1.

INTRODUCTION
Foreword
The following things have been covered under the present chapter.
 Introduction to HR Practices and Employee Performance as well as Organizational
Productivity
 Significance of the study
 Important Terminologies
 Thesis Structure
 Introduction to IT-ITES industry
 World Scenario of IT-ITES industry
 Indian Scenario of IT-ITES industry
 Gujarat Scenario of IT-ITES industry
 HR practices prevailing in IT-ITES industry

1.1 Introduction
There are many aspects involved in manufacturing of a product or providing service of
particular product and for the same, we need human beings as well as machines to perform
the aforesaid task. Since ancient times, the role of human beings has been changing
constantly before and even after Industrial Revolution. With the increased use of technology,
one can make things simple and easy but with that one cannot avoid or ignore effective
involvement of humans into the entire process. Though the use of machines and automation
has increased, the importance of human beings has raised a lot and it's constantly going
upwards. The role of humans has now taken a shift from physical part to intellectual part.
Indian industries have been divided into many portions, but amongst all the sectors, IT-ITES
industries have been successful enough to make the noise in the market of India since last
30-35 years. The growing importance of the sector can be reflected by its increasing
contribution towards India’s GDP which was about 1.2% back in the year 1998 and got
increased by 7.5% in the year 2012 and the graph is still on. Unlike other sectors, IT-ITES
sector has human brains working for it and hence recruits intellectual capital which in itself is
a challenging task. One can say it’s a challenge as human being, as well as their brains, need
to be taken care of and with this concept comes into the picture of how to take effective care
of them. The only way out is to provide them with better facilities, compensations, taking care
of their requirements at every stage of their career etc which one in all is termed as Human
Resource Practices. And with this concept into considerations, firms now a day have realized
the importance of human capital and hence make huge investments after them. And last but

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 not the least to what extent firms need to stretch themselves being handling these important
assets and how to leverage this investment and return on investment things. Theories on
Human Resource Management practices and performance have been studied and conducted
by researchers in order to study and explore more insight into this mysterious relationship.
The present study is just one another study in the same direction to try to study HRM practices
provided by the firms and Employees or Organization performance but in the IT-ITES industry
(i)
. The chapter includes brief about HRM practices and employee performance as well as
organizational productivity, important terminologies, about IT-ITES Industry, World Market
and Indian Market of IT-ITES industry, Gujarat Scenario of IT-ITES Industry, the conceptual
framework of HRM practices.

1.2 Introduction to HRM Practices and Employee Performance as well as Organizational

Productivity
Human Resource Management is all about practices, policies and different structures firms
adopt to take care of the most important resource of the organization ie employees or human
resource. HRM is about planned HR deployments and activities intended to achieve its goals
as per Wright and McMahan (ii). More concisely, HRM is about how a firm uses the complete
package of practices and policies in order to achieve effectiveness and better organizational
performance. The present study is an insight into details of HRM practices and Performance
linkages, as mentioned in Figure 1.1 which encircles the strategic linkage between HR
practices and firm performance. Figure 1.1 shows the linkage between HRM Practices and
Firm Performance as developed by Guest et al (iii).
HR
Effectiveness
Business
Strategy

Quality of
HR Goods and
Practices HR
Outcomes: Services
Financial
HR Performance
Strategy Employee
Competency,
Commitment Productivity
(Source: Guest et al, 2000)
Figure 1.1 Model of Linkages between HRM Practices and Performance

Few models in the past have also been studied and developed as Harward Model developed
(iv) (v)
by Beer et al (1984) , Michigan Model developed by Fombrun, Tichy, and Devanna and

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 Warwick developed by John Bratton and Jeffrey Gold (2008) (vi). The present study is all about
impact or linkages between HRM practices and Employee Performance as well as
Organizational Productivity, here is very famous and widely studied model of the same.

1.3 Significance of the Study

The study is significant as following outcomes may be derived which hence can be useful to
HR managers/Managing Heads of selected IT-ITES firms.

1. Essential HRM Practices Experienced in IT-ITES Firms: Although a lot of studies have
been done in the past regarding investment in HRM practices and Organizational
Performance, still there is a dearth of studies which directly or indirectly develops or
establishes the linkages between HRM practices and Firm performance. The present
study is done in the same continuation but for IT-ITES Industry of Central Gujarat to know
which major practices prevail in the above-mentioned sectors, which are widely practiced
and which are followed less or given less priority.

2. Diverse HR Related Performance: Though there are about thirty-five to forty HRM
practices, the present study thoroughly identifies only selected or important HRM practices
widely acceptable or practiced by selected companies in the Industry.

3. Assorted Organizational Related Productivity: There may be many parameters for

which investment in HRM practices is measured by various performance outcomes. The
present study covers outcomes like HR or Employee Outcomes, Organizational outcomes
out of four major performance outcomes which also include Market Growth as well as
Financial Outcomes.

4. Exploration of HR Practices and Employee Retention relation: This is a “Black Box”

issue which still remains unexplored; however, the present study tries to through light on
the linkages between HRM practices and Firm Performance.

5. Relation Between HR Practices and Absenteeism, Turnover and Satisfaction: Out of

few performance outcomes, like HR or Employee performance, Financial Performance,
Organizational or Operational Performance and Market Growth or Value, the present study
highlights the linkages between Various HRM practices provided by the firms and the

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 result or outcome related to HR like Job Satisfaction, Decreased employee absenteeism
and Decreased turnover.

6. Impact of HR Practices on Customer Service, Service Quality, and Product Quality:

The present study gives details about Organizational Performance like Employee
Productivity, Quality of Service provided by the employees and Quality of Products
delivered by the employers of IT-ITES Industry.

7. An insight into HR Practices affordable and Firm Size: The study highlights about the
fact that bigger or more is the size of the firm better can be the facilities and benefits
provided to the employees.

1.4 Important Terminologies Covered Under Present Study

1.4.1 HR Practices
HR practices are based on the business needs of the firm within the context of culture,
structure, technology and processes Armstrong (vii). Decent HRM practices are a mixture of
Human Resource Planning, Recruitment and Selection, Training and Development.
Compensation and Benefits, Performance Management, Career Planning and Development
Coaching and Mentoring etc. Talking about small size firms, the major decisions regarding
Human Resources are directly taken by the owners and managers as compared to a formal
department of big organizations Koch de Kok(viii). As reasoned by HR professionals there
can’t be any “best fit” combination of HR practices. What happens is good HR practices are
taken from benchmarked companies and “best practice” HRM practices are framed. Hence
for the present study, based on literature review, following HRM Practices are covered:

1.4.2 Work Design

Resources of organizations undergo meticulous task to meet their objectives, including odd
jobs as well as jobs with which employees are well versed with. Job appointees are primarily
provided with training to undergo their tasks with at most responsibility and hence ‘Job
design’ refers to the result of this procedure and may be defined as the requirement of the
content and process of jobs. Various terminology often used as synonymous for job design
include ‘work design’ and ‘job’ or ‘work structuring’. In the field of organizational behaviour
job design has specifically focused on properties of the job, referred to as ‘job
characteristics’, such as the variety of tasks in jobs and the amount of discretion job

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 incumbents have in completing those tasks. Work design is broadly referred to as a mixture
of job complexities, job demand and control, job rotation, teamwork, role conflicts and clarity
etc.

