms have earned ISO 9000 as well as SEI-CMM certification, with five of them reaching Level 5 (only nine firms worldwide have reached this level). India has achieved this feat by leveraging its most valuable resource: highly skilled manpower. The country today boasts of the second-largest English- speaking pool of scientific manpower in the world and graduates 70,000 computer professionals every year, in addition to graduates from the Indian Institutes of Technology (IITs). Technical excellence explains why India was identified by 82 per cent of American companies as their top destination for software outsourcing, according to a World Bank survey.

Realising the strategic importance of IT for the country, the Union Government has set itself an ambitious target of making India a global IT power by 2008. In 1998, a National IT Task Force was set up and a National IT Policy formulated. The policy calls for raising the software industry's turnover to $ 85 billions by 2008, $ 50 billions of this coming from exports. It also proposes to strengthen the country's human infrastructure through the establishment of an Indian Institute of Information Technology (IIIT) in every State.

Eager to climb up the value chain, the Indian IT industry is at present aggressively pursuing two hottest segments: electronic commerce and IT enabled services - Internet and e-commerce opportunities. With Internet access now liberalised, Indian IT firms are eager to tap into its lucrative software and services market. Goldman Sachs Asia predicts that by 2003 India will have 9 million Internet users and 400 ISPs. E-commerce is also taking off in India. According to IDC (India), Indian e-business revenues will grow from $ 14 million in 1999 to $ 51 million in 2000 and reach $ 162 million in 2001. IT enabled services (ITES): Value-added `remote services', such as back office operations, call centres and medical transcription, could some day make India's $ 3 billion software exports in 1998 look like a paltry figure. The worldwide ITES market is poised to grow from the present $ 10 billion to $ 180 billion by 2010. According to NASSCOM, 25,000 Indians are currently employed in remote services. McKinsey & Company thinks that this number will rise to between one million and three million people within 10 years.

Tamil Nadu has always been a front-runner in the industrialisation process in India, both in terms of industrial output and encouraging various new large-scale projects. It is now trying to climb up the value chain of innovation and intends to become a major player in the global IT industry. Its Government has recognised IT as a thrust area that has the potential to accelerate economic development. It has multiplied efforts to create a business environment in the State that is conducive to rapid IT development. In 1997, it became the first State to announce a comprehensive IT policy; and it later set up a special task force, with representatives from Government, industry and academia, to oversee its implementation. It has also established an IT Department - another first in India - to speed- up the adoption of IT within the entire administration. What makes Tamil Nadu's IT policy unique is its dual focus on both the `demand' and `supply' side of the IT market, as well as its willingness to address both the `physical' and `institutional' infrastructure issues. The IT industry in Tamil Nadu has lately been performing extremely well, growing at a higher rate than its competing neighbour States. In 1998, its software exports alone, valued at $ 300 million, contributed to 15 per cent of the country's software exports. Tamil Nadu today has the largest number of software professionals in India and also boasts of the largest mainframe computing capacity in the country. Chennai, the State capital, is fast emerging as a prominent development centre for multimedia software applications: Pentafour, a local IT firm, now designs multimedia content for Hollywood animation movies. International software majors such as Alcatel, EDS and IBM have already opened offices in Chennai. Domestic software giants such as TCS, Infosys and Wipro, too, operate large development centres here.

Undoubtedly, the first step in a successful State-level IT development strategy is the creation of an institutional infrastructure that supports the establishment of an IT industry. The Tamil Nadu Government scores high in this regard. It has set up a forward-looking technocratic structure that acts as a major catalyst for IT development in the State. This structure is made up of the IT Task Force, that provides policy guidance, the IT Department, which oversees the implementation aspects, and the Electronics Corporation of Tamil Nadu (ELCOT), which acts as a ``single-window'' agency for all IT-related investments in the State. The key strength of this technocratic institution is its determination to drum up grass-root support in the administration for each of its policy initiatives.

Another favourable factor for Tamil Nadu is the advanced level of preparedness of its society. The State today boasts one of the highest literacy rates. It also has a high teledensity, with 75 per cent of rural areas having access to telephones. Moreover, PC penetration rate in both business and society ``has traditionally been higher in the State compared to the rest of India''. The recent introduction of computer science as an elective in all State high schools is a step in the right direction to achieve the goal of 100 per cent computer literacy within 10 years. Furthermore, the 1,000 Internet Community Centres (ICCs) being set up by WorldTel all through the State will ensure that even remote areas reap the benefits of the Internet. Finally, the adoption of a coding standard for the Tamil font, along with other initiatives (for example Tamil Virtual University) aimed at using IT as a tool to promote Tamil language and culture will go a long way in raising IT awareness in society.

Hi-tech parks are another important part of an information infrastructure. Consequently, the Tamil Nadu Government is setting up TIDEL, a 1 million-sq.ft. software technology park in the heart of Chennai at a cost of $ 75 million, as well as two other IT parks near Chennai. We would like, however, to observe two points: first, in addition to Chennai, the Tamil Nadu Government needs to actively create infrastructure for software development in other major cities such as Coimbatore, Madurai and Tiruchi. This will ensure that Chennai does not become congested and will also help spread the benefits of IT development across the State. Second, in addition to IT Parks, the Government may wish to promote ``IT Zones''. Companies that wish to settle in IT Zones would be free to build their own facilities according to their own specifications. This `grow-as-you-need' model will help foster a stronger sense of ``community'' among its occupants.

Tamil Nadu has been quite successful in developing both its `soft' and `hard' infrastructure. Its telecommunication infrastructure, however, still needs to be improved, but this cannot be done without strong support from the Central Government.

(Concluded)

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