Project Report

On
CONTRIBUTION OF IT SECTOR IN
INDIAN ECONOMY
(Business Economics)
Submitted by
Mangesh M. Uke
(132)
Ami! "#o$a# Business Schoo#
Mum$ai
TAB%E OF CONTENT
S.N. CONTENT &A"E
NO.
1 Introduction 1
2 Literature Review 14
3 Study Objective 19
4 Research Methodoo!y 2"
# $uestionnaire 32
% Re!iona &eveo'(ent 41
) *hubaneswar +ase study 44
, Li(itations 49
9 Reco((endations #"
1" +oncusion #1
11 *ibio!ra'hy #2
In!'o(uc!ion
The IT/ITES industry has contributed to the growth and development of the country in terms of
various economical and social aspects through its for-profit as well as not-for-profit
activities. This particular study attempts to identify areas in the economic and social sector
where IT/ITES industry has made a significant contribution and assess the same based on
!uantitative and !ualitative parameters. "#$ member companies participated in this study well
spread across geographical regions turnover categories and areas of operation. The profile of the
respondents is shown in E%hibit ".
Exhibit 1: Profile of respondent cos. In terms of turn over ranges (in numbers)
&esides the information received from the participating companies the study has relied heavily
on past reports and articles on relevant aspects of the industry. Specific e%amples and case
studies of member companies which help illustrate the points being made in the report have been
liberally used. To illustrate the impact made by IT/ITES companies by spreading their business
to Tier II/III cities a case study on &hubaneswar has been included which is based on field visit
and secondary research. 'n overview of the socio-economic contribution of the Indian IT/ITES
industry has been shown in E%hibit #.
Con!'i$u!ing !o Economic "'o)!h
In the last two decades the Indian IT/ITES industry has contributed significantly to Indian
economic growth in terms of ()* foreign e%change earnings and employment generation.
+owever e!ually signify-cant though not as tangible has been the ripple effect it has created on
the general economic environment in the national and international economic space. The
industry has been the trigger for many firsts and has contributed not only to unleashing the
hitherto untapped entrepreneurial potential of the middle class Indian but also ta,ing Indian
e%cellence to the global mar,et.
*
Di'ec! con!'i$u!ion !o !he In(ian econom
The current and evolving role of IT/ITES industry in India-s economy is well established. The
sector is proving to be the ma.or growth pole within the services sector which in turn drives
several economic indicators of growth in the country. ' few ,ey indicators of direct contribution
are/
0 Growing share of the countr!s G"P: The sector-s contribution to the country-s ()* has
been steadily increasing from a share of ".#1 in 2345 to 6.#1 in 2378
0 #oosting the foreign exchange reserve of the countr: E%port earnings in 2375 stood at
appro%imately 9S) :7.7 billion with a growth of $;1.
0 Emploment generation: )irect employment in the sector is e%pected to be #.7 million by end
of 2375 growing at a <'(= of #;1 in the last decade ma,ing it the largest employer in the
organi>ed private sector of the country.
E+hi$i! ,- Socio.economic con!'i$u!ion o/ In(ian IT.an o0e'0ie)
,
In(i'ec! con!'i$u!ion !o !he In(ian econom
The growth of the IT/ITES sector and its resultant contribution to the economic growth and
development has also resulted in certain wider impacts which in many cases have had a rub-off
effect and set benchmar,s for other sectors of the economy while boosting
the image of India in the global mar,et.
$dditional emploment generation: The indirect employment generated at the rate of :
additional .obs created in the economy for every " .ob created in the sector is even more socially
relevant as nearly 861 of the wor,force employed in those additional .obs are SS</+S< or less
educated
"riving growth of other sectors of the econom: 'part from contributing to the growing
income of its direct sta,eholders ?promoters shareholders and employees@ the IT/ITES industry
has had a multiplier effect on other sectors of the economy with an output multiplier of almost #
through its non-wage operating e%penses capital e%penditure and consumption spending by
professionals. Study show that 9S) "6.56 billion spent by the IT/ITES industry in the domestic
economy in 237; generates an additional output of 9S) "6.6 billion.
% Encouraging balanced regional development: &y gradually spreading their business
operations to smaller Tier II/III cities the IT sector ?besides generating revenue and
employment@ is also assisting in improving the supply of talent pool and development of physical
and social infrastructure either directly by themselves or by spurring the (overnment to action
In case of &hubaneswar ?a Tier III city@ some of the ,ey impact of the IT/ITES sector has been
1. Increase in software exports - Software e%ports from the state reached 9S) "5$ million in
7;-78 a ;71 rise over e%ports in 76-7; on trac, to reach the target of 677mn 9S) by #7""-"#.
&. Increase in registered I'(I'E) units * The number of registered and e%porting units has
risen steadily showing a <'(= of ""5 and "871 respectively. as compared to 45-44. &esides
the capacity e%pansion of e%isting units many of the big companies are also setting up
operations in the city
+. Emploment * Supply of IT professionals which was higher than demand till #77: now
have a shortfall of ;#;48. )emand for IT professionals is e%pected to reach :$7777 by #7""-"#
with the corresponding figures on indirect employment being "8#7777
,. Education * Ahile building and e%panding capacity of educational institutes are underway
IT ma.ors are underta,ing training initiatives to improve student !uality. 't least 6 new
educational institutions ?including IIIT and IIT Bharagpur campus@ by both (overnment and
private players are also being set up.
+
-. Infrastructure and other amenities * Beeping in line with the e%pansion/entry plans of
ma.or IT/ITES companies IT par,s and townships are being built with a corresponding
improvement in other amenities li,e roads housing retail and entertainment facilities.
Exhibit +: Impact of entr of I' companies into 'ier II(III cities
.uelling the growth of PE(/0 funding: The worldwide dot com boom and growth in the IT
sector ,ic,-started C< activity in India which led to the creation of first generation of India
centric C< funds. Dther sectors such as healthcare manufacturing and financial services have
also benefitted from this phenomenon as these sectors are now also being able to access this
source of funding.
0 Ahile IT/ITES continues to be the favorite sector with the largest share ?#51@ of *E/C<
funding other sectors now account for 8#1 share as compared to $:1 in #777.
0 )purring first generation entrepreneurship: <orporate India consisted of either large family
owned businesses or multinational companies till the advent of the IT/ITES industry and it was
rare to see a first generation entrepreneur. The shift of focus from physical capital to intellectual
capital and the advent of the *E/C< funding enabled a large number of first generation
entrepreneurs with no wealth to try their hand at starting new enterprises. The demonstrated
success of these entrepreneurs created an aspiration among the middle class and spurred them to
e%ploit their potential with confidence.
0 's per information available with Software Technology *ar,s of India ?ST*I@ "476 new units
were registered during the period 237" to 2376 most of which are li,ely to be set up by first
generation entrepreneurs Ahile many first-generation entrepreneurs became billionaires in the
process the wealth created was not restricted among the founders alone. The practice of
,
Employee Stoc, Dption *lan ?ESD*@ first started by the IT/ITES industry before it was adopted
by many other industries as well shared this wealth among employees as well thereby creating
many salaried millionaires.
% Improving the product(service 1ualit level: The fact that IT/ITES companies cater to and
compete with global players has led to their adopting the highest !uality standards. This high
!uality of services and products has been the driver and sustainer of growth which has helped
move India out of the mediocrity low !uality image and has in fact raised the bar for other
industries as well. Indian e%ports had traditionally been restricted to low end low-technology
oriented products li,e gems and .ewelleries and garments/apparels. It is with the advent of
IT/ITES industry that the world began to recogni>e that Indian products and services could also
compete and win against global competitors on !uality parameters. India is now also emerging as
a research and development centre for some of the large IT/ITES companies in the world
once again demonstrating that India now stands for !uality.
0 $71 of companies worldwide who have reached Eevel 6 of <apability Faturity Fodel
Integration ?<FFI@ are Indian IT/ITES firms .
0 Gearly 861 of 2ortune 677 and 671 of (lobal #777 corporations source their technology
related services from India with an increasing number of FG<s outlining their investment plans
for setting up =H) operations in India.
% .ront runner in practicing good corporate governance: The industry has been a front runner
in practicing good corporate governance and their commitment to infuse it in their business
activities have led to a creating a positive pressure within the industry as well as in other
industries with more and more companies adopting global standards in corporate governance
practices.
0 The ma.or IT/ITES companies in India have in recent times received national and international
recognition for their corporate governance initiatives.
% #oosting the image of India in the global mar2et: Aidely travelled Indians have watched
with pride as different countries and people loo, at India and Indians with hitherto un,nown
respect and admiration. The India IT/ITES industry has contributed to what brand IIndia- stands
for in today-s global mar,et.
-
0 Ahile India Inc. has been witnessing an ac!uisition spree of overseas companies in recent
yearsJ the IT/ITES sector has led this phenomenon with the highest share ?#$1@ of outbound
FH' deals in #77;.
0 Eisting of Indian IT/ITES companies in global stoc, e%changes which re!uires adherence to
stringent global accounting norms has helped build a strong brand of the companies and the
sector outside India.
Di0e'si! in em1#omen!
&esides being the largest employer in the organi>ed private sector the IT/ITES industry also
consciously follows a diverse employment practice and encourages diversity in the wor, place in
terms of !ualification abilities gender s,ill sets.
% 0reating emploment opportunities in smaller towns(cities: &y recruiting talent from non-
metro towns and rural bac,ground the industry has reached out to the educated resource pool in
these places and created employment opportunities which hitherto was largely limited
0 Earge IT/ITES companies often have $$ to 671 of their employees coming from non-
metro/rural areas
% Encouraging emploment of differentl3able: Through their policy and practice of
employing differently able people training them and creating a conductive wor,ing
environment IT/ITES companies are initiating a trend which could have a significant impact
on employment opportunities for the differently able in India.
0 ;:1 of the companies surveyed by )eloitte employ people with disabilities
% 4pening opportunities for non3technical personnel: The growing employment opportunities
in this sector ?both direct and indirect@ are not restricted to the better educated or technically
educated people alone. Ahile 861 of the employment generated through the indirect route are
filled in by candidates who are SS</+S< or less educated companies also help under !ualified
candidates to reach a desired s,ill level by investing in their training and s,ill up gradation
% Promoting women empowerment: The growing trend in the number of women employed in
this sector indicates that not only does the industry offer e!ual opportunity to women but also has
in place proactive and sensitive mechanisms which counter the common causes that discourage
women from pursuing employment in the corporate sector.
0 Aomen employment in the industry is set to rise to :61 by #7"7 from the current $71.
5
% Providing high growth opportunities for the outh: The industry has created e%cellent
employment and fast trac, growth opportunities for the younger section of the population and is
li,ely to become one of the largest employers of a growing Iyoung population- of India.
0 The overall median age group of the sector is #5.4 years with 871 of the wor,force being in
the age-group #;-$6 years.
% 0reating opportunities for the 6out3of3the3mainstream! candidates: The IT industry
through its innovative recruitment practices has also hired persons who would not typically be
considered employable such as retired persons and housewives.
2uman Resou'ce De0e#o1men!