1.4.3 Job Complexity

Job complexity basically includes psychological and task-person complexity. Psychological
complexity is a more subjective measure of job complexity and refers to the psychological
dimensions of tasks, for example variety and perceived job scope. Such an approach to
job/task complexity has often been equated with the concept of job enrichment. Task–
person job complexity refers to tasks that can be objectively classified as simple or complex,
based on the mental demands that a given job places on the person and the extent of
education, skill or training required on the part of the person to do that job.

1.4.4 Job Demand and Control

Various aspects like physical, psychological, workload, monitoring and complexity are
important in studying under decision control and predictability. The liberty for Job Demand
and Control are very vital in knowing and exploring on how demands and control have key
consequences for different work-related outcomes.

1.4.5 Job Rotation

The concepts of job rotation, enlargement and enrichment are all recommended answers
to the struggle posed by job simplification. Job rotation involves doing more than a sole
type of recurring task. The intrinsic logic of job rotation is to help crack the dullness arising
out of doing the identical task repeatedly and making the employee more multitalented as
he/she learns various other tasks. It does not, however, change the content of the job.

1.4.6 Teamwork
Researches on teamwork in the main look at how self-directed or semi-autonomous teams
can have a noteworthy impact on certain occupational outcomes. Self-governing teamwork
propose that increases in work factors like diversity, individuality, significance, sovereignty
and feedback are causally linked to occupational outcomes, such as motivation, job
satisfaction and productivity.

1.4.7 Role Clarity and Conflict

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 Learning’s of role conflict and role ambiguity have classically delighted these variables as
dimensions of role stress, focusing on whether, for instance, bigger levels of role conflict
or role ambiguity lead to bigger role stress and, on the other hand, whether advanced
levels of role clarity lead to dwindling role stress. Various literature treated role ambiguity
as a stressor, with some even cataloguing it as such.
1.4.8 Staffing
Staffing mostly includes Recruitment-Selection, Induction-Orientation and Work
Scheduling. Conventionally, recruitment has been conceptualized as the organizational
procedure that precedes selection. More specifically, recruitment has been portrayed as
the process of generating pools of applicants for job vacancies; and selections as the
process of choosing from among those applicants. Recruitment has been regarded as an
attraction activity, selections as a screening or winnowing activity more recently,
recruitment and selection have come to be regarded as less distinct activities.

1.4.9 Induction and Orientation

Most organizations provide some form of induction, orientation, or socialization
programmed to new recruits. These programmed may be conducted in various ways,
depending on the requirements of the position and the organization.

1.4.10 Work Scheduling

Organizations use a variety of forms of work arrangement to carry out their route for
activities. Some works schedules are driven by function, for example round-the-clock
running of hospitals or factories, demanding the use of shifts. Other forms of work
scheduling are intended to enhance the work experience of employees by, for example,
making a more family-friendly environment through HRM practices, such as flextime and
compressed work weeks

1.4.11 Training and Development

When learning proceedings planned in a methodical style which are correlated to events
in the work environment, are called training programmed. Employees acquire various skills
and knowledge through the training programs. Organizations investing heavy in training
programs have become a trend in itself as at the end of the training programs the improved
performance is measured in terms of firm performance. Individual, Career and Quality
training are the widely provided training programs imparted to the employees. The present
study covers all these three types of training programs.

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 1.4.12 Compensation and Benefits
Compensation can be in cash or benefits, including health care, a paid vacation or a
company car. Recompense systems differ within and across organizations in their mix up.
A few organizations pay all employees a base salary whereas others use uneven pay
where a number of portions of employees’ pay are uncertain. For example, performance-
related pay refers to a number of pay programmes that link pay to the individual, group and
organization level performance measures. Pay programmes that persuade pay mix are
merit pay, incentive pay, gain sharing, profit-sharing and stock options. Pay can also be
described in terms of its level, i.e. how much organizations pay for specific jobs, and in
terms of its structure which refers to the nature of pay differentials within an organization.
Payment systems can influence attitudes and behaviours of employees, and which
employees are attracted to the organization and which decide to leave. Organizations use
an array of compensation and reward plans as an instrument for weighting abundant
objectives of fundamental organizational interest. For this, various types of compensation
and reward systems that have been examined by the researchers are different incentive
plans, bonuses; employee stock option plans (ESOPs), gain sharing, merit-based pay,
performance-related pay, earnings-at-risk plans and perceptions of pay fairness.

1.4.13 Pay
The main distinction between benefits and pay is the type of monetary rewards and other
rewards like merit pay, performance pay, pay at risk, etc. is that incentives to much extent
did not affect salary. The entire focus of these types of concepts is rather to encourage
employees to perform better for gaining monetary awards over and above their base pay.

1.4.14 Employee Family Friendly

The term ‘work and family’ or the ‘family friendly workplace’ is one that recognises the non-
workplace family responsibilities of its employees and develops and implements policies
that allow employees to simultaneously fulfil work and family responsibilities.

1.4.15 Performance Appraisal System

There is no universally accepted definition of performance management, and it is
sometimes used simply to refer to ‘performance appraisal’ or to ‘performance-related pay’.
However, it is increasingly coming to mean a general, integrated HR strategy that seeks
to create a shared vision of the purpose, aims and values of the organization, to help each

MS STUTI TRIVEDI 7
 individual employee understand and recognize their part in contributing to them, and, in so
doing, to manage and enhance the performance of both individuals and the organization.
Typically, elements of such a strategy will include developing the ‘mission statement’ and
business plan, objective setting and other methods of performance measurement,
appraisal, performance-related pay and various approaches to enhancing internal
communication.

1.4.16 Firm Performance

Firm or Organization Performance has number of parameters. There are many ways to
measure firm’s outcomes, but the one suggested by Dyer and Reeves (ix) has gained
tremendous momentum. According to him, the performance can be measured into four
distinctive criteria’s as HR or Employee outcome, Organization or Firm outcomes, financial
outcome and Market Growth outcome. The performance parameters included in the
present study are:
 HR Outcomes like Job Satisfaction, Absenteeism and Turnover
 Organizational Outcomes like Employee Productivity, Quality of Product and
Quality of Service

1.4.17 IT-ITES Industry

IT stands for Information Technology which includes development, implementation and
maintenance of computer soft wares and hardware. ITES stands for IT enabled services,
which takes an aid from IT but its not core IT. It majority includes soft skills in
communication where the data are required to be feed in. it is divided into BPO-Business
Process Outsourcing, KPO-Knowledge Process Outsourcing and LPO-Legal Process
Outsourcing. The industry chosen for the present study, to undergo the exploration of
linkages between HRM practices and Firm Performance is IT-ITES Industry.

1.4.18 Central Gujarat

Gujarat State is bifurcated into several regions like Kutch, Saurashtra, North Gujarat,
South Gujarat and Central Gujarat. Central Gujarat is geographically located in the centre
of Gujarat State. It has districts like Ahmedabad, Vadodara, Anand, Kheda, Panchmahal,
Dahod, Mahisagar and Chhota Udaipur. It has major cities and towns like Ahmedabad,
Gandhinagar, Vadodara, Anand, Nadiad, Halol etc. Of the cities mentioned above, IT-ITES
Industry has developed in Ahmedabad; Gandhinagar and Vadodara cities of the selected

MS STUTI TRIVEDI 8
 region compared to other cities of the same region, hence for the present study, IT-ITES
companies Ahmedabad, Gandhinagar and Vadodara are included for data collection.

