Chapter

THE INFORMATION TECHNOLOGY SECTOR IN INDIA

WHAT IS INFORMATION TECHNOLOGY

Information Technology (IT) is a business sector that deals with computing, including
hardware, software, telecommunications and generally anything involved in the transmittal of
information or the systems that facilitate communication. Clearly the definition of information
technology is not restricted to any one application area. In fact IT is worthy of study only
because of its all pervasiveness in society. In the Indian context, however, when reference is
made to the IT industry we are referring to IT Services and Business Process Outsourcing
(BPO).

PRESENT STATUS OF THE INDIAN IT INDUSTRY

 Indian IT industry accounts for 8% of GDP. The IT sector has been India's fastest
growing sector for quite some time now. The industry has contributed considerably to
changing India's image from a slow developing economy to a global player in providing
world class technology solutions. The Indian IT-BPM industry, grew by 7.7% in FY17.
India's share in the global sourcing market about 38% in FY17. According to the IBEF
(India Brand Equity Foundation) figures, the Indian IT industry is set to touch $225
billion by 2020. The growth will be driven by new digital technologies and the adoption
of new digital technologies will bring huge disruption to the industry's traditional
business model. India's IT industry can be divided into six main components, viz.
Software Products, IT services, Engineering and R&D services, ITES/BPO (IT-enabled
services/Business Process Outsourcing), Hardware, and e-commerce.

 Export revenues from IT services (US$ 66 billion) continues to drive growth of IT

industry. BPM accounted for 22.2% of total IT exports of US$ 117 billion. Software
products and engineering services contributes US$ 25 billion. The Indian IT sector will
benefit significantly from the government's schemes like Digital India, Make in India,
and Start Up India. (Source: Equitymaster)
Market size of it industry in India (US$ billion)

(Source : IBEF)
 IT industry is fuelling the growth of startups in India, with the presence of more than 5,200
start-ups in India
 The global digital transformation market size is expected to rise at a CAGR of 18.56 per
cent from US$ 1.2 trillion in 2017 to US$ 2 trillion in 2020. India is the leading sourcing
destination across the world, which handles approximately 55 per cent market share of the
US$ 185-190 billion global services sourcing business in 2017-18.
 Indian IT sector employment prospects, both in the near and long-term are expected to
be broadly positive and encouraging for the future. India IT companies currently serve
two thirds of the fortune 500 companies and have created 40 lakhs direct jobs in India.

FUTURE OUTLOOK

 Research in the IT industry has so far been predominantly focussed towards

programming technologies like Java. However, more recently, the research focus has
shifted towards technologies like mobile computing, cloud computing and software as
a service. This shift in focus is attributed to preference of clients towards ubiquitous
computing over standalone computing and a growing demand for low cost computing
solutions.
 New technologies are gaining market in the IT industry which are disruptive in nature
such as cloud computing, social media and data analytics, are offering new avenues of
growth across verticals for IT companies. The SMAC (social, mobility, analytics, cloud)
market is expected to grow to US$ 225 billion by 2020.
 Another prominent trend is the gradual geographical diffusion of IT jobs that have so
far been confined to the city of Bangalore into other cities like Chennai, Hyderabad and
 Pune. However, the pace of diffusion is fairly slow mainly in view of the slow pace in
of development of the proper telecommunication infrastructure. The penetration levels
are higher for mobile services, but the network speed at which the backbone
infrastructure works and the coverage it offers are far below what other countries of the
world are currently offering.
 Tier II and III cities are increasingly gaining traction among IT companies, aiming to
establish business in India. Cheap labour, affordable real estate, favourable government
regulations, tax breaks and SEZ schemes facilitating their emergence as a new IT
destination. Giving rise to the domestic hub and spoke model, with Tier I cities acting
as hubs and Tier II, III and IV as network of spokes ( Source: IBEF)
 Growth in the sector is fuelled by the government policies like make in India, start up
India, digital India etc. Government of India has identified Information Technology as
one of the 12 champion service sectors for which an action plan is being developed.
Also, the government has set up a Rs 5,000 crore (US$ 745.82 million) fund for realising
the potential of these champion service sectors.
 Export revenue from the industry has grown at a CAGR of 12.25% to US$ 126 billion
in FY18 from US$ 50 billion in FY10.

EMPLOYMENT POTENTIAL IN THE INDIAN IT INDUSTRY

 As per NASSCOM the industry continues to be a net hirer and reports that 2.5-3 million
new jobs will be created by 2025. In FY 2017, the industry added 1,70,000 new jobs. IT
industry added 600,000 in last three years and as of May 2017 boasts of a total employee
base of 3.9 million.
 India continues to be amongst the leading destinations for IT development, given its cost
advantage. Major global outsourcing in IT sector are being moved to regions like India
where talent is reasonably economical.
 NASSCOM and Global advisory firm McKinsey & Company said that nearly half of the
workforce in the IT services firms will be “irrelevant” over the next few years. A similar
views were echoed by CEOs of many IT giants who feels that 60-65 percent of the
workforce are just not trainable. This is because of the quality in IT education.
 While the IT sector is looking for trained talent, only about 27% of companies showed
interest in upskilling their workforce whereas globally the number is almost double, at a
 53%. So there comes the need of Top class institutes which could produce Industry ready
students.

( Source:
//economictimes.indiatimes.com/articleshow/64069430.cms?utm_source=contentofinterest&utm_medium=te
xt&utm_campaign=cppst )

 The old-fashioned manual coding jobs are likely to be replaced by automatic coding and
cloud computing that significantly reduces the size of the workforce. But there will be
demand for skills in robotics, artificial intelligence (AI), digital space, biotech, nanotech,
smart technologies, blockchain, Augmented reality, IoT etc. This will demand Indian IT
sector to re-skill their employees. The industry have already on the verge of adopting to
newer changes but the education system will also have to bridge the skill gap fast.
 India BPO promotion scheme was approved under Digital India programme. It aims to
create employment opportunities for the youth and promote investments in the IT&ITeS
industry. Under the scheme employment has already been created for more than 10,000
individuals.
NEWER TECHNOLOGIES & NEED OF ACADEMIA TO ENHANCE THE GROWTH

Indian IT services players may have to re-skill significant chunks of their workforce to drive
the digital technology transformation. As per Mckinsey these below mentioned 12
technologies can have a disruptive impact on Indian businesses, government, and society in the
next decade. These “empowering” technologies have the potential to add economic value of
$550 billion to $1 trillion per year in 2025, create millions of well-paying productive jobs.

How to nourish empowering technologies

For these technologies to take root and have the level of impact we desire, India needs to create
a supportive environment. Academic Institutes want to generate wealth, employment and create
social good. So by partnering with these institutes Industry can explore a new set of skilled
employees who is ready for the changed dynamics of the market. Institutes have to undertake
the role of an incubating platform, Institutes have to tap the unexploited market potential.
Along with curriculum Institutes should encourage students by
 Arranging hackathons, playing host to start-up weekends, and arranging seminars
and workshops
 Propel Innovation propelled
 Foster entrepreneurship
 Develop start-up ecosystem
 Help commercialize technology
 Assist in training and development