India’s success in the export of Information Technology (IT) Software and related services over the past decade has been acknowledged globally. India now accounts for 65 percent of the global market in IT off shoring and 55 percent of the ITES market. The growth of the sector has led to tremendous pay off in terms of wealth creation and generation of high quality employment. IT/ITES industry has been one of the key driving forces fuelling India’s economic growth. The industry continues to be a net employment generator – already added more than 230,000 jobs in FY2013, thus providing direct employment to about 3 million, and indirectly employing 9 million people.
Software and IT enabled services have emerged as a niche sector for India. IT has deep roots in India going all the way back to the discovery of zero. Even in the recent past a number of developments have taken place mostly away from the media glare, some of them include investment in education, nurturing excellence in key educational institutions, emphasis on R & D, imaginative policy planning and political will to support and sustain IT across all areas. They all helped Indian IT to grow to its current difficult position.
Recognizing the importance of software exports, SEEPZ (Santa Cruz Electronics Export Processing Zone) was setup in Mumbai in 1973. The Mini Computer Policy of 1978 opened up computers manufacture to private sector. Many state governments created state Electronic Corporations – KEONICS in Karnataka, KELTRON in Kerala, OSEDC in Odisha, UPLC (UPTRON) in UP, BELTRON in Bihar, etc. The National Informatics Centre (NIC) was setup in 1977 which played a major role in the later decades to become crucial support system for the government, both the central and state governments. Communications infrastructure improved with the setting up STPI (Software Technology Parks of India) hubs in Banglore, Pune and other cities in 1991.
The STPI policy removed the inspector Raj from software companies. The nineties also saw a direct “push” from the government through number of policy measures, some of them include – IT Task force led by prime Minister in 1999 and several chief ministers at the state level and IT fairs started like IT.com and now IT.in, IT parks (starting with cyber city in Hyderabad and ITPL in Bangalore), launch of public internet access through VSNL in August 15, 1995, launch of mobile telephony on August 23, 1995.
The early 2000 saw the rise of Software Technology Parks and formation of the Ministry of Information Technology, respectively they fillip the software industry and exports. After that Indian IT and ITES companies have created global delivery models (onsite – near shoreoffshore), entered into long term engagements with customers, expanded their portfolio of services offerings, built scale, extended service propositions beyond cost savings to quality and innovations, evolved their pricing models and have tried to find sustainable solutions to various issues such as risk management, human capital attractions and retention and cost management.
A key demand driver for the Indian IT services and ITES industry has been the changing global business landscape which has exerted performance pressures on multinational enterprises. India has emerged as an important venue for the services sector including financial accounting, call centres and business process outsourcing. Biotechnology and Bio informatics, which are on Government’s priority list for development.
The study recognizes that emergence of a strong Indian IT industry happened due to concerned efforts on the part of the Government, particularly since 1980’s, and host of other factors like Government, private initiatives, emergence of Software Technology Parks.
In the initial years, export of software initially meant a physical transfer – either of the programmer himself sometimes called body shopping ( the provision of labor intensive, low value added programming services, such as coding and testing at client sites) or of software on floppies. In that time 75 percent of export earrings came from body shopping. The absence of reliable telecommunication links in 1980s forced Indian firms to be primarily “body shoppers”, who provide programming services on site, typically USA, UK, to customer under contract. India was among the first developing nations to recognize the importance of software, and the key driver behind exporting software was foreign exchange.
To export software, Indian companies had to design it for hardware systems that were the standard worldwide. However, Indian import duties on this hardware were extremely high (almost 300 percent in the year 80’s). In order to improve the export of software from the country, the Government lowered import duties to almost zero on all IT equipment and made many important modifications in the STPI scheme. Today STPI is widely regarded as an entity that has played a seminal role in the development of software industry in the country.