1.4.19 HR Managers and Managing Heads

HR managers are the persons responsible for all HR functions of their firm, in small size
firms where formal HR department is missing; managing heads of different functions like
HR, Accounts, and Finance etc are responsible for all HR related activities. Hence for the
present study, the respondents selected are HR managers and in absence of HR managers,
Managing Heads are assumed to response about HRM practices and Performance aspects.
Another widely used designation of IT-ITES industry is Team Leaders or Project Managers,
which are equivalent to Managing Heads and hence they are also been covered for the
present study.

1.5 Thesis Structure

Chapter 1 Introduction includes introduction of the study, followed by significance of the
study. It also includes important definitions related to study as well as chapter brief and
diagrammatic representation of the thesis structure. The important part covered in this
chapter is Industry Study ie introduction to IT-ITES industry, World Scenario, Indian
Scenario, Gujarat Scenario as well as theoretical concepts of HRM practices prevailing in
IT-ITES industry.
Chapter 2 Review of Literature consists of details about various literature review regarding
HRM practices, firm performance and linkages between HRM practices and firm
performance in other industry as well as IT-ITES industry. Chapter 3 consists the blueprint
of how the research has been conducted in the present study. Chapter 4 contains the
quantitative analysis and interpretation while Chapter 5 discusses the results and findings
derived from the analysis and interpretation chapter. Chapter 6 includes summary,
conclusions as well as suggestions. Figure 1.2 describes the Diagrammatical
Representation of the Thesis Structure.

Chapter 1: Introduction, Chapter 2: Review of Chapter 3: Research

Structure of Thesis and Literature Methodology
Industry Study

Chapter 6: Summary and Chapter 5: Results and Chapter 4: Analysis and

Conclusion Findings Interpretation

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 Figure 1.2 Diagrammatical Representation of Thesis Structure

1.6 About IT-ITES Industry

Popularly known as IT sector, IT-ITES stands for Information Technology-Information
Technology Enables Services. Indian IT-ITES industry consists of IT Services, Business
Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and Legal Process
Outsourcing (LPO). Indian IT Industry took birth in the year 1967 with Tata Group and
Burroughs partnerships in the special export zone SEEPZ in Mumbai in the year 1973. Since
then the success story of IT Industry never turned back, in fact within next two decades than,
the contribution of Indian IT Industry increased from 4% in the year 1998 to 25% in the year
2012. Banglore, Hydrabad, Chennai, Mumbai, Delhi as well as Kolkota are the city which
contributes about 90% towards export of the sector, in fact Banglore is popularly known as
Silicon Valley of India as it is the foremost export provider of the country. HCL, TCS, Wipro
and Infosys are very popular names of Indian IT companies worldwide contributing their
services in fields like operations, remote maintenance, accounting, public call centres,
medical transcription, insurance claims etc.

As mentioned earlier, Indian IT sector started in way back 1970’s but took place after 1990’s.
US based companies started giving outsource work based on intellectual skills to Indian IT
companies in the early 1990’s and country than started investing it infrastructure
development and by 1995 to 2000 India started creating its own niche as product
development centre. And by early 21st century, India was now seen as one of the important
outsources destination serving in about 78 countries with 640 centres by the year 2015.
India has also become very favourite destinations for outsourced IT services and solutions,
in fact majority of Fortune 500 companies are choosing India as their outsourcing destination
which makes sector grow for about 55% for offshore destination. This is quite possible with
India due to its cost competitiveness ie providing cheap labour which is 3-4 times cheaper
than US market and hence with this Unique Selling Point (USP), the industry has been
successful enough for the economic transformation of the country and has changed the
perception of India in the global economy.

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 The sector has also grown massively as employment generation and have successfully
employed 2.8 million directly and 8.9 million indirectly by the year 2012. The sector due to
this has grown as in educational field as well giving employment opportunity for computer
engineering as well as computer science discipline. Indian government’s favourable steps
for software technology parks of India (STPI) and Special Economic Zones (SEZs) are
providing platform for easy documentation and clearance facilities (x). The industry has given
wide range of opportunities to entrepreneurial start up as well. In FY14 the launch of 10,000
start ups programmes has already touched over 25,000 entrepreneurs. (xi)

Realizing about the growing trend of the sector, Gujarat have eventually started making its
place for IT-ITES sector. Cities like Ahmedabad, Gandhinagar, Vadodara and Surat a Have
started them to be recognized as IT destinations of the state. Gujarat IT-ITES industry is of
Rs 1,000-crore market and is likely to be Rs 1,500-crore market with around 400 BPO and
KPOs. There are 1000 companies being operated in Gujarat with 127 additional companies
being registered, and for the state, 14 Special Economic Zones are specially planned for IT-
ITES (xii).

1.6.1 World Scenario of IT-ITES Industry

IT-ITES industry being the world’s best face embodies the connectedness of the world.
Information Technology and Information Technology Enables Services are the services
which are passed over telecom or data network to a number of places. It includes Business
Process Services, Knowledge Process Services and Business Process Management which
includes customer services, website development, etc. the sector has successfully
increased its reach to provide services in different segments like customer interaction
services, accounting, data entry jobs, call centres, content development, animation,
geographic information system, legal database, online education, HR services like payroll
etc, mobile and internet technologies, engineering and R & D, medical sciences etc
combination of one and more technologies have also expanded the scope of IT and ITES
(xiii)
. Cloud computing is another aspect where the sector has increased its reach over
different platforms like Software as a Service (SaaS), Platform as a Service (PaaS),
(xiv).
Infrastructure as a Service (IaaS) and others Markets for IT services includes IT
applications and engineering services while ITES consists of services delivered using
internet technology.

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 The global Information Technology (IT) industry has come of age, yet new applications and
devices continue to emerge. We may be tempted to say the business models are in the
maturity phase evidenced by slowing innovation, growth if any coming by operational edges
than through inventive edges. Further organic growth is conspicuous by absence, but growth
by merger and acquisition is becoming the order. However, it is the IT, more than any other
industry has an increased productivity, particularly in the developed world, and therefore is
a key driver of global economic growth, world over. Large markets and growing opportunities
IT services typically include IT applications and engineering services, while ITES involve a
wide range of services delivered over electronic networks. Estimating the market size for
trade in IT services and ITES is difficult given definitional issues and the relative novelty of
the field. Official statistics are often not available or not reliable, and calculations based on
balance of payments and trade in services may not accurately isolate IT services and ITES.
As a result, much of the data on the size of the current market come from private surveys,
consulting firms, and anecdotal evidence.

Most estimates of the addressable ITES market are derived by estimating spending on a
range of business process functions and evaluating the potential for delivering such
functions remotely. Businesses across the globe are taking measures to imbibe innovation
in their operations to save cost while increasing efficiency and effectiveness. Global trends
in IT-ITES and the global macroeconomic factors like the Global GDP and global SGDP,
and the USGDP are dealt now from data that were strenuously collected from diverse
sources.

India like many other countries have been successful enough to make a remarkable position
in the industry and create job opportunities for the same. IT-ITES industries have been
leader enough in achieving business objectives worldwide by applying the concept of cost
saving and increased efficiency and effectiveness. Increased jobs, raised incomes,
increased export and GDP are the direct benefits of IT-ITES industry gained by majority of
the countries of the world. The technology which is adopted widely mainly comprises of
creating, managing, optimizing and accessing the information used for business purposes.
With the increased use of technology like mobile commerce, cloud computing, social media
etc the industry has crossed all his limits and have become boundary less and can serve
remotest of the areas. The segment, once slowed down had now started registering a growth
of 4.8 % in 2013 to reach US$3.24 trillion. The total IT-ITES spending had reached US$3.87
trillion by the year 2014 and the worldwide spending had grown by 0.6% to US$3.54 trillion
in 2016 as per Gartner (xv). With the growing use if IT-ITES services, world has become very

MS STUTI TRIVEDI 12
 short distanced as there are even hardly distance left between hardware, software, fine ware
and brain ware as well. With this the industry had grown to 3.8% by the year 2015 according
to International Data Corporation and telecommunications and consumer technology
markets (xvi).

