The information technology (IT) industry has become of the most robust industries in the world. IT, more than any other industry or economic facet, has an increased productivity, particularly in the developed world, and therefore is a key driver of global economic growth. Economies of scale and insatiable demand from both consumers and enterprises characterize this rapidly growing sector.
The Information Technology Association of America (ITAA) explains 'information technology' as encompassing all possible aspects of information systems based on computers.
Both software development and the hardware involved in the IT industry include everything from computer systems, to the design, implementation, study and development of IT and management systems.
Owing to its easy accessibility and the wide range of IT products available, the demand for IT services has increased substantially over the years. The IT sector has emerged as a major global source of both growth and employment.
Features of the IT Industry at a Glance
· Economies of scale for the information technology industry are high. The marginal cost of each unit of additional software or hardware is insignificant compared to the value addition that results from it.
· Unlike other common industries, the IT industry is knowledge-based.
· Efficient utilization of skilled labor forces in the IT sector can help an economy achieve a rapid pace of economic growth.
· The IT industry helps many other sectors in the growth process of the economy including the services and manufacturing sectors.
The role of the IT Industry
The IT industry can serve as a medium of e-governance, as it assures easy accessibility to information. The use of information technology in the service sector improves operational efficiency and adds to transparency. It also serves as a medium of skill formation.
Indian IT Industry
Poised to become a US$ 225 billion industry by 2020, the Indian information technology (IT) industry, as a whole, has placed India on the world map as a major knowledge-based economy and outsourcing hub. Business Process Outsourcing (BPO) segment, which is an industry in itself, has played a vital part in fuelling economic growth. The industry not only influences people’s lives through an active direct and indirect contribution to the various socio-economic parameters such as employment, standard of living and diversity, but also has played a significant role in transforming India’s image to a land of innovative entrepreneurs and a global player in providing world class technology solutions and business services. The IT-BPO sector has become one of the most significant growth catalysts for the Indian economy. In addition to fuelling India’s economy, this industry is also positively influencing the lives of its people through an active direct and indirect contribution to various socio-economic parameters such as employment, standard of living and diversity. The industry has played a significant role in transforming India’s image from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a global player in providing world class technology solutions and business services, according to National Association of Software and Service Companies (NASSCOM).
Nearly one million jobs were created in India during 2010-11, of which 70 per cent were from the IT and BPO sectors, according to data released by the Ministry of Labour and Employment. Various industry experts believe that the workforce in Indian IT industry will reach 30 million by 2020 and this sunrise industry is expected to continue its mammoth growth.
The sector is estimated to have grown by 19 per cent in the FY2011, aggregating revenue of almost US$ 76 billion. India’s outsourcing industry has witnessed a rebound and registered better than expected growth according to National Association of Software and Service Companies (NASSCOM).
The export revenues are estimated to have aggregated to US$ 59 billion in FY2011 and contributed 26 per cent in total Indian exports (merchandise plus services), according to a research report ‘IT-BPO Sector in India: Strategic Review 2011’, published by NASSCOM.
Within exports, ITeS segment (contributed 57 per cent of total IT exports), grew by 22.7 per cent for FY11, while BPO export segment grew by 14 per cent.
Driven by increasing use of electronics, technology alignment and demand for localised products, engineering design and products development segments generated revenues of US$ 11.3 billion in FY2011, growing by 13.4 per cent.
The domestic IT-BPO market marked an improvement of 16 per cent to aggregate revenues of US$ 17.6 billion. Massive expansion in technology adoption across government and private sectors has driven customer services and internal controls to get efficient which has led to an increase in outsourcing within domestic market also.
Market Dynamics
Top 200 Indian IT companies have garnered combined revenues of US$ 84 billion, achieving an average growth rate of 25 per cent in 2010-11, the highest since 2007, according to an annual research by Cybermedia’s Dataquest magazine. According to the survey, the top 5 Indian IT companies in FY11 were Tata Consultancy Services (TCS), Infosys, Wipro, Hewlett Packard (HP) and Cognizant with revenues of US$ 7.4 billion (25 per cent growth over 2009-10), US$ 5.8 billion (22 per cent), US$ 5.6 billion (13 per cent), US$ 5.2 billion (30 per cent) and US$ 4.8 billion (37 per cent), respectively.