The fast growing IT/ITES industry has been struggling with several issues concerning variability
and !uality of talent. The industry has responded to this issue by evolving sustainable and
innovative solutions. Since the educational institutes lagged behind in supplying the re!uisite
number of trained people re!uired for the industry and their curriculum could not ,eep pace with
the changing trends in technology the IT/ITES industry themselves came forward and made
massive in house training investments which helped them power their growth and compete at
par with international giants in the global mar,et. The industry has also gone beyond and
collaborated with the government private educational institutions as well as industry
associations to contribute towards capacity building s,ill development and continual training of
e%isting and potential employees to enhance their capabilities and competitive s,ills. The
industry is also ma,ing efforts to ensure that employees are provided a stimulating and healthy
wor,ing environment for improving their level of satisfaction and productivity.
% 'raining of wor2force: The industry has played a pioneering and pro-active role in
developing the talent pool in the country by forging lin,s with the academia and the
(overnment. It has not restricted its efforts to developing its own employees but is also investing
in raising the overall standard of education. The industry has collaborated with academic
institutions for the bridging the gap between the education imparted to students and the actual
re!uirements in the .ob scenario. <ollaborations have been in the areas of curriculum
development and course design training for students.
0 The top 6 software companies are investing close to 9S) :$7 million in 2375 to train around
"77777 engineers hired during this period.
7
0 <ompanies on an average conduct ";$ training programmers annually with almost 571 spend
on training entry level hires.
% Promoting higher education: The industry has emphasi>ed upon developing its wor,force by
encouraging and aiding up gradation of s,ills and abilities. It has done so through various means
including provision of scholarships as well as training and development activities. Fany
companies have tie-ups with educational institutes for supporting the higher education needs of
their employees and provide full/partial scholarships thus supporting their career goals.
0 ;51 of the companies surveyed offer scholarships for their employees.
% Improving the wor2 environment: Improving the wor, environment/ IT/ITES companies
have been ta,ing the lead in providing a conducive wor, environment to employees leading to
increased productivity and better morale. The facilities provided focus on health of employees by
providing gymnasiumJ yoga/meditation facilities as well as their safety through pic, and drop
facilities.
0 To cater to the need of providing a wor,-life balance particularly to women employees 471
of the companies surveyed offer fle%ible wor,ing hours while 641 offer a wor, from home
option.
Con!'i$u!ing !o socie! !h'ough socia## 'e#e0an! 1'o(uc!s3se'0ices an(
communi! ini!ia!i0es
's socially responsible organi>ations companies in the IT/ITES sector in India have underta,en
various initiatives which have had a significant impact on various disadvantaged sections of the
society. These initiatives have been a combination of the following/
0 )eveloping products and services either as part of their regular business activity or consciously
developing offerings that enable betterment of lives and thus ensure that the benefits of
technology percolate to all levels of the society.
0 9nderta,ing various community based programmes for sustainable development which have a
focus on the marginali>ed and span across a wide range of sectors such as health education rural
development and women and children.
Socia## 'e#e0an! 1'o(uc!s an( se'0ices
Some of the areas where products and services developed by IT/ITES companies have created a
positive impact are as follows/
8
% Education: Fany products have been developed with a view to provide access to high !uality
education and cater to a diverse group of users ranging from adults who are being provided
elementary level education to researchers who collaborate on multi-disciplinary pro.ects.
0 E%amples include computer based functional literacy programmed for providing adult literacy
through innovative means and Aeb =DF technology for ensuring availability of standardi>ed
!uality of education to students.
0 <reating computer based graphical content as well as boo,s that are being made available to
children from rural areas to support their school curriculum.
0 Encouraging pro.ect based learning through the use of collaborative tools and portals for
primary and secondary school ,ids
0 <reating a curriculum Ai,ipedia that can help teachers and students from rural areas to get
access to the current curriculum and content
% Emploabilit and Entrepreneurship: *roducts facilitate improvements in lives of people by
creating a positive impact on the manner in which they earn their employability and
entrepreneurship by providing improved access to accurate information standardi>ed systems
and processes.
0 E%amples include mobile application products to provide critical information related to mar,et
prices weather information and FIS products which help improve operations of micro finance
institutions.
0 Setting up of rural &*Ds which provide training in English spea,ing and computers to the rural
youth thereby creating employment opportunities.
0 <reating applications curriculum and courses for alternate s,ills development in several
verticals li,e animation retail and micro-finance.
0 Dver 677 technical and personality development online courses for wor,force development
% 9ealth: Dne of the critical sector where application of IT tools can help bring about significant
improvements li,e development of systems/services which enable rural population of the country
to access !uality health care.
0 E%ample include a tele-consultation system which enables hospitals to reach out to semi-urban
and rural centers and provide access to specialists at minimum charges and wireless solution for
eye care in rural areas.
0 *roviding service for medical emergencies through a networ, of ambulances fitted with
advance life support systems
0 <reating awareness on +IC and 'I)S through wor,shops conferences blood donation drives
creating computer based applications.
0 Efforts are also on by many companies to mainstream the wor,place policy on +IC H 'I)S
prescribed by the IED and other international agencies.
% #ridging the digital divide: Fany IT/ITES companies have ta,en initiative to ensure that IT
aided growth and development is not restricted to particular sections of the society by developing
software in local languages.
0 E%amples include multilingual software software for visually impaired and te%t less user
interface for illiterate people.
0 Setting up e%ecutive training centers for people with disabilities to increase the employability
and self reliance 0 Setting up of Tele centers/ ,nowledge centers in public-private partnerships
?***@ across rural India and urban slums to ensure inclusiveness of the
underserved communities.
:
Socia## 'e#e0an! communi! ini!ia!i0es
It was observed that the socially relevant community activities underta,en by companies in
IT/ITES industry have a focus on the marginali>ed and span across a wide range of sectors such
as health education rural development livelihood women and children. This is especially
relevant in the light of global efforts to meet the Fillennium )evelopment (oals ?F)(s@ which
include universal primary education empowerment of women reducing child mortality
eradication of poverty and combating diseases such as 'I)S and malaria.
Exhibit 2: Socio-economic contribution of the Indian IT/ITES industry an overview
Some of the ,ey findings w.r.t. socially relevant community initiatives underta,en by IT/ITES
companies are as follows/
0 561 of the companies who participated in the survey underta,e some ,ind of socially relevant
initiatives with ::1 of them having a policy in place/process of forming a policy for such
activities.
0 Fa.ority of the companies ?;$1@ participate in community initiatives through a combination of
ma,ing donations and time spent by volunteers/employees.
0 ##1 of the companies surveyed have a dedicated department/personnel for community
initiatives while in most of the other companies ?;;1@ such activities are being driven by other
functional departments The typical activities carried out by various IT/ITES companies in the
various thematic areas are described in subse!uent sections.
E(uca!ion
It is an established fact that basic education improves the level of well being of society especially
with regard to life e%pectancy infant mortality and nutritional status. +owever only about ".81
of ()* is spent on primary education and $.:1 on education overall in India. The ,ey issues
that plague basic education relate to providing access to all retaining students and ensuring high
!uality in teaching standards. Education is perceived to be the fundamental enabler for cataly>ing
social change and is therefore the most preferred sector for socially relevant initiatives.
1;
0 Dut of all the companies that underta,e socially relevant activities ;51 contribute to the cause
of education.
0 Dut of the companies who have initiative in the education sector the average number of
initiatives per company is 6.
0 Initiatives by the top si% companies in the sector ?in terms of number of lives touched@
impacted almost ".86 million people during #77;-78 The involvement of IT/ITES companies in
the sector has contributed to the overall effort towards improving the !uality of education at
various levels. Efforts made have not only been confined to local regions in which companies
operate but have implications for the country-s e%isting education system as a whole. Some of
the ,ey initiatives underta,en by IT/ITES companies in this sector which attempts to address
the issue of access retention and !uality include/
% $ccess: Fany initiatives have contributed in ensuring that all groups of society especially the
marginali>ed ones are able to access educational facilities include sponsoring schools in rural
areas provision of scholarships to deserving and needy candidates.
% <etention: Initiatives by companies such as provision of mid-day meals
counseling/motivation by employees for deprived groups to send and ,eep their children in
school as well as wor,ing towards ensuring a more child friendly learning environment are some
of the means by which students are motivated to attend school regularly.
% =ualit: IT/ITES companies are ma,ing significant effort to improve the overall standard of
education in the country through a variety of initiatives such as underta,ing curricular research
providing training to teachers improving educational infrastructure such as setting up libraries
and basic amenities. &esides monetary contribution there is also a high level of direct
involvement of companies with employees volunteering to teach students teachers and
organi>ing events. This brings in a sense of engagement among companies and employees apart
from providing tangible value addition to the students. This has also brought about an inclusive
culture with IT/ITES companies now considered as an integral part of the education eco-system.
2ea#!h
The level of public e%penditure on health in India is among the lowest in the world at only 7.41
of ()*. )espite the ma.or advances in science and technology a large number of people
continue to die from preventable diseases such as gastroenteritis malaria diarrhea due to lac, of
awareness poor sanitation and hygiene. +ealth continues to be a priority sector for India-s
development initiatives and after education it is the second largest area of contribution for
IT/ITES companies in terms of number of initiatives beneficiaries and spend. The )eloitte
survey indicates that 6;1 of all companies contribute to the health sector. The percentage is 8#1
for ' and & category companies and :61 for < and ) category companies. Dut of the
companies who have initiatives in the health sector the average number of initiatives per
company is over $. Some of the initiatives of the IT/ITES industry which attempts to tac,le the
issues of awareness access and !uality include/
% $wareness: Some of the IT/ITES companies are contributing to enhance the level of
awareness and sensiti>ing the community regarding good health care practices by underta,ing
campaigns for the prevention of 'I)S anti-smo,ing campaigns setting up information help
lines and other related programs.
11
% $ccess: Several IT/ITES companies have leveraged technology for ensuring access to medical
care by developing telemedicine systems. These systems not only provide access to health care
but also have much lower costs thus hugely benefiting the community.
% =ualit: IT/ITES companies are contributing to improving the healthcare infrastructure by
sponsoring hospitals wards and e!uipments.
En0i'onmen!
The rising levels of industriali>ation across the globe have had an adverse impact on the
environment due to high levels of emissions and deforestation among others resulting in critical
conse!uences such as global warming. IT/ITES companies are playing a ,ey role in promoting
environment friendly practices in their day to day operations as well as underta,ing specific
community lin,ed initiatives. &y creating awareness among their employees and the community
they are also ensuring that a more environmentally conscious and responsive society is created.
Feasures for betterment of the environment have been adopted by companies through both
internal business practices as well as community lin,ed activities. Df the companies who
participated in the survey :#1 of the companies are involved in carrying out environment
friendly practices. The most common initiatives include conservation of resources ?such as
energy water paper@ adoption of environmentally friendly practices throughout the supply
chain tree plantation and conducting awareness programmers. The sector has ta,en a lead in
ensuring that the IT *ar,s/buildings conform to the certified energy conservation measures and
have the potential to earn carbon credits in the future.
O!he' sec!o's
&esides education health and environment IT/ITES companies have been involved in
community based activities in a variety of other sectors such as
0 Empowering the lives of women children and differently- able.
0 9sing technology to improve the !uality of life in rural areas.
0 *roviding livelihood opportunities.
0 Encouraging arts and sports.
The contribution of IT/ITES companies in these areas is mainly through financial assistance
either directly or through G(Ds wor,ing in these sectors providing opportunities for the less
privileged and using technology to improve living standards.