1.6.2 Indian Scenario of IT-ITES Industry

The IT & ITES industry is expected to reach US$300 billion by 2020 driven by rising demand
in domestic market, along with increasing IT Services exports. The CAGR for 2013-2020 is
estimated to be 16 % till now, the sector has been primarily driven by the large amount of
exports owing to cost arbitration. However, the following factors are also driving the sector;
Global sourcing will continue to be the major growth driver for the industry. Further,
increased demand from the domestic government sector is fuelling the domestic IT & ITES
sector. More than 1,100 start-ups in the last five years have driven growth from supply side.
Further, the industry is set to achieve its 2020 target based on the emergence of disruptive
technologies that would impact the Indian industry in different phases, i.e. from a window of
2–5 years to 5–10 years. Moreover, these technologies would also change the landscape
of the job market with new job profiles and shifting opportunities.

The Information Technology enabled Services (ITES) sector has not only changed the way
the world looks at India but has also made significant contributions to the Indian economy.
IT enabled Services (ITES), also called web enabled services or remote services or Tele-
working, covers the entire gamut of operations which exploit information technology for
improving efficiency of an organization. These services provide a wide range of career
options that include opportunities in Call Centre, medical transcription, medical billing and
coding, back office operations; etc.

Information technology in India is an industry consisting of two major components: IT

Services and IT enabled services (ITES), more commonly known as Business Process
Outsourcing. Outsourcing as phenomena is not new, if one looks at the outsourcing history,
one realizes that outsourcing, especially BPO has been the means for developing countries
to exploit their competitive advantage in information and technology communication. Over
the last few years the worldwide business process outsourcing (IT-ITES) industry has also
undergone rapid transformation. Continuing emphasis on cost cutting in a competitive world
is driving companies to look at offshore outsourcing as a strategic alternative. IT-ITES

MS STUTI TRIVEDI 13
 sector has emerged as a major contributor to Indian economy. Contribution to for ex.
reserves, generating employment opportunities, growing prosperity of burgeoning
middleclass, and rise in consumerism – IT-ITES sector is driving the growth engine in more
than one-way BPO.

1.6.3 Market Growth and Segmentation of Indian IT-ITES Industry

Out of various Industries in India, IT-ITES Industry is one of the fastest growing industry
which had successfully recorded growth of about 12-14% till the year 2016-17 and is
expected to grow thrice the current market by the year 2025. Mentioning about global
market, Indian IT-ITES consists of 12.3% out of which export of IT-ITES products and
services has major share and the same amounts to 56.12% of total IT exports including all
types of hardware also. The entire Indian IT-ITES market is segmented into four categories
ie IT Services, Business Process Management, Software Products and Engineering
Services, and Hardware. Business Process Management out of these has maximum
revenue generation of about 85% of the IT-ITES market, followed by Software Products and
Engineering Services which is of 79% of the market while IT services holds 67% of share.
In totality, Indian IT-ITES is one of the world’s sourcing destinations marking the presence
of about 55% of total US market as far as outsourcing is concerned. The country's cost
competitiveness in providing Information Technology (IT) services, which is approximately
3-4 times low-priced than the US, is its advantage. India’s possesses qualified talent pool of
technical graduates which is again available at a cost saving of 60-70 % to source countries.
This large pool of qualified skilled workforce has enabled Indian IT companies to help clients
to save US$ 200 billion in the last five years. For about 640 offshore development centres
have been developed as of now serving for about 78 countries. The IT-ITES sector is
estimated to expand at a CAGR of 9.5 % to US$ 300 billion by 2020. The same details
(xvii)
regarding Growth and sector wise break up of export revenue is shown in Fig. 1.2 . As
shown in figure 1.3, average CAGR from the year 2009 to 2016 accounts for 13.5% and
same is expected to grow by 9.5% by the year 2020. The sector ranks fourth in India’s total
FDI share and accounts for approximately 37% of total Private Equity and Venture
investments in the country.

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 Figure 1.3 Growths and Export Revenue of IT-ITES Industry

Banking and Security firms total spending in IT-ITES is expected to grow by 8.6% by the
year 2017. India's business to business (B2B) e-commerce market is expected to reach US$
700 billion by 2020 whereas the business to consumer (B2C) e-commerce market is
expected to reach US$ 102 billion by 2020. IT-ITES market leader TCS had accounted for
about 10.4 % of India’s total IT & ITES sector revenue in FY16. Five IT-ITES giants
contribute over 25 % to the total industry revenue, indicating the market is fairly competitive.
The details regarding growing market size from FY10 to FY16 is shown in Fig.1.4 (xviii).

Figure 1.4 Growth of Market Size of IT-ITES Industry

Accounting for 5% of total GDP, Indian Internet Economy is expected to cross Rs 10 trillion
by the year 2020. One more market of Healthcare Information Technology market is valued
at US$ 1 billion currently and is expected to grow 1.5 times by 2020. The Indian IT-ITES
Industry’s Porter 5 Force model is shown in Fig. 1.5(xix).

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 Figure 1.5 Porter Five Force Model of IT-ITES Industry

1.6.4 Major Investments in IT-ITES Industry

Indian IT-ITES Industries growth till date has been able to successfully attract investments
from many countries. Indian IT giants like Infosys, Wipro, TCS and Tech Mahindra have
since long started offering blockchain ideas, Artificial Intelligence, Research and
Development centres and hence in a way these companies have been setting a benchmark
to offer a diversified product range to their clients within the country and outside the country
as well. So in line with above facts, companies such as ZestMoney has raised US$ 6.5
million, Google is planning to set up first of its data centres in India by the end of the year
2017, Sagoon Inc has filed mini-initial public offering (IPO) papers to raise around US$ 20
million, while SAP, on the other hand have partnered with Associated Chambers of
Commerce of India (ASSOCHAM), to open up a one-stop portal for businesses in search of
migrating their business processes or ready to reengineered their businesses with
government taxation reforms like GST, another company Freshdesk has raised US$ 55
million while one more Accel Partners are estimating to value the company at US$ 700
million on the other hand Warburg Pincus LLC plans to invest around US$ 75 million while
Helpshift Inc, which makes customer support software for mobile apps, announced raising
US$ 2 million from Cisco Investments and Fitpass which deals majority in revolutionary app
which put forward access to gyms and health clubs membership, has raised US$ 1 million
in seed funding and Knowlarity Communications has announced raising US$ 20 million while
in addition Cisco solutions Pvt Ltd, a cloud telephony provider, from multiple investors such

MS STUTI TRIVEDI 16
 as Dubai-based private equity investor Delta Partners, existing investors Sequoia Capital
Funds and Mayfield Fund, apart from venture-debt from Blacksoil and Trifecta Capita., has
re-entered the private label business by launching Smart Buy, the first of two new private
labels, with a view to boost earnings and fill gaps in its product selection, International
Finance Corporation (IFC) is estimating to invest US$ 10 million while Paytm’s online
marketplace unit has already raised US$ 200 million in a funding round led by a US$ 177
million investment to be made by Alibaba Group Holding Ltd, and balance by SAIF
Partners(xx).