IT & ITeS - Key Developments and Investments
Between April 2000 and April 2011, the computer software and hardware sector received cumulative foreign direct investment (FDI) of US$ 10,821 million, according to the Department of Industrial Policy and Promotion (DIPP).
· Latin American nations, in a bid to have closer ties with India, have indicated development of bilateral trade pacts and free trade agreements, wherein there is a growing interest for co-operation in IT.
· Tech giant IBM and telecom service provider Bharti Airtel have signed a 10-year deal wherein former will provide IT solutions to the latter’s employees in 16 African countries.
The Growth Story
India is a preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people.
The country’s domestic market for business process outsourcing (BPO) is projected to grow over 23 per cent to touch US$ 1.4 billion in 2011, says global research group Gartner. In 2010, the domestic BPO market was worth US$ 1.1 billion. The firm predicts that the domestic BPO market would reach US$ 1.69 billion in 2012 and increase to US$ 2.47 billion by 2014.
With the first quarter of the new fiscal 2011-12 offering positive business outlook, hiring sentiments for sectors like IT, ITeS and telecom have risen by over 20 per cent, says a study by TeamLease Services Pvt. Ltd. As per the Employment Outlook Report for the period April-June 2011, released by TeamLease Services Pvt. Ltd., hiring intent from IT and ITeS was the highest in cities like New Delhi, Mumbai, Hyderabad and Pune.
India's top technology firms like TCS, Infosys, Wipro and HCL are readying plans to gain a bigger share of their largest market, US, by aggressively chasing contracts being served by multinational rivals. Analysts expect the top IT firms to grow between 23-27 per cent in the FY2012 on the back of more number of discretionary projects, improved pricing, and robust business volumes.
Advantages of information technology:
Globalization- IT has not only brought the world closer together, but it has allowed the world's economy to become a single interdependent system. This means that we can not only share information quickly and efficiently, but we can also bring down barriers of linguistic and geographic boundaries. The world has developed into a global village due to the help of information technology allowing countries like Chile and Japan who are not only separated by distance but also by language to shares ideas and information with each other.
Communication- With the help of information technology, communication has also become cheaper, quicker, and more efficient. We can now communicate with anyone around the globe by simply text messaging them or sending them an email for an almost instantaneous response. The internet has also opened up face to face direct communication from different parts of the world thanks to the helps of video conferencing.
Cost effectiveness- Information technology has helped to computerize the business process thus streamlining businesses to make them extremely cost effective money making machines. This in turn increases productivity which ultimately gives rise to profits that means better pay and less strenuous working conditions.
Bridging the cultural gap - Information technology has helped to bridge the cultural gap by helping people from different cultures to communicate with one another, and allow for the exchange of views and ideas, thus increasing awareness and reducing prejudice.
More time - IT has made it possible for businesses to be open 24 x7 all over the globe. This means that a business can be open anytime anywhere, making purchases from different countries easier and more convenient. It also means that you can have your goods delivered right to your doorstep with having to move a single muscle.
Disadvantages of information technology include:
Unemployment- While information technology may have streamlined the business process it has also crated job redundancies, downsizing and outsourcing. This means that a lot of lower and middle level jobs have been done away with causing more people to become unemployed.
Privacy- Though information technology may have made communication quicker, easier and more convenient, it has also bought along privacy issues. From cell phone signal interceptions to email hacking, people are now worried about their once private information becoming public knowledge.
Lack of job security- Industry experts believe that the internet has made job security a big issue as since technology keeps on changing with each day. This means that one has to be in a constant learning mode, if he or she wishes for their job to be secure.
Dominant culture- While information technology may have made the world a global village, it has also contributed to one culture dominating another weaker one. For example it is now argued that US influences how most young teenagers all over the world now act, dress and behave. Languages too have become overshadowed, with English becoming the primary mode of communication for business and everything else.
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