Cha##enges ahea(
The contribution of the IT/ITES industry to India-s economy and society has been well
established and is indeed significant. 's the industry grows in stature and si>e it would be
e%pected to play an even larger role especially in contributing to the marginali>ed and
vulnerable sections of the community. This is even more important as the industry has at its call
the two most important tools for ma,ing this impact a young motivated wor, force and
technology. &oth together can ma,e a significant impact on improving the lives of the poor.
The study highlights that while there are many meaningful and significant initiatives being ta,en
1&
by a number of companies there is both a need to increase the participation by member
companies as well as to wor, towards ensuring that the efforts are able to achieve the ma%imum
impact.
Cha##enges /ace( in un(e'!aking communi! ini!ia!i0es
% >ow level of involvement of small companies: Typically companies in their early years of
operation find it difficult to allocate time and resources to community initiatives due to low
margins and pressure on the bottom line.
% )tand alone and isolated initiatives: Ahile there are several success stories of companies
underta,ing commendable socially relevant wor, companies have not developed an industry-
wide focus for such activities. The e%tent of contribution reach and scalability of initiatives is
thus limited to the e%tent of the investments that each company can commit.
% >imited geographical outreach of social initiatives:
<ompanies usually underta,e social initiatives within the geographical pro%imity of their
organi>ations which are typically urban areas. In a country li,e India where a ma.ority of the
population resides in small cities towns and villages the impact of the initiatives is thus
restricted and relatively less successful in reaching the marginali>ed sections of society.
0 >ac2 of monitoring and evaluation: The survey has revealed that while a large section of
respondent companies participate in community initiativesJ few are involved in measuring the
outcomes or capturing data which would help in assessing the impact of such activities. The lac,
of monitoring and evaluation systems prevents companies from planning activities measuring
Impact ma,ing mid term course corrections.
1+
%ITERATURE RE4IE5
Though agriculture has been the main preoccupation of the bul, of the Indian population the
founding fathers saw India becoming a prosperous and Fodern State with a good industrial base.
*rograms were formulated to build an ade!uate infrastructure for rapid industriali>ation. Since
independence India has achieved a good measure of self-sufficiency in manufacturing a variety
of basic and capital goods. The output of the ma.or industries includes aircraft ships cars
locomotives heavy electrical machinery construction e!uipment power generation and
transmission e!uipment chemicals precision instruments communication e!uipment and
computers. Early planners in free India had to ,eep in mind two aims/ all-round development and
generation of large-scale .ob opportunities. Economic development strategies were evolved with
an eye on these twin ob.ectives.
Ne) In!e'na!iona# Economic O'(e'
's a responsible and progressive member of the international community India is continuing her
untiring efforts to bring about a constructive dialogue between the developed and developing
countries in their !uest for a cooperative approach towards a new International Economic Drder.
India is convinced that the establishment of e!uitable International Economic Drder involving
structural and other
Economic Res!'uc!u'ing
The international confidence in IndiaKs economy has been fully restored. The reforms launched
have made India an attractive place for investment. )uties have been lowered repatriation of
profit made liberal and levels of foreign e!uity raised considerably "771 in case of e%port
oriented industry. Ahile several multinational companies have entered the Indian mar,et some
Indian companies have also begun to gain international recognition. In the field of computer
software India is among the ma.or e%porting nations with an overflow of scientists in the field.
Aith the conclusion of the 9ruguay =ound of Fultilateral Trade Gegotiations India decided to
.oin the new Aorld Trade Drgani>ation successor to ('TT. India hopes that developing
countries will not suffer on account of any protectionism.
NRIs
The government ac,nowledges the great role that the vast number of Indians living and wor,ing
abroad the Gon-=esident Indians can play in accelerating the pace of development in the
country. In the "457s the G=Is contribution through their remittances was instrumental to a
large e%tent in stabili>ing the balance of payment situation.
The G=Is are allowed "771 investment in $: priority and infrastructure facilities on non-
repatriation basis. 'pproval is given automatically on investment in certain technical
collaborations. They can buy Indian )evelopment &onds and ac!uire or transfer any property in
India without waiting for government approval. The 2oreign E%change =egulation 'ct has been
amended to permit G=Is to deal in foreign currency and they can also bring in five ,g of gold.
1,
There are programs to utili>e the scientific and technical talents of the G=Is with the help of the
<ouncil of Scientific and Industrial =esearch.
6e In(us!'
Telecommunications/ Aith rapid advances in technology India now uses digital technology in
telecommunications which derives advantage from its ability to interface with computers. The
present strategy focuses on a balanced growth of the networ, rapid moderni>ation a !uantum
.ump in ,ey technologies increased productivity and innovation in organi>ation and
management. Foving towards self-reliance besides establishing indigenous =H) in digital
technology India has established manufacturing capabilities in both the (overnment and private
sectors.
The private sector is e%pected to play a ma.or role in the future growth of telephone services in
India after the opening of the economy. The recent growth in telecommunications has also been
impressive. Till September "44; the number of telephone connections had reached "#;." la,h
?"#.; million@. Soon every village panchayat will have a telephone. &y "448 cellular services in
most ma.or urban areas were functional and telephone connections were available on demand.
India is lin,ed to most parts of the world by E-mail and the Internet.
Electronics/ The electronics industry in India has made rapid strides in recent years. The country
produces electronics items worth over =s. #77 billion annually. E%ports are also risingJ in "446-
4; they reached =s. :.6 billion. The software e%port during the same year reached =s #.6 billion.
<ompared to "44:-46 the software e%port growth in "446-4; rose by an impressive 871. The
Software Technology *ar, scheme for attracting investments has proved successful. The relative
low cost of production in India ma,es items made in India competitive in the world mar,et.
Some of the ma.or items manufactured in India are computers communication e!uipment
broadcasting and strategic electronics television sets microwave ovens and washing machines.
The compound growth of the computer industry has been 671 during the last five years. 'lmost
the entire demand for floppy dis, drives dot matri% printers <=T terminals ,eyboards line
printers and plotters is met from indigenous production. Aith the availability of trained technical
manpower computers have been identified as a ma.or thrust area. Special emphasis has been
given to software e%port.
The Indian software industry has developed s,ill and e%pertise in areas li,e design and
implementation of management information and decision support systems ban,ing insurance
and financial applications artificial intelligence and fifth generation systems. =ecognition for the
Indian computer software industry has been global. Indian software enterprises have completed
pro.ects for reputed international organi>ations in :$ countries.
In(ia Econom "'o)!h
The rate of growth improved in the "457s. 2rom 23 "457 to 23 "454 the economy grew at an
annual rate of 6.6 percent or $.$ percent on a per capita basis. Industry grew at an annual rate of
;.; percent and agriculture at a rate of $.; percent.
1-
Investment went from about "4 percent of ()* in the early "487s to nearly #6 percent in the
early "457s. India however re!uired a higher rate of investment to attain comparable economic
growth than did most other low-income developing countries indicating a lower rate of return on
investments. *art of the adverse Indian e%perience was e%plained by investment in large long-
gestating capital-intensive pro.ects such as electric power irrigation and infrastructure.
+owever delayed completions cost overruns and under-use of capacity were contributing
factors.
*rivate savings financed most of IndiaKs investment but by the mid-"457s further growth in
private savings was difficult because they were already at !uite a high level. 's a result during
the late "457s India relied increasingly on borrowing from foreign sources. This trend led to a
balance of payments crisis in "447J in order to receive new loans the government had no choice
but to agree to further measures of economic liberali>ation. This commitment to economic
reform was reaffirmed by the government that came to power in Lune "44".
IT in In(ia
Information technology essentially refers to the digital processing storage and
communication of information of all ,inds. Therefore IT can potentially be used in every sector
of the economy. The true impact of IT on growth and productivity continues to be a matter of
debate even in the 9nited States which have been the leader and largest adopter of IT.
+owever there is no doubt that the IT sector has been a dynamic one in many developed
countries and India has stood out as a developing country where IT in the guise of software
e%ports has grown dramatically despite the country-s relatively low level of income and
development. 'n e%ample of IT-s broader impact comes from the case of so-called IT-enabled
services a broad category covering many different ,inds of data processing and voice
interactions that use some IT infrastructure as inputs but do not necessarily involve the
production of IT outputs. India-s figures for the si>e of the IT sector typically include such
services.
Since the numbers on India-s software e%ports are well publici>ed. The latest figures on
the software and services sector indicate that annual revenue was =s :57 billion ?9SM "7."
billion@ in #77"-7# up from =s. $5# billion ?9SM 5.: billion@ in #777-7". This translates into
overall growth of #;1 in rupee terms and #71in dollar terms. Ahile growth rates have been
high India-s IT sector is still small relative both to the world mar,et and to India-s ()*. Aorld
sales of software and services in #777 were M ::7 billion. Even if this did not grow at all India-s
#77"-7# sales would be .ust about #1 of the world mar,et. To compare the software sector to
()* one has to estimate the fraction of sales that constitutes value added. 'ssuming this
fraction to be two thirds would imply that software directly contributed about ".6 1 to ()*.
)espite India-s emphasis on import-substituting industriali>ation it has not developed a robust
world-class manufacturing industry and this includes IT hardware. Fuch of India-s hardware
industry consists of assembly tas,s almost entirely for the domestic mar,et. India-s software
industry is of course more robust N at least in certain areas. Ahile selling pac,aged software to
consumer ?and most business@ mar,ets re!uires economies of scale and scope
15
as well as mar,eting and customer support muscle pro.ect-oriented components of software
development do not do so to !uite the same degree.
Indicators of the strength of India-s software e%port capabilities include the depth of its
base and the breadth of its global reach. There are over #677 Indian software e%porters and
while only the top five ?T<S Infosys Aipro Satyam and +<E@ are N or are approaching the
status of N global brands they together account for only about $61 of software e%ports. The
9nited States remains by far the largest mar,et for India-s software e%ports its share of India-s
software e%ports being ;$1 with Europe coming in at #;1 and Lapan and the rest of the world
accounting for the remaining ""1. Individual firms and organi>ations such as G'SS<DF have
shown themselves to be adept at targeting mar,ets with substantial growth potential such as
(ermany and the reputations built in e%porting to the 9S are proving important.
IT S1ecia# Theo'
IT may have a special role to play in growth and development simply because of empirical
characteristics that apply at the current time. In particular the recent and continuing rapid
innovation in IT ma,e it a dynamic sector that is an attractive candidate as a contributor to
growth for that reason alone much as the automobile industry was targeted by the Lapanese after
Aorld Aar II. I ta,e up this case in the ne%t section. Dn the other hand there may be features of
IT that ma,e it attractive from a theoretical perspective on economic growth. 2or e%ample IT
may be one of the sectors in which countries such as India have or can develop a comparative
advantage. Even if this is so IT is li,ely to share this characteristic with several other sectors.
' somewhat more special characteristic of IT may be that it is a Igeneral purpose
technology- ?(*T@ distinguished by pervasiveness technological dynamism and innovational
complementarities. In this case IT is one of a special few technologies/ other e%amples of (*Ts
include steam and electricity ?both advances in power delivery systems@ and synthetic materials.