Reliance Industries Ltd (RIL) has already launched their plans to set up entrepreneurship
hubs in major cities of India by investing US$ 748 million fund, under the name of Jio Digital
India on the other hand Intel Corporation strategy is to invest in Digital India related solutions
such as India stack, Unique Identification (UID), e-government 2.0 and other government
initiatives, and scale up operations of its data centre group (DCG), Apple’s supplier
Winstron, is all set to set up an iPhone assembly facility in Bengaluru’s industrial hub, thus
making India the third country across the world to have an assembly unit for Apple’s iPhone
and Kratikal Tech Pvt Ltd, has raised around US$ 500,000 in seed round of funding led by
Mr. Amajit Gupta, which will be used for product development and building training modules.
The computer software and hardware sector in India attracted cumulative Foreign Direct
Investment (FDI) inflows worth US$ 22.83 billion between April 2000 and December 2016,
according to data released by the Department of Industrial Policy and Promotion (DIPP).
Gurgaon-based digital wallet start-up MobiKwik has raised US$ 40 million from Nasdaq-
listed firm Net1, which will be the first data centre in India to be designed using 'green' data
centre concepts.

1.6.5 Government Initiatives for IT-ITES Industry

Many giant Strategic decision have been taken by Government f India in the present year of
2017-18 for making India digital such as The Telecom Regulatory Authority of India (TRAI)
is shortly going to announce regulations and standards for the rollout of fifth-generation (5G)
networks and Internet of Things (IoT) in India, a very similar project of BharatNet aiming to
provide super speed internet broadband services to about 150,000gram panchayats and a
budget of US$1.5 billion have also been sanctioned for the same this is also in continuation
of taking India towards digital project. Railway Ministry is planning a step ahead to push
Indian Railways digital by planning to provide bar-coded railway tickets, Wifi facilities at all
the railway stations and GPS facility inside the coaches along with super-fast long route

MS STUTI TRIVEDI 17
 railway services. The Government of India is all set to revamp the United Payment Interface
(UPI) and Unstructured Supplementary Service Data (USSD), making easier for consumers
to transact digitally with an Internet connection towards making India a digital economy. The
Government of Gujarat not keeping itself behind also have taken many important and major
steps by signing 89 MoUs worth Rs 16,000 crore (US$ 2.3 billion) in the IT sector, during
Vibrant Gujarat Global Summit-2017.

Indian Government has developed to set five incubation centers as a part of Digital India
and Start-up India campaign, for smart agriculture. The Government of India has launched
the Digital India program to provide in almost all government services to the people using IT
and to integrate the government departments and the people of India. And with the
welcoming of 'Digital India Initiative' government is planning to boost India's Gross Domestic
Product (GDP) by US$ 550 billion to US$ 1 trillion by 2025. Also taking Education sector
technologically at another level, The Human Resource Development (HRD) Ministry has
joined hands with corporate giants like Tata Motors Ltd, Tata Consultancy Services Ltd and
real-estate firm Hub town Ltd, to open three Indian Institutes of Information Technology
(IIITs), through public-private partnership (PPP), at Nagpur, Ranchi and Pune.

1.6.6 Contribution Of IT-ITES Industry Towards Indian Economy

The Indian IT-ITES industry has been successful in showcasing many initiatives and has
contributed very well towards not only to the hitherto unexploited entrepreneurial potential
of the middle class Indian but also taking Indian excellence to the global market. The Indian
IT-ITES industry has remarkably contributed to Indian economic growth in terms of GDP,
foreign exchange earnings and employment generation and hence the intangible impact is
the flow effect created in the national and international economic space and hence the
industry was equally successful in generating most important employment opportunities as
well. According to a NASSCOM study reviewing the impact of the IT-ITES industry over a
decade brought to light the multifold contribution made by the industry on the various social
and economic parameters in India.

This sector is likely to fragment in with about 14% of the total services sector revenue for
which the emerging role of ITES industry in the Indian economy is crucial. ITES is
considered as the fastest growing segment of the services sector, which in turn fuels the
key economic indicators of the country. There are certain direct contributions of the IT-ITES
sector like its contribution in country’s GDP has continuously increased, way back in the

MS STUTI TRIVEDI 18
 year 2012, its contribution was 13% and is expected to reach 18-20% by the year 2020.
Another major contribution is towards employment generation which again was somewhere
around 2.8 million in the year 2012 and had tremendously increased to 8.3 million in the
year 2016, and when it comes to CAGR, it was about 26% in the year 2012 and is and is
expected to grow more by 10% in the year 2020. It also has played a major role in making
human resource one of the most powerful assets of the industry. It is one of the rare sectors
in Indian economy where its resources of about 76% falls in the category of age group less
than 40 years, only 4% of the resources are having poor economic background and one of
the most important as far as women empowerment is considered as it employs 45% of
women in the sector and 60 percent of companies offer employment to differently - able
people and 58 percent of total employed are originally from Tier-2 and 3 cities (xxi).

1.6.7 Impact of IT-ITES Industry on Indian Economy

The worlds have literally seen the growth of Indian IT-ITES industry in front of it to such an
extent that an industry which has a history of mere about 30 years has become a great
success story and obviously the envy of the world. Another uniqueness of the industry is
that it has given a tremendous opportunity for rural development. It is a sector where 30 to
40 percent of its manpower comes from non urban background and hence in a way have
boosted the country’s economy by providing a platform for rural development and migration
of rural towards urban. IT-ITES giants often have 33% to 50% of the pie of their cake ie
resources from non-metro/rural areas which open or provides exposure to non-technical
personnel like the growing employment opportunities in this sector (both direct and indirect)
which are obviously are not controlled to the better educated or technically educated people
alone. In many ways, this industry has helped create the brand of ―New Indiaǁ and served
as an inspiration for everyone else. The IT - ITES industry has radically contributed through
socially relevant products/services and in human resource development, education,
employability, health, encouraging women empowerment (xxii).

It has also successfully set an example of an industry which has been set up by the
individuals coming from very modest background and has exemplified what can be done
by unleashing the power of middle-class individuals, and with help of these strategies, India
has now become a hub for quality and timely delivery of products and is a proud spot on
the earth. Again, it is a sector which gives an opportunity to about 75% of the employment
which are again packed in by candidates who are not graduates or at times even carrying

MS STUTI TRIVEDI 19
 diploma degrees, companies also help under-qualified candidates to reach the desired skill
level by investing in their training and skill up- gradation (xxiii).

1.6.8 Challenges faced By Indian IT-ITES Companies

Like many other developed countries IT-ITES sector, Indian IT-ITES industry have not
lagged behind in providing the suitable HR environment, facilities etc but then to one of the
major issues and dispute that the Indian IT-ITES companies face today in their operations
is High Level of Attrition, and this problem has not got decreased despite huge investments
of government towards setting IT-ITES industry framework, educational institutes, training
centres etc. But the problem of attrition has still remained a standstill. Which can also be
interpreted as there is a plenty of supply at fresher’s level but as and when the hierarchy
goes up, there comes the shortage of skilled and experienced staff. As per records, the
current average attrition rates faced by the industry is about 30 to 35%. There are few
challenges which are commonly faced by Indian IT-ITES industry like Lack of Career
Commitment ie employees working with BPO or call centres do not pursue a long career
ahead, than Nature of the Job ie in most of the cases the jobs are monotonous which is
one of the most important reason for employees to lose interest and hence, do not see a
longer perspective and one more reason is Employees work in isolation where work is de-
skilled and allocated automatically using scheduling systems and is monitored and
controlled by the management. In spite of sector providing most favourable environment to
work with the jobs in IT-ITES are in general considered as 'dead-end' and offer few career
prospects and hence, mismatch of Expectations leads to higher attrition, this is partly due
to the perceptions created by the general public with respect to the career growth, type of
work, compensations offered, competition, etc (xxiv).

