Indian It Industry

The Indian IT services Industry

- Revenues of $24 billion, 75% of them exports. BUT it is only 4% of global revenue of all IT services industry($625 billion). 30% sustained industry growth since 1990. 2.5% of India's GDP

- Wages of Indian IT professionals rising 15%, compared to 3% in US. Also, IBM, Accenture etc have started local operations in India- Threat to TCS, Infosys and other Indian firms.

Offshore IT Services

Once the IT services sector matured, processes became standardized, and development work could be offshored effectively, needing only the internet for coordination. Labor intensive- So India has low cost advantage (salaries 12% of US salaries). Initial overhead costs were high, subsequent projects were high savers.

Market Potential- $200 Billion

Critiques- many failures of offshore work, Walmart failed, more hours to complete work, low performance, security of personal information, "outsourcing our jobs"

History of IT services in India- Govt's policy of indigenous development caused slow or no growth until 1980s. TCS was first in 1968. Govt's liberalization in 1991 set the stage for IT boom. Devaluing of rupee from 20 to 40 per dollar also helped. Main driving factor was non-regulation of software. What started with "body shopping" transformed into full management mode of projects.

Indian IT Services in 2007 (Now)- India has 65% of world's market share in offshoring. Top 5 Indian IT firms grew at 36%, but top 5 western firms grew at 5%. Core strength is Custom application development. Biggest customers- Financial services, manufacturing, Telecom, and government and health.

Labor inputs- Due to the shrinking wages differential, India's labour is now less competitive. Attrition a big problem.

Macro-economic, currency and regulatory environment- India still lags far behind in infrastructure, health, literacy, power, etc. An adverse currency rate hits the IT industry especially hard.

Questions:

1.      India still faces significant...