2inally IT may be uni!ue in its impact on growth. In this view IT has a special role in the
process of innovation because it affects the rate at which potential new ideas are converted into
additions to the usable stoc, of ,nowledge in ways that nothing else can. The formali>ation of
this special role is based on the model of recombinant growth ?Aeit>man "445@. I briefly
consider each of these possibilities N comparative advantage (*Ts ?and complementarities more
generally@ and recombinant growth in turn
5h In(ia7
Inspired by the Indian IT-ITES success story several other locations have been presented
as alternate options for offshore outsourcing. +owever feedbac, received from several FG<s
having multi-country operations as well as syndicated analyses comparing the various sourcing
locations has revealed that India continues to offer and deliver the best Ibundle- of benefits
sought from global sourcing.
Aith significant potential still untapped it is e%pected that the global sourcing
phenomenon will continue to e%pand in scope scale and geographic coverage. 's global
delivery matures multi-location strategies will become the norm and most sourcing destinations
including emerging locations will grow in si>e. &uilding on its e%isting strengths
17
India will remain the leading destination and will continue to play an important role in
most global sourcing strategies.
S!'eng!hs
Earge +uman =esource Every year appro%imately "4 million students are enrolled in
high schools and "7 million students in pre-graduate degree courses across India. Foreover #."
million graduates and 7.$ million post-graduates pass out of IndiaKs non-engineering colleges.
Ahile #.6-$ percent of them find .obs in other fields or pursue further studies abroad the rest opt
for employment in the IT industry. If the flow from high schools to graduate courses increases
even marginally there will be a massive increase in the number of s,illed wor,ers available to
the industry. Even at current rates there will appro%imately be "8 million people available to the
IT industry by #775.
In(ian E(uca!ion Ss!em
The Indian education system places strong emphasis on mathematics and science
resulting in a large number of science and engineering graduates. Fastery over !uantitative
concepts coupled with English proficiency has resulted in a s,ill set that has enabled the country
to ta,e advantage of the current international demand for IT.
8ua#i! Man1o)e'
Indian programmers are ,nown for their strong technical s,ills and their eagerness to
accommodate clients. In some cases clients outsource wor, to get access to more speciali>ed
engineering talent particularly in the area of telecommunications. India also has one of the
largest pools of English-spea,ing professionals.
*9
S!u( O$:ec!i0e
The ob.ective of this particular study has been to highlight besides the <S= activities of the
member companies the significant economic and social contribution of the Ifor profit- activities
of the industry. The study based on the responses received from the participating companies and
analysis of facts and information available from various other secondary sources has attempted
to bring forth the contribution of the industry both in social and economic terms. ' conscious
attempt has been made to loo, at those instances wherein the initiative has touched the lives of
wider segments of the society instead of being restricted to the direct and immediate sta,eholders
of the industry only. The e%tent of involvement of member companies in socially relevant
community activities varies greatly depending on factors li,e si>e years of e%istence and
commitment of the top management. Ahile initiatives of relatively bigger and renowned
companies are often tal,ed and written about innovative and significant initiatives of smaller
and lesser ,nown companies often do not get the coverage they deserve. Ahile attempting to
highlight and showcase initiatives of member companies cutting across categories the study
aims to fulfill an important ob.ective N to encourage more member companies to participate in
community activities share their success stories and promote creating a greater awareness within
the industry.
*;
RESEARC2 MET2ODO%O"Y
The study methodology involved a combination of secondary research and primary survey of
member companies.
&'ima' su'0e
's a first step a one-pager !uestionnaire was designed to capture some basic information about
the companies and their relevant activities. Individual e-mails were sent to all the member
companies briefing them about the study being underta,en and re!uesting their participation
&ased on the companies which responded to the !uestionnaire and a stratified random sampling
process ?to ensure representativeness of the target universe@ select companies were contacted for
administering a detailed !uestionnaire ?comprising of both close ended !uestions to solicit
facts/information and open ended !uestions see,ing views/opinions@ and conducting discussion
with relevant personnel. The response constituted either or all of the following/
". <ompleting the !uestionnaire
#. )iscussion with the consultants on various !ualitative issues pertaining to the study
$. Sharing of select data sought and/or brochures/articles/newsletters/web-items which would
help provide some of the information relevant for the study.
:. )iscussion with relevant (overnment departments IT/ITES companies and other respondent
categories ?e.g. real estate developers@ in &hubaneswar ?Drissa@ to highlight the impact of
IT/ITES industry in a Tier III city
Secon(a' su'0e
'nnual =eports websites of member companies and documented information shared by
companies who had participated in the survey.
0 Information/reports shared by relevant (overnment )epartments in &hubaneswar.
0 'rticles newspaper clippings reports available in public domain.
Res1on(en! &'o/i#e
2inally "#$ companies participated in the survey most of which are member ?regular/associate@
companies of G'SS<DF and are spread across different areas of operation li,e Software
services IT enabled services *roduct )evelopment Engineering and =H).
<lassifying on the basis of their turnover range the distribution of the "#$ companies is as
follows/
".78 's seen from e%hibit "." ' and & category companies constitute $;1 of the total number
of respondents who participated in the survey. The smaller companies ?) category@ account for
almost :51 of the total number of respondents.
,<
Fost of the companies who participated in the survey are located across the $ main IT/ITES
hubs of the country namely/
0 &angalore +yderabad and <hennai ?Southern hub@
0 G<= ?Gorthern hub@
0 Fumbai and *une ?Aestern hub@
S!'uc!u'e o/ !he Re1o'!
The report is structured as follows/
,*
Con!'i$u!ing To Economic "'o)!h
In the last two decades the Indian IT/ITES industry has contributed significantly to Indian
economic growth in terms of ()* foreign e%change earnings and employment generation.
+owever e!ually significant though not as tangible has been the ripple effect it has created on
the general economic environment in the national and international economic space. The
industry has been the trigger for many firsts and has contributed not only to unleashing the
hitherto untapped entrepreneurial potential of the middle class Indian but also ta,ing Indian
e%cellence to the global mar,et. Some of the direct and indirect impact of the industry in the
economic scenario has been discussed in the following paragraphs.
Di'ec! con!'i$u!ion !o !he In(ian econom
The current and evolving role of IT/ITES industry in India-s economy is well established. The
sector is proving to be the ma.or growth pole within the services sector which in turn drives
several economic indicators of growth in the country. ' few ,ey indicators such as ()* foreign
e%change and employment are discussed in subse!uent sections.
Sha'e in na!iona# "D&
The Indian IT/ITES sector-s contribution to the country-s ()* has been steadily increasing over
the last few years as shown in E%hibit #.". 's a proportion of national ()* the IT/ITES sector
has grown from ".#1 in 2345 to 6.#1 in 2378.
Fo'eign e+change ea'nings
If e%port earnings of the industry are considered as an indicator of contribution to foreign
e%change reserves of the country the IT/ITES industry has cloc,ed an impressive growth of
$#.;1 in 2378. E%port earnings for 2375 stood at appro%imately 9S) :7.7 billion as compared
to 9S) "5.$ billion in 2376 as shown in E%hibit #.#.



,,

Em1#omen! "ene'a!ion
#.78 The direct employment in the IT/ITES sector is e%pected to be #.7 million by end of 2375
and has been growing at a <'(= of #;1 in the last decade as shown in E%hibit #.$. This ma,es
it the largest employer in the organi>ed private sector in the country. 's per data from Finistry
of Eabour H employment ?)(ET@ IT services accounted for almost "#1 of the employment in
organi>ed private sector in #77:.

In(i'ec! im1ac! on !he Economic Scena'io
#.75 The growth of the Indian IT/ITES industry and its resultant contribution to the economic
growth of the country has also had wider impacts li,e indirect employment generation driving
the growth of other sectors fuelling the rise and growth of *rivate E!uity ?*E@/Centure <apital
?C<@ funding spurring the growth of fi rst generation entrepreneurs improving the
product/service !uality level practicing good corporate governance and boosting the image of
India in the global mar,et.
In(i'ec! em1#omen! gene'a!ion
#.74 If one were to consider the multiplier effect on employment it is even more compelling.
Studies have shown that for every one .ob created in the IT/ITES sector four additional .obs are
created in the rest of the economy. Therefore the indirect employment generated by the sector
can be considered to be almost ;.6 million. These include direct service providers to the IT/ITES
industry li,e catering transport and house,eeping security etc. 'mong the various consumption
categories spending on housing/ construction food items clothing outdoor eating/holidays
induce ma%imum employment.
#."7 It needs to be noted that the increased indirect employment opportunities are not restricted
to the educated/s,illed professionals. *ast study by G'SS<DF has shown that nearly 861 of
the wor,force employed by the ma.or service providers to IT/ITES is SS</+S< or less educated.
Thus the IT/ITES sector is providing employment to low s,illed/educated wor,ers as well.
,=
D'i0ing !he g'o)!h o/ o!he' sec!o's o/ !he econom
#."" The growth of the IT/ITES sector is having a considerable multiplier effect on output in the
Indian economy. It has been established that every =e " spent by the IT/ITES sector ?on
domestically sourced goods and services@ translates into a total output of about =s # in the
economy N driven by derived demand from fi rm-level spends ?capital e%penditure as well as
operating e%penses@ and high level of consumption spending by professionals employed in this
sector.
'able &.1: Fultiplier effect of IT/ITES industry on other sectors of the economy ?237;@
)ectors )pending
b I' sector
(?)" bn)
4utput
impact
(?)" bn)
4utput
multiplier
Dther services 6.6 "7.:5 ".4
<onstruction/housing $."6 ;."5 #.7
Transport services ".#5 #.88 #.#
2urnishing/clothing 7.8$ ".64 #.#
<ommunication ".77 ".64 ".;
2ood items 7.6; ".$5 #.6
Entertainment/travel 7.;$ ".$7 #.7
<onsumer durables 7.:$ "."# #.;
+ealth/Insurance 7.65 ".7" ".8
2uel and power 7.:# 7.46 #.$
+otels/restaurants 7.:6 7.46 #."
Education/research 7.;# 7.8; ".#
'utomobiles 7.#8 7.;; #.6
IT infrastructure 7.#7 7.:$ #."
*rinting/publishing 7.74 7.:4 #.#
'otal "6.5$ $".$: #.7
*ast study by G'SS<DF indicated that in 237; out of the total revenue of $$.66 billion 9S)
of the industry "6.56 billion 9S) is spent in the domestic economy via non-wage operating
e%penses capital e%penditure and consumption spending by professionals. This spending in
turn generates additional output of "6.6 billion 9S) via its direct and indirect bac,ward
lin,ages with other sectors and induced effect of wages and salaries. The sectors which are most
impacted through this multiplier effect include housing/construction transport services
communications consumer durables food items and clothing.
,>
Fue##ing !he g'o)!h o/ &E34C /un(ing ac!i0i!
Shift in the Indian (overnment-s economic policy towards liberali>ation led to the genesis of
venture capital operations in India. The worldwide dot com boom and growth in the IT sector
,ic,-started C< activity in India which led to the creation of first generation of India-centric C<
funds li,e <hrys <apital Infinity and &aring *vt. E!uity *artners etc.
They were followed by larger private e!uity players li,e <)< <apital +S&< *vt. E!uity etc.