As Indian IT-ITES industry have majority of outsourcing and offshoring centres, the clients
are based in developed nation where communication for them is considered a routine task,
but talking about Indian IT-ITES sector where majority of the resourcing does not come
from the background which has sound communication skills especially in English language
and hence face many problems regarding two-way or dual communication which is one of
the biggest challenges of the sector and hence in such cases firms have to do investments
in providing language facilities to their resources. The situation becomes more critical when
these weaknesses of human resources than results in higher attrition. And hence in order
to bring the resources at par with other country’s nationals, companies have to invest

MS STUTI TRIVEDI 20
 heavily in training cost like soft-skills training, product delivery training etc. In such a
scenario, the start-ups will face a higher training cost as they may require outsourcing the
voice and accent and soft skills training. However, on reaching a stable growth stage,
companies are able to build up a resource base and avoid outsourcing. Probably this is a
major concern as the training cost graph increases by about 45% which as per records an
increase of about 190 percent to date. The Indian IT-ITES companies spend nearly INR
6,450 crore on training their employees (xxv). hence this is one of the major reason that HR
managers of the sector have to keep themselves continuously involved in evolving career
path, creating the culture of oneness and should be able to continuously motivate their
human resources.

1.6.9 IT-ITES Industry as Driving Force of Indian Economy

A continuous focus on delivering quality products have been sustained by demonstrated

process quality as well as service expertise and this is possible as Indian IT-ITES Industry
has plentiful ability ie the demographics are in favour of India as there is large pool of
young population, complemented by an educational infrastructure which churns out large
numbers of English speaking talent. The productivity levels of the Indian employee base
are also significantly higher. The advantage in cost competitiveness is further reinforced
by having a competitive infrastructure e.g. Telecom. This is also when you compare with
other competing low-cost countries such as Philippines, China, East European countries
etc. While India is ranked second in terms of the total number of graduates available
annually, it has the largest number of the ready-to-hire graduate pool. Furthermore, with
an increasing requirement for a secured environment, Indian IT-ITES are adopting
standards such as ISO 17799, BS7799, COBIT, and ITSM. Sustained Cost
Competitiveness ie according to an Everest study (xxvi) clients have reported significant cost
savings in lines of about 50 -60 percent as compared to source location. India is capable
of achieving this primarily because it has access to highly skilled and English-speaking
labour at relatively lower costs.

Also, there are many changes radically been done like strengthening the regulatory
framework through amendments of Information Technology Act, 2000 which also revives
cyber law and scaling up the National Skills Registry (NSR) and establishing a self-
regulatory organization. India provides a state of the art Information Security Environment
as an info- secure environment to the clients. This is achieved by individual firm level efforts
and complemented by a comprehensive policy framework established by Indian authorities

MS STUTI TRIVEDI 21
 through whom rapid growth in main Business Infrastructure at the cheap cost of
international connectivity and increased service standards has helped the IT-ITES industry
significantly. Already a very well-established infrastructure such as telecom and
commercial real estate, the government needed to improve the other supporting
infrastructure as in STPI infrastructure available across the country played a dominant role
in the emergence and development of the IT-ITES industry. The 100 % tax holiday extended
by the government under the STPI scheme also supported the extensive growth of this
industry.

Enabling Business Policy and Regulatory Environment ie the Indian government provided
an enabling policy environment in the initial years which acted as the catalyst for growth.
Post liberalization, the government encouraged foreign investments in this industry which
not only provided the fill up in the capital but also facilitated the transfer of knowledge and
technology. The software technology parks of India (STPI) policy was established for
promoting the export of software and services from India. The Special Economic Zone (SEZ)
Act made special provisions for the IT-ITES industry in order to aid the continuing growth of
the industry. Due to this approach by policymakers the Indian IT-ITES industry has benefited
by enjoying minimal regulatory and policy restrictions coupled with a broad range of fiscal
and procedural incentives (xxvii).

1.6.10 Gujarat Scenario for IT-ITES Industry

The increasing importance of IT-ITES industry and its huge scope for encouraging
employment has been recognized by all State Governments. Previously, banking on its
locational advantage and entrepreneurial spirit of its people, Gujarat built core strength in
Pharmaceuticals, machine tools, chemicals, textiles, petrochemicals, port development and
power sector. Beginning with IT Policy in 1999, the Government recognized the need for a
different approach for the development of IT-ITES Industry in Gujarat. NASSCOM report
also predicts that several global mega trends in economic, demographic, business, social
and environment will create new opportunities for IT/ITES by 2020. Such mega trend will
open up new industry verticals such as public sector, healthcare, media, and utilities; will
open up new customer segments pre-dominantly from small and medium businesses; and
will open hitherto closed economies from IT perspectives, in countries such as Japan,
BRICS nations, African and South American continents. The report predicts that these new
opportunities will lead to IT exports from India of USD 175 billion by 2020.

MS STUTI TRIVEDI 22
 In consideration of the above emerging trends, it has become necessary to revisit the
provisions of the IT Policy (2014-19) to make it more attractive and entrepreneur-friendly.
As per department of Science and Technology, Gujarat, the Gujarat IT-ITES Industry
observed the growth of around 1.1 USD billion and exports worth USD 400 million in the
year 2015-16. More than 1500 companies were registered with GESIA. IT units in Gujarat
are now spreading their markets from the US to other regions like Europe, Middle East, and
Africa. In order to promote IT-ITES industry, state of the art infrastructure facilities is being
provided at Garima Park Gandhinagar, GNFC Info Tower, Astron IT Tech Park in
Ahmedabad and L&T Technology Park in Vadodara. The stretch between Ahmedabad and
Gandhinagar is now being developed as Knowledge Corridor. Land and several centres of
excellence have already started investing in this region.

About nine special Economic Zones have been planned for Gujarat IT-ITES industry in the
region of Ahmedabad, Gandhinagar, and Vadodara. Gujarat has a Software Technology
Parks of India (STPI) with a sub-centre in Surat. The services offered by STPI includes
increased connectivity solutions, OSS solutions with complete SLA, an end to end link
monitoring backed by a strong network monitoring centre, web hosting services, FTP facility,
Softlink Services, Converged IP services, incubation facility etc (xxviii). The government of
Gujarat has developed a five-year policy for the year 2016-21 with the objective of increasing
the current investment by 10 times. To increase the turnover as well as IT exports up to USD
15 billion, to promote and develop employment opportunity in the IT and ITES sector and
provide direct employment to 10 lakh persons. To focus more on financial services, mobile
applications, animations, 3D gaming, cloud, big data etc.

Government of Gujarat in order to promote more of IT-ITES enabled Technology Parks,

provides assistance up to capital subsidy up to 25 crores, 100% reimbursement of
registration and stamp duty, 100% reimbursement in electricity duty up to 5 years power
tariff subsidy at Rs 1 per unit etc. not only that Government provides Capital Subsidy up to
INR 1 crore, lease rental subsidy up to INR 8/sq. Ft. For 5 years, interest subsidy up to INR
50 lakhs for 5 years, VAT, CST and GST incentives for 8 years, and employment generation
incentive through EPF contribution.

