India has emerged as the fastest growing IT hub in the world, its growth dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, IS Outsourcing, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. When it comes to IT services, the world is coming to India. With a CAGR of 28 per cent during the last 5 years, the IT-ITES industry’s contribution to India’s GDP has risen from 1.2 per cent during 1999-2000 to 4.8 per cent in 2005-06.
❖ Growth Curve
A survey by the National Association of Software and Services Companies (Nasscom) shows why the Indian IT industry has become a case study of success:
• The Indian IT-ITES industry has recorded 33 per cent growth in exports, clocking revenues of US$ 23.6 billion in FY 2005-06, as compared with export revenues of US$ 17.7 billion in FY 2004-05. • FY 2005-06 also saw the overall Indian IT-ITES industry (including domestic market) growing by 31 per cent registering revenues of US$ 29.6 billion, up from US$ 22.5 billion in 2004-05. • Of the total IT-ITES exports in FY 2005-06, IT software and services grew by 33 per cent, registering revenues of US$ 13.3 billion • The ITES-BPO segment clocked revenues of US$ 6.2 billion, recording a growth of 37 per cent. • Engineering services and product exports grew from US$ 3.14 billion in FY 04-05 to US$ 4 billion in FY 05-06. • Domestic market clocked revenues of US$ 6 billion in FY 04-05 from US$ 4.8 billion in FY 05-06.
❖ Growth Drivers
According to Nasscom, the growth in India's services exports has been led by many factors, including: • A strong demand and increased traction for traditional services like ADM • New services like EAI (Enterprise Application Integration) and package implementation • New areas like engineering services.
• Indian companies are enhancing their global service delivery capabilities through a combination of green-field initiatives, cross-border M&A, partnerships and alliances with local players. • Global software product giants such as Microsoft, Oracle and SAP have established their captive development centres in India. • Leading MNC IT companies have operations in India, accounting for 16 percent of their delivery capabilities in offshore locations, with India accounting for 70 percent of the total offshore employee base.
India is fast emerging as a research and development hub for some of the largest IT companies in the world. The country is drawing 25 per cent of fresh global investments in R&D centres. In many cases, such as Oracle, Intel, Adobe, STMicroelectronics (STM), SAP and others, the India R&D centre is their largest facility outside the US or Europe. Others, including IBM, Texas Instruments, Delphi, HP, Microsoft, Google and Cisco have been tapping Indian talent for conducting cutting-edge research. According to Daniel Dias, director, IBM India Research Lab, “India has a rich talent base. As a result, a lot is going on in the Indian context which forms the basis for R&D work.” Meanwhile, the companies that are already here are betting big on India. For instance:
• SAP Labs India is SAP’s largest development facility outside Germany. • Adobe Systems has 900 people in its India R&D operations — the highest number outside the US. • Chipmaker Intel has 3,000 staff in India, the majority in its R&D unit. Some of Intel India R&D’s recent contributions include complete design of the Centrino mobile chip called Napa. • STM has built a state-of-the-art design campus in Greater Noida, which once fully developed, will have 5,000 engineers. The company has earmarked US$ 30 million in investments over the next two years.
Companies are lining up to invest in India, and a big chunk of their spending is directed towards setting up...