The main focus was on IT/ITES sector as initial investments in IT/ITES sector had offered
relatively better returns and high growing industries li,e IT offered a continuous flow of good
investments for *E and C<s. Investment in Indian companies which was only 9S) #7mn in
"44; ?6 deals@ shot to 9S) "";7mn ?#57 deals@ by #777 as shown in E%hibit #.:. IT and ITES
sector accounted for ;6.61 of the number of deals by the year #777. +owever soon it was not
.ust the IT/ITES industry that was the focus of the *E/C< fund. E%hibit #.6 indicates that while
IT/ITES still attracted the largest number of deals in #77; other sectors such as healthcare
manufacturing and financial services are now also being able to access this source of funding.
S1u''ing !he g'o)!h o/ /i's! gene'a!ion en!'e1'eneu's
Traditionally corporate India consisted of either large family owned businesses or multinational
companies till the advent of the IT/ITES industry and it was rare to see a first generation
entrepreneur. The shift of focus from physical capital to intellectual capital and the advent of the
*E/C< funding enabled a large number of first generation entrepreneurs with no wealth to try
their hand at starting new enterprises. There are hundreds of success stories across the country.
Success s!o'ies o/ /i's! gene'a!ion en!'e1'eneu's
- Seven so.tware 'ro.essionas incudin! /arayana Murthy started In.osys in 19,1 with an initia
ca'ita o. ony 0S& 2#" (based on current e1chan!e rate)2 3oday4 the co('any e('oys around
%"4""" e('oyees and has a turnover o. around 341)# (n 0S& (56"))
,?
- 7nother .irst8!eneration entre'reneur4 Shiv /adar to!ether with .ive other en!ineers4 aunched
a .ir( (a9in! o..ice 'roducts i9e co'iers4 :industan +o('uters Li(ited (:+L) in 19)%2 In
19,24 :+L ca(e out with its .irst co('uter2 3oday4 :+L derives ,"; o. its revenue .ro(
co('uters and o..ice e<ui'(ent and is the /o22 in the =+ (ar9et in ter(s o. (ar9et share2
The demonstrated success of these entrepreneurs created an aspiration among the middle class
and spurred them to e%ploit their potential with confidence. IT/ITES firms brought in a new
concept - first generation entrepreneurs who were not related to each other and didn-t share the
same language or bac,ground who come together as professionals to create a first-generation
company.
0 's per information available with Software Technology *ar,s of India ?ST*I@ "476 new units
were registered during the period 237" to 2376 most of which industry e%perts believe are
li,ely to be set up by first generation entrepreneurs.
0 The Indian entrepreneurship trend was also seen in the Silicon Calley. ' study by 9< &er,eley
professor found that in "445 <hinese and Indian entrepreneurs ran #6 percent of Silicon
Calley-s high-tech businesses accounting for 65777 .obs and more than M";.5 billion in sales.
#."8 Ahile many first-generation entrepreneurs became billionaires in the process the wealth
created was not restricted among the founders alone. The practice of Employee Stoc, Dption
*lan ?ESD*@ first started by the IT/ITES industry before it was adopted by many other industries
as well shared this wealth among employees as well thereby creating many salaried millionaires.
&5
Im1'o0ing !he 1'o(uc!3se'0ice @ua#i! #e0e#
Indian IT/ITES companies have evolved from being preferred low-cost solution providers to
becoming high value partners for companies across the world. The &*D sector too is maturing
rapidly which is apparent through the volume and comple%ity of wor, being outsourced to India.
In line with this evolution companies are now redefining/setting global benchmar,s in !uality in
order to differentiate and attain business e%cellence.
The fact that these companies cater to and compete with global players has led to their adopting
the highest !uality standards. This high !uality of services and products has been the driver and
sustainer of growth. This has helped move India out of the mediocrity low !uality image and
has in fact raised the bar for other industries as well.
Indian e%ports had traditionally been restricted to low end non-technology oriented products li,e
gems and .ewelleries and garments/apparels. It is with the advent of IT/ITES industry that the
world began to recogni>e that Indian products and services could also compete and win against
global competitors on !uality parameters.
Several IT/ITES companies in India irrespective of their si>e have been able to demonstrate
their commitment towards achieving and maintaining high !uality standards by receiving !uality
certifications as depicted in E%hibit #.;.
,A
The high !uality standards adhered to by IT companies in India can also be gauged from the fact
that a large number of companies source their technology related services from India. Gearly
861 of the 2ortune 677 and 671 of (lobal #777 corporations source their technology related
services from India.
India is now also emerging as a research and development centre for some of the largest IT/ITES
companies in the world once again demonstrating that India now stands for !uality. 'ccording
to data from the Finistry of <ommunications and Information Technology out of the #5
companies that have outlined their investment plans "8 have already infused capital and si% of
these have committed over 9SM " billion each towards their India operations.
Com1anies )i!h RBD o1e'a!ions in In(ia
0 )$P >abs India is S'*-s largest development facility outside (ermany.
0 9S-based )nopss Inc a 9SM "."-billion semiconductor design software firm plans to invest
9SM 67 million in its India operations which will be used to e%pand =H) facilities in the cities
of &angalore and +yderabad over the ne%t three years.
0 0ambridge )ilicon <adio ?<S=@ a provider of personal wireless technology including
&luetooth and 2F receivers has its largest =H) centre in India outside the 9B.
0 $dobe )stems has 477 people in its India =H) operations O the highest number outside the
9S.
0 Intel has a staff of $777 people in India the ma.ority in its =H) unit.
F'on! Runne' in 1'ac!icing "oo( Co'1o'a!e "o0e'nance
Some of the Indian IT/ITES companies have played a role in institutionali>ing good corporate
governance practices by creating a positive pressure within the industry as well in other
industries to adopt global standards.
In a ma.ority of the cases the drivers behind companies adopting increased disclosures have
been the need to gain overseas customer credibility access global talent pool and underta,e
global FH' activity. Ahile this has been true since companies operated in a global mar,et
research indicates that in case of some Indian IT companies e%posure to global mar,ets was a
result of rather than the cause for adopting global corporate governance standards.
The industry has been a front runner in practicing good corporate governance and their
commitment to infuse it in their business activities have led to a movement within the industry
with more and more companies adopting good corporate governance practices with several
companies being recogni>ed and rewarded for these initiatives. Some of the ma.or IT/ITES
companies in India who have in recent times received recognition for their corporate governance
initiatives are as mentioned below/
0 Satyam Computer Services Ltd. - Earned the top spot in two categories in the #778 Investor
=elations (lobal =an,ings by FP <onsult ?number one in India and among the top five in the
'sia/*acific region in the financial disclosure procedures category and number one in the 'sia/
*acific region in the corporate governance category@.
,9
0 Wipro 3 Gamed amongst 2ive &est <orporate (overnance *ractices in 'sia/*acifi c by
Technical <riteria at Investor =elations (lobal =an,ingQ and 'wards #778 by FP <onsult.
0 Infosys 3 'warded the Institute of <ompany Secretary-s of India ?I<SI@ Gational 'ward for
E%cellence in <orporate (overnance- #776
0 TCS 3 'warded the Institute of <ompany Secretary-s of India ?I<SI@ Gational 'ward for
E%cellence in <orporate (overnance- #778
Boos!ing !he image o/ In(ia in !he g#o$a# ma'ke!
Aidely travelled Indians have watched with pride as different countries and different people loo,
at India and Indians with hitherto un,nown respect and admiration. The Indian IT/ITES industry
has contributed to what brand IIndia- stands for in today-s global mar,et. Some significant
achievements of the Indian IT/ITES industry which have contributed include/
0 'c!uisition of overseas companies by Indian IT ma.ors
0 Eisting of Indian IT companies in global stoc, e%changes
0 Indian IT products e%ploring new hori>ons
Ac@uisi!ion o/ o0e'seas com1anies $ In(ian IT ma:o's
India Inc. is witnessing an ac!uisition spree led by the IT/ITES industry. In #77; Indian
companies announced "#6 foreign ac!uisitions with a value of nearly M"7 billion. This is roughly
an eight-fold increase from #777. The IT/ITES sector saw the lion-s share of outbound FH'
deals with #$1 of the total number of international ac!uisitions followed by
pharmaceuticals/healthcare/biotech ?":1@
%is!ing o/ In(ian IT com1anies in g#o$a# s!ock e+changes
Eisting on the 9S stoc, e%changes is not easy for Indian companies as they follow accounting
standards that are significantly different from 'merican standards of accounting.
&:
'able &.&: E%amples of overseas ac!uisitions by Indian IT/ITES companies in recent times
Indian 0ompan $c1uired 0ompan
Aipro 0 IT infrastructure management company
Infocrossing Inc. ?9S'@ in 78
0 <hip design fi rm @ew>ogic 'echnologies
?'ustria@ in )ec 76
0 Semiconductor design fi rm 42i 'echno
0entre )ingapore Pte >td in Sept 78
FindTree <onsulting
Etd
0 *urple Cision Technologies *vt. Etd a
fully owned subsidiary of global electronic
design company 'E) Electronic
)olutions )$ ?2rance@ in 78
Satyam 0 Gitor (lobal Solutions Eimited of 9B
a niche consulting fi rm providing
Infrastructure
Fanagement Services ?IFS@ in
Dctober #778
0 <itisoft an 9B based investment
management
consulting fi rm in #776
T<S 0 T<S Fanagement ?formerly called Total
<ommunication Solutions@ a privatelyowned
consulting company in 'ustralia
in Govember #77;
0 2GS a Sydney-based software solutions
company in #776
Infosys 0 In #778 Infosys bagged a M#67 million
contract from <oal Philips Electronics
@/ which will include Infosys ta,ing
over *hilips- fi nance and administration
business process outsourcing ?&*D@
centers spread across three countries
N India *oland and Thailand
Sas,en <ommunication
Technologies Etd
0 Eeading provider of wireless =H) and
testing services #otnia 9ightech 4
?2inland@ in Luly 7;
Faste, 0 9.S.-based software solutions company
Entegram >>0 in Dct 76
Sube% Systems 0 Telecoms revenue assurance company
9B-based $Aure )olutions in 7;
+;
It thus re!uires adhering to one of the most stringent accounting norms in the world which in
turn improves corporate discipline. Eisting in global stoc, e%changes helps build a strong brand
outside India and is often a part of companies- overseas growth strategy.
Infosys was the first Indian company to list on the G'S)'R Stoc, Far,et in Farch "" "444.
Infosys Technologies is also the only Indian company in the G'S)'R Stoc, Far,et Inc-s new
listing tier the G'S)'R (lobal Select Far,et for public companies. <ompanies listed here
meet the highest listing standards in the world with respect to measures such as mar,et value
li!uidity and earnings.
Infosys was soon followed by Satyam Infoway which offered its shares on G'S)'R in Dctober
"444. In #777 Aipro Etd-s 'merican )epositary =eceipts were listed on the Gew 3or, Stoc,
E%change. Some other Indian IT companies which have been listed in G'S)'R subse!uently
include *atni <omputer Systems AGS +oldings Etd ESE.
In(ian IT 1'o(uc!s e+1#o'ing ne) ho'iCons
'n indicator of the growing influence of Indian IT products is the partnership between various
Indian IT firms and high profile events/brands and use of IFade in India- software products
worldwide.
% Tata Consultancy Services has entered into an agreement with Scudery 2errari to provide the
entire software to the Italian automa,er-s 2ormula Dne cars. T<S will wor, with the 2errari 2"
team to provide IT-based solutions before during and between races.