MS STUTI TRIVEDI 23
 1.7 HR Practices Prevailing in IT-ITES Industry
According to Dessler(xxix) Human resource management (HRM) refers to the policies and
practices involved in carrying out the ‘human resource(HR)’ aspects of a management
position including human resource planning, job analysis, recruitment, selection, orientation,
compensation, performance appraisal, training and development, and labour relations. A lot
of research work is carried out on HRM for the sheer reason of its importance in managing
the firm and the amount of impact it makes on the performance of the firm. Because the
performance of a firm largely depends on the combined performance of the people of that
organization, HRM is a major area of focus for academic and business researchers. HR
practices such as job analysis, recruitment and selection, training and development, work
environment and performance appraisal may enhance the competence of employees for
high performance apart from interaction with technology and processes, relations with
employees working within the departments and the synergy of such effective teamwork
(xxx)
decide the operational success Barney and Wright . To achieve better results, effective
synergic interaction in the working group is a necessary requirement.

Human Resource is life and blood of IT Industries as skillful talents are the source of
competitive advantage in these industries. The IT-ITES industry is considered most vibrant
by nature as it has innovative methods of work culture like virtual office and virtual migration
etc which are exclusive from other sectors as there is high attrition rate, lack of job
satisfaction, job hopping of the employees, flexibilization, and individualization which are
very common phenomenon in the industry, which is major concern for the IT Industries. The
HR practices in Indian IT Industries like employee sourcing and human resource
development initiatives are remarkably different from the manufacturing and other service
sector companies.

Recruitment and selection practice is being treated as a tool for realizing strategic intent.
Some of the common recruitment strategies include on-going recruitment, employee
referrals, and realistic job previews, determination of clear-cut selection criteria. People
Development and Training are necessary to the constant success of every organization.
Employee training and development enables employees to develop skills and competencies
necessary to enhance bottom-line results for their organizations (xxxi). Skill redundancy is fast
in the Indian IT Industry, with the changing time and even fast-changing technologies Indian
companies have started realizing the importance of corporate training and to overcome
these omen organizations give the extreme priority to training and skill enhancement

MS STUTI TRIVEDI 24
 programs on a continuous basis. Performance is the mirror of training, which works as a
scale for the performance appraisal of an employee. It is an objective system to judge the
(xxxii).
ability of an individual employee to perform his tasks The process of Performance
Appraisal has become the heart of HRM system in Indian IT Industries. Incentives to
employees play a vital role in motivating and retaining them in the organization
Compensation and rewards in the Indian IT industry have long included a basic pay
component along with a bonus pay when the company made higher profits.

Work-Life Balance has become a buzzword for the HR recently. The employees in the
present scenario simply don't find money as the only motivator for performing aggressively;
rather give more emphasis to a meaningful work which offers ample scope for enjoying
leisure with the family and taking care of the important household chores. It is for this
reasons that the corporate fraternity has realized the significance of work-life balance and
has started taking initiatives for promoting employee well - being and satisfaction.
Employees differentiate a good employer from any other employer through the feeling of
'well-being' that is generated at the workplace. A balance between work and personal goals
and wants of an employee contributes positively to the retention of employees. Recently,
Saxena and Tiwari (xxxiii ) examined the HR Practices implemented by leading IT Companies
such as TATA, Infosys, and Wipro in India. They developed the 3 tier Framework of HRM
practices and identified Training and Development, Employer-Employee Relations,
Recognition through Rewards, Culture building, Career Development, Compensation and
Benefits as important HRM Practices. Leading IT-ITES organizations more or less follow HR
Practices such as Safe, Healthy and Happy Workplace, Open Book Management Style;
Performance linked Bonuses, 360 Degree Performance Management Feedback System.
While studying literature, the researcher came across some of the HRM practices which are
found to be practiced or adopted in the IT-ITES industry.

1.7.1 Shared Vision

Successful IT-ITES organizations aim to create a shared vision among employees, aligning
them to the direction of a company. There is a need to develop a culture of trust and
collective accountability which can enable a sense of belongingness among employees and
lead them enhanced to corporate citizenship. To do this, the participation of higher
management is extremely important in building a culture of open communication and
transparency in processes. Attributes such as providing healthy work conditions,

MS STUTI TRIVEDI 25
 encouraging healthy work-life balance, providing flexibility of schedule can also help in
developing cordial and trust-based relations with employees.

1.7.2 Career Opportunity

Companies encourage a dual career path approach to provide opportunities in both
Technical and Managerial roles. In most organizations, employees continue to grow in
Management roles but are not motivated to augment their Technical capabilities. Running a
parallel technical career path can help organizations become more dynamic and have a
culture conducive to innovation and IP creation.

1.7.3 Performance Management System (PMS)

A Performance management system which assesses employee performance objectively
and is also seen as being fair by the employees goes a long way in assuring employees that
their career needs are being addressed by the organization. At the same time, a robust PMS
helps the organization identify its top talent across levels and the former can formulate
development and retention strategies for this group of employees.

1.7.4 Training and Development

Identification of competencies required at various levels is the first step towards ensuring
the all-round development of the workforce. As per the gaps identified between
competencies required and skills possessed by an individual, it is necessary to develop your
workforce through training, both classroom, and E-Learning, conducting internal certification
courses and Individual Development Plans. As employees start recognizing the benefits
they accrue by way of gain in competencies, not only do they start feeling empowered, any
gain in existing skill levels benefit the organization by way of increased productivity.

1.7.5 Succession Planning

Not only does succession planning signals to employees that their performance and tenure
in the organization are going to be rewarded by career growth, but it also ensures the
promotion of best-suited incumbents for key roles. A comprehensive succession planning
framework involves identification of key competencies for the leadership of tomorrow’s
organization, assessment of available (internal and external) talent pool for the leadership
roles, coaching, mentoring and requisite seasoning of identified successors, facilitated on-
boarding and initial handholding followed by handing over of independent charge to the new
leader.

MS STUTI TRIVEDI 26
 1.7.6 Developing High Performers
While talent management may ideally aim at developing the potential of each or most of the
employee pool, in an IT-ITES organization, which typically employs a very large number of
people, it may not be feasible for having a development strategy for each individual in the
organization. Likewise, even with growth, senior-level positions in organizations are limited
by design. Hence, the organization needs to identify employees who are top performers,
constantly perform tasks which are beyond their defined scope of work and have the
potential to be leaders of tomorrow.

1.7.7 Motivation
With the increasing challenges, it will be the Indian IT-ITES industry's ability to harness
opportunities depending on its strategic business planning, consisting of the hiring of the
‘right’ talent’, paying the ‘right’ compensation and developing and retaining its employees
the ‘right’ way. Companies have also realized that it is important to have diverse and gender
inclusive workforce to be an open and innovative organization. To include diversity, there is
a need for reorientation of leadership and management styles to accommodate a different
set of needs and the growing aspirations of personnel. With increasing complexity of tasks,
companies may leverage the professional expertise of consultants who can help companies
develop comprehensive competency assessment models and frameworks such as models
based on People Capability Maturity Model (PCMM), a five-level capability architecture
which aims at continuously improving individual competencies and institutionalizing new
capabilities for developing the organization's workforce. Using approaches and practices
like these can help firms unlock their investments on intellectual capital, which forms a
substantial portion of budgets in IT-ITES industry.