% Satyam is the first Indian company to sign up as a 2I2' Aorld <up Sponsor. This agreement
awards Satyam global rights for the #7"7 2I2' Aorld <up in South 'frica the #7": 2I2'
Aorld <up in &ra>il and the two 2I2' <onfederations <ups which fall within the #778-#7":
period as the sponsor and official information technology ?IT@ services provider.
% i-Flexs homegrown flagship ban,ing product I2le% cube- has been powering over #57 ban,s
across "77 countries including big names li,e the IF2 )&S and 9nion &an, of Swit>erland.
2le% cube has been ran,ed the Gumber Dne selling ban,ing pac,age in the world for the year
#77# by International &an,ing Systems of the 9nited Bingdom.
=*
A Su'0e o/ In(iaDs &'i0a!e Sec!o' E 8ues!ionnai'e
This survey has T+=EE parts and !uestions. Ae appreciate your time and effort in finishing this
survey. &ecause the results from this survey will be used to conduct scientific economic
research we appreciate your candid and detailed answers and suggestions ?please feel free to
attach your comments on separate sheets@.
Part I: General Information
=espondent-s name and contact information
1.1.1 3our name/
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.1.& Title/*osition in the firm/
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.1.+ Game of your company/
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.1., Failing address of company/
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
<ontact Information/
1.1.- Dffice *hone/ TTTTTTTTTTTTTT
1.1.5 E%tension/ TTTTTTTTTT
1.1.7 Dffice 2a% number/ TTTTTTTTTTTTTTTTTTTT
1.1.8 3our cell phone ?or other phone U we can reach you@/ TTTTTTTTTTTTTTTTTTTTTTT
Dther contact information/
1.1.: E-mail address TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.1.1; Aebsite TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.&.1 .Ahen was your firm founded and registered TTTTTTTTTV
1.&.& Aho is ?are@ the founderV
*lease give the names of up to two other ma.or founders ?person or organi>ations@
1.&.+ TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.&., TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
1.+ Ahat is the current legal form of your firm ?please select DGE choice that best describes
your firm@V
a@ 9nlisted public company
b@ *ublicly listed and traded company
c@ <ooperative enterprise
d@ *artnership ?general or limited@
e@ Loint-venture with G=I investors
f@ Loint-venture with non-G=I foreign investors
g@ Individually owned/proprietorship
h@ Got registered
i@ Dther forms please specify TTTTTTTT
+&
$ssets 3ear #77:-6 3ear #77$-: 3ear #77#-$
<urrent 'ssets
<ash
=eceivable accounts
Inventories
Dther
2i%ed 'ssets
*roperty plant and e!uipment
Eess depreciation
Intangible assets and others
'otal $sset
>iabilit and E1uit
<urrent liabilities
'ccounts or notes payable
'ccrued e%penses
Eong-term liabilities
E!uity
'otal liabilit
13-. Income )tatement of your firm ?you can ignore the following table if you can provide us
with copies of your income statements for the last $ years@. 'll figures are in =s "77777 ?one
la,h@.
#77:-6 #77$-: #77#-$
'otal operating revenues
<ost of goods sold
Selling general H administrative e%penses
)epreciation
4perating income
Dther income
Earnings before interests and taxes
Interest e%penses
Ta%es
@et income
=etained earnings ?for reinvestment@
)ividends
++
Part II. 0orporate .inancing and Investment
.inancing )ources:
&31. +ow did the firm/business get started ?select all that apply@V
a@ Started with all family-owned store/shop/factoryJ
b@ Started with a few partnersJ
c@ *urchased the businessJ
d@ Dthers please specify TTTTTTTTTTTTTTTTTT.
&.&.1 )id the founders need to apply for a license to start up the firmV
3es or Go TTTTTTTTTTT
&.&.& If 3es how long did it ta,e to get the licenseV
a@ Eess than " monthJ
b@ " N # monthsJ
c@ # N $ monthsJ
d@ $ N : monthsJ
e@ Eonger than : months.
&.&.+ )id the founders face difficult ies to get the license and/or to register the business ?select
all that apply@V
a@ Ta,es too long to complete the processJ
b@ Too many different procedures/stamps re!uiredJ
c@ <osts too muchJ
d@ Cery difficult to deal with government officials at various officesJ
e@ Dther problems please specify TTTTTTTTTT
&.+.1 In your opinion which of the following factors new firms entering your industry will faceV
?Select all that apply@
a@ it ta,es too long and/or costs too much to apply for a license ?government bureaucracy@
b@ high ta%es high !uality standards ?regulatory hurdles@
c@ bad transportations poor communications ?infrastructure problems@
d@ difficult to find suppliers/customers ?high information costs@
e@ resistance from e%isting firms
f@ difficult to raise funds from state-owned ban,s and financial mar,ets
g@ Dther factors please specify TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
&.+.& To get around ?a@ and ?b@ above do other firms in your business
". &ribe government officials
#. +ire legal advisers to negotiate with government officials
$. 2ind friends of the government officials and as, them to negotiate on behalf of the firm
:. Dther methods please specify TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
&3, 'mong the following start3up financing sources please ran, the importance of E'<+
?In terms of the fraction of the total funding raised@
?*lease fill in each brac,et with a numerical score of " N :@
". little importance ?less than "71@J
#. somewhat important ?"71 to #61@J
$. very important ?#61 - 671@J
:. e%tremely important ?more than 671@
W X 2unds raised within founder-s family including founder-s own savings
W X 2unds rais ed from founder-s close friends
+,
W X Eoans from state-owned ban,s ?short-term and long-term@
W X Eoans from private credit agencies and individuals
W X 2unding from state budget or local government
W X Trade credits
W X Centure capital
W X Investment from G=Is
W X 2oreign direct investment ?non-G=I@
W X Dther channels please specify TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT
&.-.1.1 If funds raised from founder-s close friends is one of the ma.or funding sources when
the business started ?otherwise s,ip this !uestion@ was there a written contract between the
founders and their friendsV
3es or Go TTTTTTT.
&.-.1.& Ahat about a verbal contractV 3es or Go TTTTTTTTTTT.
&.-.1.+ Ahat was the form in which the founders- friends invested in the firm when it started
?select all that apply@V
a@ *rivate e!uity/profit sharingJ
b@ *ersonal loan with pre-specified interest rate and maturityJ
c@ *ersonal loan without clearly specified interest or maturityJ
d@ General partnership ?and unlimited liability@ between the investors and the foundersJ
e@ Limited partnership ?and limited liability@ between the investors and the foundersJ
f@ Dther forms please specify TTTTTTTTTTTTTTTTTTT.
&.-.&.1 If G=I investment is one of the ma.or funding sources when you started ?otherwise s,ip
this !uestion@ was
there a written contract between the firm and the investorsV
3es or Go TTTTTTT.
&.-.&.& Ahat was the form in which these investors invested in your firm when it started ?select
all that apply@V
a@ *rivate e!uity /profit sharing
b@ *ersonal loan with pre-specified interest rate and maturityJ
c@ *ersonal loan without clearly specified interest nor maturityJ
d@ General partnership ?and unlimited liability@ between the investors and the foundersJ
e@ Limited partnership ?and limited liability@ between the investors and the foundersJ
f@ Dther forms please specify TTTTTTTTTTTTTTTTTTT
&.-.+ *lease ran, the degree of difficulty to access the following financing sources during the
growth period of your firm using a score or " - :/
" N very easy and low costJ # N relatively easy and moderate costsJ
$ N difficult and costlyJ : N e%tremely costly and difficult
W X =aising funds within family and close friends of the ownersJ
W X Short-term ban, loansJ
W X Eong-term ban, loansJ
W X Eoans from special institutions such as SI)&I and S2<s
W X Trade creditsJ
W X *rivate e!uity or debt from investors within IndiaJ
W X G=I InvestmentsJ
W X 2oreign direct investment ?non-G=I@J
+-
&.-.,.1 In your opinion is it easy for a firm li,e yours to get funding support from government
financial institutions ?2Is@ V
3es or Go TTTTTTTT.
&.-.,.& Ahich of the following factors would facilitate the process of obtain funding from the 2Is
?select all that apply@V
a@ 2irm is profitable and has good growth opportunitiesJ
b@ Si>e factor/ easier for large firm to get government support even if it is not profitableJ
c@ Ahether firm operates in protected industriesJ
d@ Business connections between firm and government officialsJ
e@ *olitical or personal connections between firm and government officialsJ
f@ Dther factors please specify TTTTTTTTTTTTTTTT.
&.-.-.1 In the first year that you reinvested your firm-s net income ?earnings after-ta% and
interests@ what was the
fraction of net income reinvestedV
a@ 7 N #61J
b@ #61 - 671J
c@ 671 - 861J
d@ 861 - "771.
&.-.-.& In the same year as mentioned above did your firm pay out dividends ?or similar
payments@ to the firm-s
e!uity holders ?or owners@V 3es or Go TTTTTTTTTTTTT.
&.-.-.+ If 3es what was the fraction of net income that was paid out TTTTTTTT1V
&.-.-., If Go did you pay dividend ?or similar payments@ to the firm-s e!uity-holders ?or
owners@ in the past 6
yearsV 3es or Go TTTTTTTTTTTTT.
&.-.5.1 If trade credits was one of the main financing sources during your firm-s growth period
how many
customers/clients did you have a trade credit account ?please give number@ TTTTTTTTV
&.-.5.& Aere there any written contractsV
a@ Go written contractJ b@ 'll written contractsJ c@ Some are written some are not.
&.-.5.+ +ow many suppliers did you have a trade credit account ?please give number@ TTTTTTTTV
Investment evaluationB planningB and capital structure:
&.5.1 )id your firm have ma.or investment pro.ects in the past # yearsV
3es or Go TTTTTTTT
&.5.& If 3es for the largest investment pro.ect what is the total scale TTTTTTTTTTTTTTTTV
&.5.+ Ahich of the following were sources of financing in terms of financing the pro.ectV ?select
all that apply@
a@ =etained earnings of the firm
b@ Eoan from state-owned ban,s
c@ Eoan from non-state ban,/financial institutions
d@ Eoans from special institutions such as SI)&I and S2<s
e@ Trade credits with e%isting business partners
f@ *rivate e!uity or bonds from investors within India
&.7.1 )oes your firm have a target debt ratioV 3es or Go TTTTTTTTTTTTTTTTT.
+5
&.7.& If 3es how important are the following factors affect your choice of the debt levelV
" O not importantJ # O somewhat importantJ $O important.:-------very important
W X 2irms- anticipated growth and funding needsJ
W X <ash on hand
W X <osts of financial distress and ban,ruptcyJ
W X Cariations in firm-s earnings and cash flowsJ
W X 2irm-s credit rating ?if applicable@J
W X Dther factors please specify TTTTTTTTTTTTTTTTTTTTT.
Inter3corporate borrowing(lending
&.8.1.1 Ahat proportion of your debt is Gon-collaterali>ed WTTTTX
&.8.&.& Ahat proportion of your debt is from other corporate bodies ?not ban,s/2Is@ WTTTTX
2or borrowings from other companies what proportions come from following sources/
&.8.&.1 Suppliers WTTTTX
&.8.&.& <ustomers WTTTTX
&.8.&.+ 9nrelated companies owned/managed by family members/friends WTTTTX
&.8.+ Ahat is the average interest rate paid by your comp any on such borrowingsV
TTTTTTTTTTTTTTTT
&.:.1 )oes your company also lend to other companiesV 3es or GoV
&.:.& 're such loans collaterali>edV 3es or GoV
&.:.+ Ahat is the average interest rate earned by your company on such lendingV
TTTTTTTTTTTTTTTT
&.1;. If your firm lends money to another firm but the repayment is not made what would you
do to secure the
repaymentV
a@ It never happens because I screen all borrowers/clients carefullyJ
b@ Sei>e the collateral and renegotiate the contractJ
c@ Threat to go to court but allowing renegotiationJ
d@ (o to court without renegotiationJ
e@ Sei>e the borrower-s personal assets yourselfJ
f@ Dther actions please specify TTTTTTTTTTTTTTTTTTT.
<elationship with financial ins titutions
&.11.1 +ow many ban,s or other financial institutions ?please give number@ currently have
outstanding loans to your firmV
&.11.& Ahich type of financial institutions are they ?select all that apply@V
a@ S&I group ban,s
b@ Dther public-sector ban,s
c@ SI)&I /S2<
d@ *rivate ban,s or trust saving or credit agencies/companies
f@ Dther financial institutions please specify TTTTTTTTTTTTTTTTT.
&.11.+ If you have a choice which of the following financial institutions would you most prefer
to borrow fromV
a@S&I group ban,sJ
b@Dther public-sector ban,sJ
c@SI)&I/S2<
+7
d@*rivate ban,s or trust saving or credit agencies/companiesJ
e@ 2oreign ban,sJ
f@ Dther financial institutions please specify TTTTTTTTTTTTTTTTT.
&.1&.1 2or the largest loan on your boo,s does the lending ban, re!uire certain
operating/profitability standards or improvement in these conditions in order to approve loansV
3es or Go TTTTTTT.
&.1&.& 2or this loan how long did it ta,e for your loan application to get approvedV
a@ Eess than " month
b@ " - # monthsJ
c@ # N $ monthsJ
d@ longer than $ months.
&.1+ +ow often does the staff of the ban, that issued the largest loan to your firm contact your
firm to in!uire about the investment pro.ect financed by the loanV
a@ staff from the ban, is actively involved with the pro.ectJ
b@ once a monthJ
c@ once a !uarterJ
d@ once in si% months or less fre!uent
e@ never contacted the firm once after the loan was issued
$ccess to capital mar2ets
&.1, In your opinion what are the benefits for a firm li,e yours to go public ?select all that
apply@V
a@ Dnce listed will have easy and cheap access to future funding
b@ Dnce listed will have large scale funding
c@ <an e%pand business to more customers
d@ <an attract more foreign investors or Indian investors whom the firm cannot reach as a private
firm
e@ Increase the reputation of the firm and its products and future profits
f@ Increase the reputation and pay of the firm-s top e%ecutivesJ
g@ Dther benefits please specify TTTTTTTTTTTTTTTTTTTT
&31-.1 In your opinion what are the costs of going public for a firm li,e yours ?select all that
apply@V
a@ Too much bureaucracy ma,es it very time consuming
b@ E%pensive fees must be paid to government agencies and investment ban,s
c@ 2irm must disclose valuable financial and business information to outsiders and potentially
can be revealed to
competitors
e@ Dther costs please specify TTTTTTTTTTTTTTTTTTTTT
&.1-.& Aill you ever consider going publicV 3esTTTT GoTTTT FaybeTTTTT
+8
Part III: 4wnershipB Propert <ightsB and 0orporate Governance
+31. Aho is currently the ma.ority owner or the person/organi>ation that owns the largest
fraction of your firm-s assetsV
a@ The founder and/or his family
b@ 2ounder plus ?the number of@ TTTTTTTTT partners ?outside of the founder-s family@
c@ <ollectively owned/ individual owners along with community or local government or an
institution such as hospital or school etc.
d@ Eocal or central governmentJ
e@ 2oreign investors ?including G=Is@
f@ ' group of owners including individuals and organi>ations but the specific ownership
structure ?i.e. which party owns what fraction of the firm-s assets@ is not clear
g@ Dthers please specify TTTTTTTTT.
+.&.1 )oes your firm have limited liabilitiesV 3es or Go TTTTTTT.
+.&.& If a firm li,e yours has limited liabilities what will happen when the firm can not honor the
debt paymentV
a@The debtholders will have full control of the firm-s assets and run the firm if necessary
b@The firm will be li!uidated immediately and the proceeds of asset sales will be distributed
among debtholders and other owners of the firm
c@The firm-s current managers can still run the firm but will be under close monitoring of the
debtholders
d@The firm-s current managers will have full control of the firm and will renegotiate with
debtholders to reduce debt burden
e@Dthers please specify TTTTTTTTTTTTTTTTTTTTT
+.+.1 . If a firm li,e yours is sub.ect to unlimited liabilities and when the owners can not honor
all the debt payment in your opinion how concerned will the owners be about the following
events occurring ?please give a score of " - $ for E'<+ !uestion@V
" O Got concerned
# O somewhat concerned
$O very concerned
W X Eose reputation ?face@ among friends and business partnersJ
W X Eose some or all of their personal assetsJ
W X &e sentenced by a court to go to .ailJ
W X *ersonal safety
+.+.& If a firm li,e yours is sub.ect to unlimited liabilities and the owners thin, that their
personal assets may be ta,en
away from them by creditors what could the owners do to protect the owners- personal assets in
that situation
?please select all that apply@V
a@Try to negotiate with debtors for debt e%tensionJ
b@)eclare personal ban,ruptcy and hire a lawyer and prepare to go to courtJ
c@Dther actions please specify TTTTTTTTTTTTT
+:
+., If the <ED or top manager is not a partial owner of the firm how much discretion can the
manager have in ma,ing business/operation related decisionsV
a@ 2ull discretion/ can do whatever he/she decidesJ
b@ Some to a lot of discretion/ needs to get approval from owners on critical decisionsJ
c@ Eittle discretion/ needs to consult the owners for most decisionsJ
d@ Go discretion at all always consults the owners for all decisions.
+.-. If a firm li,e yours is in financial distress how would it pay the employeesV
a@ Dwners will renegotiate to delay part or all of the paymentsJ
b@ 9se non-cash payment methods e.g. firm-s own productsJ
c@ Dwners will cut payments to some employees replacing full-time employees by part-time
employees or lay off
some employees to reduce costsJ
d@ Dthers please specifyTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT.
+35 If a firm in your business is not well managed in your opinion how li,ely will it be
for that firm-s assets ?or liabilities@ be purchased by other firms or individualsV
a@. Cery li,elyJ b@. Somewhat li,ely c@. Got li,ely.
'han2 ou ver much for ta2ing time to finish this surve. Cour input will greatl enhance
the 1ualit and impact of our research. De wish ou success and prosperitE
"ate:
"etails of Interviewer
Name:
ffiliation:
!-mail ddress:
"#one:
><
RE"IONA% DE4E%O&MENT
+istorically IT/ITES companies were clustered in Tier I cities. Fost large international
companies ?li,e (E I&F and Ficrosoft@ as well as Indian IT/ITES companies set up their initial
operations in such cities. +owever IT/ITES/&*D companies located in metros are now shifting
to smaller cities driven by a need to reduce costs and e%pand the talent base. Ahile some of
these cities ?such as +yderabad and *une@ have become an IT/ITES hub many others are still
raw in terms of being an IT/ITES destination.
E+hi$i! =.*- Eme'gence o/ !ie' ii3iii Ci!ies in In(ia
+owever efforts are being made by state governments to promote these cities for entry of new
companies. The E%hibit $." provides an illustrative depiction of the pan India presence of the
IT/ITES industry.
41
"'o)ing 1'esence o/ IT3ITES com1anies in sma##e' ci!ies an( i!s im1ac!
The G'SS<DF-)eloitte survey indicates that a large number of companies have a presence in
Tier II/III cities. The E%hibit $.# provides the survey results with respect to percentage of
companies present in tier II/III cities. In addition to the cost advantage in Tier II/ III cities a
basic level of talent ade!uate physical and social infrastructure and suitability of business
environment are necessary factors for a company to consider e%panding into a Tier II/III city.
The entry of companies ultimately leads to further improvements in each of these areas.
<onsidering that a ma.ority of Indians reside in smaller cities and towns the level of impact
created by e%pansion of companies into such locations is significant. IT/ITES industry-s inroad
into smaller cities underpins socio-economic development in these regions. It also encourages
State (overnments to ensure development in their respective regions in order to attract IT/ITES
companies. Bey areas which are impacted as a result of this trend include education employment
and infrastructure.

>,

It needs to be mentioned that while the phenomenon of moving into smaller towns and cities is
relatively new IT/ITES companies have been recruiting their employees from smaller
towns/cities which comprises as much as 671 of new recruits for some bigger companies.
2or the purpose of analy>ing the impact of IT/ITES industry growth in a region in details the
city of &hubaneswar has been selected and studied in detail.
43
Bhu$anesh)a' Case S!u(
&hubaneswar the capital of the state of Drissa has emerged as a preferred destination for
leading IT/ITES companies in recent years. This has in turn propelled socio-economic
development of the city benefiting its residents in many ways.
IT3ITES In(us!' "'o)!h
's an indicator of growth of IT/ITES industry in Drissa the number of units registered with the
ST*I ?Software Technology *ar,s of India@ as well e%porting units in &hubaneswar has risen
steadily since #77$-#77:. The E%hibit $.: provides the growth in number of registered and
e%porting units in the state. Several companies loo,ing at e%panding outside the big cities have
set up operations in &hubaneswar. The growth of IT/ITES sector in the city and its impact on
e%port earnings employment education and infrastructure have been analy>ed in details in the
following sections.
Im1ac! on E+1o'! Ea'nings
Software e%ports from the state reached "5$mn 9S) in #77;-78 a ;71 rise over e%ports in
#776-7;. The state has a target of almost 677mn 9S) in software e%ports for the year #7""-"#.
Im1ac! on Em1#omen!
Aith the entry of several large and small companies in the city employment opportunities in the
IT/ITES/&*D sector have grown manifold. 'ccording to a study by )TEHT Drissa and ST*I
&hubaneswar demand for IT related manpower in Drissa was ""8777 in #778 against a supply
of 6:$7$. 881 of the total demand is for degree ?&E &.Tech F<' F&'@ level students.
'ccording to certain estimates the pro.ected manpower demand of the IT/ITES industry would
reach around :$7777 by #7""-#7"# roughly four times the demand in #778. The government as
well as the industry is ma,ing attempts to bridge the demand supply gap by setting up new
institutions improving !uality of education encouraging industry-academia collaborations etc.
'lso many of the locals who had migrated to foreign countries or other parts of the country are
now choosing to return due to availability of multiple employment opportunities and improved
standards of living in the city. These persons would be able to meet the lateral level re!uirements
in the various companies in the city.
In(i'ec! Em1#omen!
In addition to re!uirement of manpower for the basic business operations companies re!uire
services of other agencies for functions such as security transport house,eeping and catering.
These sectors have also benefited from growth in the IT/ITES industry. Beeping in view the
overall demand of nearly :$7777 employees in the IT/ITES sector in #7""-"# and considering
the impact of the multiplier effect it may be assumed that "8#7777 .obs would be created in the
rest of the economy in Drissa ma.ority of which would be within &hubaneswar.
>>
Sna1sho! o/ 6e IT3ITES3B&O Com1anies in Bhu$anes)a'
Big > In(ian IT Com1anies
". Infosys- &egan operations in "44; with around $7 employees. (rown significantly in last
decade currently employs around $777 employees in the city.
#. Satyam- &egan operations in "44; at present employee base of around 677. *lans to recruit
around "777 employees in #775.
$. TCS- *resent in the city since "444J began e%ports in #778. +as an employee base of around
"57 at present. *lans to grow to around "677 in the coming year.
:. Wipro- *lans of growing to around "777 employees in #775 from about $7 at present.
- O!he' %a'ge &#ae's
". $enpact- 2oundation stone for 677777 s!uare feet &*D facility for :777 employees was laid
in Govember #778.
#. I%&- +as set up Small and Fedium &usiness operations in the city.
$. &indTree- *lans to establish development centre for =H) consultancy and software
development. Eong term goal of recruiting about 6777 software professionals.
:. ICICIs !astern re'ion #u( for (ac) office operations-
To be commissioned in #774 with capacity for "6777 employees. 'bout "7777-"#677 people
will be employed in the &hubaneswar hub in phases.
6. ricent- Set to open a )evelopment <entre with li,ely employee strength of around "#77.
'lso plans to set up a global training centre which will train "777 students to start with.
;. "erfectus- *lans to set up a 6777 seater IT/&*D unit.
8. Contiloe Films- Set to start operations.
5. &ed*rite India- +ealthcare &*D which will engage #77 trained professionals initially to raise
headcount to 677 by #775.
>?
Im1ac! on E(uca!ion
The rise in demand for !ualified manpower has had a beneficial impact on educational
infrastructure of the city. The number of engineering colleges in the state has risen considerably
from around ten to twelve five years ago to around forty five at present. &oth (overnment as
well as private institutes are being set up. Supply of IT professionals in the state has grown
significantly between #77" and #778. Total number of IT professionals in the city was 6:$7$ in
#778 against merely 6#;" in #77".
46
Im1ac! on In/'as!'uc!u'e an( O!he' Ameni!ies
The real estate scenario of the city has been positively impacted due to entry of IT companies.
This includes commercial spaces as well as residential properties. ' number of IT *ar,s and
Towers providing state of the art infrastructure and facilities have been set up in the city and
more are in the anvil.
,7
9ntil recently there were very few large developers in the city. +owever with growth in the
number of professionals engaged in various sectors including the IT sector demand for
residential facilities has risen over the past few years. Gational players li,e )E2 9nitech and
Sova &uilders have already ac!uired land while =ahe.as are slated to enter the mar,et to cater to
the growing demand. Sites close to IT *ar,s have been identifi ed for housing pro.ects. Some
IT/ITES companies have also collaborated with the government in developing the city-s
infrastructure. Satyam for e%ample partly contributed for setting up of street lighting as well
developing roads.
Im1'o0emen! in @ua#i! o/ se'0ices in associa!e( sec!o's
In associated service sectors ?such as security house,eeping transport catering@ capacities are
gradually being built driven by a rise in demand for such services as well as efforts by IT/ITES
companies to encourage their e%isting vendors in mature cities to provide services of the same
standards in smaller cities. The number of vendors as well as !uality of services provided by
them has improved.
IT &a'ks an( To)e's in Bhu$anes)a'
- IT &a'ks an( To)e's
". Infocity- Spread over $6 acres housing Infosys Aipro T<S and FindTree. It is the largest IT
*ar, in Eastern India and is e!uipped with modern infrastructure and amenities.
#. Fortune To*er- $.6 la,h s!uare feet built up space e!uipped with high speed connectivity
houses several companies including T<S.
$. To*er +,,,- 4:777 s!uare feet facilities e!uipped with all amenities including broadband
connectivity.
0 Proposed I' Par2s and 'owers
". Infopar)- :.# million s!uare feet facility which is to be developed by )E2 and has been
accorded
SEP approval.
#. -no*led'e Industry To*ns#ip- 85: acres of integrated township which comprises of an SEP
residential educational and commercial areas and business >ones. The township is to be
e%tended by 6677 acres over two phases.
$. I.C/ %"/ Complex- #4 acres of land .ointly promoted by I)<D and (enpact which would
be occupying "# acres of land.
Eme'gence o/ O!he' Ci!ies in !he S!a!e
The development of &hubaneswar as a preferred destination for IT/ITES companies has had a
spin off effect on other locations in the state. Some of the other locations in the state which have
been identified as having the potential of emerging as destinations for IT/ITES companies
include =our,ela &ehrampur &alasore *uri <uttac, and Bhurdah.
>9
%imi!a!ions
The contribution of the IT/ITES industry to India-s economy and society has been well
established and is indeed significant. Each of companies has played a role in this success story.
's the industry grows in stature and si>e it would be e%pected to play an even larger role
especially in contributing to the marginali>ed and vulnerable sections of the community. This is
even more important as the industry has at its call the two most important tools for ma,ing this
impact a young motivated wor, force and technology. &oth together can ma,e a significant
impact on improving the lives of the poor.
The study highlights that while there are many meaningful and significant initiatives being ta,en
by a number of companies. There is both a need to increase the participation by member
companies as well as to wor, towards ensuring that the efforts are able to achieve the ma%imum
impact. Some of the challenges faced in this area have been discussed in the following
paragraphs.
%o) #e0e# o/ in0o#0emen! o/ sma## com1anies
Typically companies in their early years of operation find it difficult to allocate time and
resources to community initiatives due to low margins and pressure on the bottom line. The
survey indicates that close to #61 of relatively smaller companies ?in terms of turnover@ are
unable to participate in socially relevant community initiatives due to such reasons.
S!an( a#one an( iso#a!e( ini!ia!i0es
Ahile there are several success stories of companies underta,ing commendable socially relevant
wor, companies have not developed an industry-wide focus for such activities. The e%tent of
contribution reach and scalability of initiatives is thus limited to the e%tent of the investments
that each company can commit.
%imi!e( geog'a1hica# ou!'each o/ socia# ini!ia!i0es
<ompanies usually underta,e social initiatives within the geographical pro%imity of their
organi>ations which are typically urban areas. In a country li,e India where a ma.ority of the
population resides in small cities towns and villages the impact of the initiatives is thus
restricted and relatively less successful in reaching the marginali>ed sections of society.
%ack o/ moni!o'ing an( e0a#ua!ion
The survey has revealed that while a large section of respondent companies participate in
community initiativesJ few are involved in measuring the outcomes or capturing data which
would help in assessing the impact of such activities. The lac, of monitoring and evaluation
systems prevents companies from planning activities measuring impact and ma,ing mid term
course corrections.
>;
Recommen(a!ion
&'o0i(ing han( ho#(ing su11o'! an( a(0iso' se'0ices
In order to enable member companies of small si>e ?in terms of turnover@ to be a part of the
growing number of IT/ITES organi>ations participating in community initiatives. It can also help
create awareness of the fact that it is possible to contribute to society without necessarily setting
aside a large amount of funds. <ompanies can demonstrate social consciousness and sensitivity
in the regular course of business or by Idoing business responsibly-.
Dissemina!ion o/ in/o'ma!ion on gui(e#inesF $es! 1'ac!icesF in!e'na!iona#
$enchma'ks an( moni!o'ing mechanisms
G2 could help create awareness among companies for the need of having in place guidelines for
underta,ing community initiatives and dedicated personnel/ department to underta,e these
activities to ensure greater effectiveness and impact. 'n effort by G2 to prepare a comprehensive
database of various successful practices of companies and create awareness of international
standards of socially relevant community initiatives would also go a long way in helping the
industry move up the learning curve. Educating companies on possible monitoring mechanisms
and ways to measure outcomes of their activities would also help in assessing the impact and
allowing course correction where necessary.
I(en!i/ sec!o' s1eci/ic in0es!men! o11o'!uni!ies
's the survey has shown the sectors in which companies underta,e their community initiatives
are diverse and are often chosen in an isolated manner based on personal perspectives. '
conscious decision to lin, the activities with F)( goals or (overnment initiatives in promoting
socio-economic development could help the IT/ITES industry achieve more in public- private
partnerships ?***@ than what is possible through the individual efforts of specific companies. It
could also help ensure that the initiatives are spread across all parts of India and not merely to
areas near the locations of companies. G2-s role could be to act as the intermediary or as a
catalyst between the (overnment and industry in helping identify specific opportunities in the
social sector which could be focused on by the member companies through ***.
Ca1aci! $ui#(ing o/ N"Os
The activities of G(Ds many of whom partner with IT/ITES companies in their community
initiatives are often hindered by their lac, of technical and pro.ect management s,ills and
limited access to technology solutions. <apacity building efforts both technical and functional
supported by G2 would help the G(Ds to e%tend the reach and scalability of various innovative
community initiatives of the IT/ITES companies.
?<
Conc#usion
It is apt to conclude with a remar, made by Gobel Eaureate )r. 'martya Sen about the Indian
IT/ITES industry during his ,eynote address at the India Eeadership Summit #778 - My point
is not that the IT industry should do something for the country at large, for that it does anyway.
It maes enormous contri!utions" it generates significant incomes for many Indians# it has
encouraged attention to technical e$cellence as a general re%uirement across the !oard# it has
esta!lished e$acting standards of economic success in the country# it has encouraged many
!right students to go technical rather than merely contemplative# and it has inspired Indian
industrialists to face the world economy as a potentially !ig participant, not a tiny little !it&
player. My point, rather, is that it can do even more, indeed in some ways, much more. This is
partly !ecause the reach of information is so wide and all&inclusive, !ut also !ecause the
prosperity and commanding stature of the IT leaders and activists give them voice, power and
a!ility to help the direction of Indian economic and social development.'
?*
Bi$#iog'a1h
<=ISIE =esearch ?#778@ The =ising Tide- Employment and Dutput Ein,ages of IT-ITES
0 )ossani =. and F. Benney ?#77#@ <reating an Environment/ )eveloping Centure <apital in
India &=IE Aor,ing *aper ":$
0 Evalueserve ?#77;@ Is the Centure <apital Far,et in India (etting DverheatedV
0 Evalueserve ?#778@ 'n Indispensable (uide to E!uity Investment in India 2acts and
2orecasts
0 India Centure <apital 'ssociation ?#778@ Centure <apital and *rivate E!uity in India
0 G'SS<DF 2oundation ?#776-7;@ <atalysing <hange
0 G'SS<DF 2oundation ?#77;-78@ <atalysing <hange
0 G'SS<DF Strategic =eview #77;
0 G'SS<DF Strategic =eview #778
0 Sa%enian 'nnaEee ?#777@ Silicon Calley-s Gew Immigrant Entrepreneurs <enter for
<omparative Immigration Studies
0 *resentation on IT Scenario in Drissa ?#778@ Drissa <omputer 'pplication <entre ?D<'<@
0 *resentations by ST*I &hubaneswar
0 *rospective IT Fanpower *lanning for the State of Drissa )TEHT Drissa ST*I
&hubaneswar
0 9nited Gations )evelopment *rogramme ?#77:@ *romoting I<T for +uman )evelopment in
'sia
0 'nnual =eports of various companies
0 <ompany websites
52