1.7.8 Retention of Talent

Training and performance together help in retention of the employees, but at the times one
of the toughest challenges for the HR managers in the industry is to deal with the prevalent
high attrition rate. Though there is an adequate supply of qualified staff at entry level, there
are huge gaps in the middle and senior level management in the industry. Attrition is
expected to intensify the demand for experienced resources. Interestingly, research has
indicated that compensation may not necessarily be the prime motivator for people to shift
jobs in this industry. More than compensation, there can be several other factors such as
the need for career growth (for example, high attrition rate among fresh-graduate employees

MS STUTI TRIVEDI 27
 post two-three years when they move out for higher studies) or to maintain a healthier
personal life (one of the primary reasons for attrition of female employees). Due to diverse
reasons as these, organization’s face a number of challenges in retaining employees.

1.7.9 Compensation
Compensation is the key motivation for any Industry and especially for an industry like IT-
ITES where the resources are skill based; compensation may only serve as driving force.
Particularly for the present industry, competitive compensation is widely recognized as a
foundation for retention. As many work options are available with IT-ITES professionals,
they always get attracted towards good compensation as well as the good culture of the
organization. In a way, it has become mandatory for the companies operating in the same
industry to provide the same. The situation is reverse some times, as India has become a
favorable destination for cheaper labour particularly for IT-ITES industry, the effect of hiring
intellectuals with relatively cheap labor, get reflected in other industries or sectors as well.

1.7.10 Productivity of Workforce

As the industry grows and adjacently the human resource expectations increase it becomes
difficult fir firms to maintain the productivity level of employees. Especially with the increasing
expectations of customers and employee’s attrition in the industry, for firms, it has become
a challenge to retain the same level of productivity. It is also significantly important to
address productivity issues as the reductions in productivity are likely to, directly impact the
revenues and margins of the company.

1.7.11 Talent Outsourcing

The trends towards outsourcing particularly with this industry where the things are so
dynamic have been caused by several strategic and operational motives. In the situations
for routine activities, HR departments are denying themselves and are more focusing on the
strategic role. Obviously, Outsourcing comes with its own bouquet of bureaucracy and
responsiveness, the challenge still lies with HR department to prove its importance as well
as relevance. With increased stack or outsourcing, comes an issue like managing diverse
work force as well as work-life balance.

1.7.12 Diverse Workforce

In turbulent times of Globalization, managing resources coming from different corners of the
world has become a burning challenge for HR professionals in the IT-ITES sector. Diversity

MS STUTI TRIVEDI 28
 is not limited up to employment equity but has far beyond that crossed the boundaries of it
and is widely used as an instrument by the HR department for facilitating a healthy
competitive spirit amongst the employees and attaining and retaining the best of the talent
pool available in the market. Appreciating and envisaging the psychographics and
professional essentials of the diverse workforce has now become fundamental
responsibilities of our present-day HR managers. In the current scenario, the HR
professionals must make attempts for providing state of the art cross-cultural training and
developing virtual organizations, which would offer flexibility and empowerment to the
employees. HR Plays a crucial role in managing diversity by communicating the clear - cut
performance standards. Diversity issues can be successfully managed by holding periodic
training programs along with the mentoring sessions and proper reward strategy.

1.7.13 Work-Life Balance

With the increase in a number of both husband and wife working, has also increased the
importance of work-life balance. To provide a balanced life to their resources is a challenge
for HR department. Hence, a program aiming balanced work-life is required which includes
aspects like childcare at or near the workplace, Job Sharing, Care for sick children and
employees, On-site summer camp, Training supervisors to respond to work and family
needs of employees, Flexible work scheduling, Sick leave policies, Variety of errands from
dry cleaning, dropping children at schools, making dinner reservations etc. and many more
like the same or other.

1.7.14 Women Empowerment

The ratio of women employed in IT-ITES industry increased by 45% in the year 2010 with
that of 30% at the beginning of 21st century indicating the growing trend in the number of
women employed in this sector offering equal 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.

1.7.15 Growth Opportunities for the Youth

As the sector recruits the majority of the employees which are in their early thirties, the
sector has created an excellent employment and fast-track growth opportunities for the
younger section of the population and is likely to become one of the largest employers ‘of

MS STUTI TRIVEDI 29
 a growing young population of India. The overall median age group of the sector is 28.9
years with 70% of the workforce being in the age-group 26-35 years.

1.7.16 Training of Workforce

The best task which the industry does is to provide the training to bridge the gap between
industry and academia. This actually helps the resources to get acquitted with the job
environment at their workplace and for which companies in the industry actually invests
heavily for the purpose in order to make sure the firm performs along with industry as well.
The industry by not limiting itself only to the firm but also plays a proactive role in the overall
upliftment of the education itself. This is done by collaborating with many government
institutions to bridge the gaps and industry to the extent plays important role in syllabus
design as well, for example, NASSCOM has been involved in developing standards for
training and recruitment at entry level to make students more employable. These training
address both the technical and soft skills training needs.

1.7.17 Promoting Higher Education

IT-ITES industry is amongst few industries which promotes higher education to the
maximum limits. Many of the firms have long term tie ups with educational institutions which
provides their employees the opportunity to undergo higher studies while doing the job, this
may range from full time as well as part-time options. Best example which can be cited is
NASSCOM is making its talent base for high-end skills in areas like multimedia
convergence and bio-informatics while working with the Ministry to develop institutes that
produce highly specialized professionals (xxxiv).

1.7.18 Improved Work Environment

IT-ITES companies are popularly talking of the town for providing best of the culture and
environment to their resources. As the philosophy lies in better to provide to the employees,
better can be fetched out of them in terms of performance. Benchmark facilities provided to
the resources includes a gymnasium; yoga, meditation facilities as well as their safety
through pick and drop facilities. To cater to the need of providing a work-life balance,
particularly to women employees, the companies offer flexible working hours and work from
home option.

MS STUTI TRIVEDI 30
 Human Resource Management will be the key area of focus in upcoming times as in
companies and government organization put in place strategies to cope up with the
economic crisis and recovery. The so-called “war for talent” is on the backburner as the
focus shifts to hiring freezes, benefits and compensation cost management, and workforce
reduction in the hardest- hit segment and as the era of skill-based workers has arrived but
if India wants to truly move to the global arena, it has to spruce up its workforce. Small may
be beautiful, but not in the IT industry. In the knowledge era and a skill-based economy, it
has become imperative that human resources become one of the essential ingredients of
success. The growth of IT-ITES companies worldwide depends on its people and the
intellectual capital it possesses. ‘Knowledge workers’ has become a buzzword in today’s IT
scenario. And if we look at the top software exporters, they have been growing
phenomenally in workforce strength. To make it big in the global software market, India
needs to increase its mass of knowledge workers.

The study leads to the conclusion that though the concept in the field of Human Resource
Management is in implementation to one extent in Indian IT Industry, still it has to cover an
extensive path to make its arrival at the door of every Indian organization. Hence, we can
say that Initiation of the usage of the concepts is something required but continuous usage
and then reaching the heights is something which is essential and this is the point where
Indian corporate lacks, which supports the fact that Indian HR is like a ship that has left the
sea shore but still is on middle path and has long journey to cover.

1.8 Outsourcing – A Conceptual Framework

Outsourcing in India have till now been used only in for decades in the manufacturing sector
but outsourcing in services is a recent phenomenon in the country. Basically, Services
outsourcing takes place when organizations catch out services to a third-party vendor either
domestically or offshore. This is also widely known as Business Process Outsourcing
(BPO), which in essence means the delegation of ownership, administration, and operation
of a business process or processes to an external service provider. Indian IT-ITES industry
have developed because of the outsourcing of the Information Technology (IT) function
from other developed nation. The history of outsourcing starts way back in 1070’s and by
the late 1980‘s, the information system trade press first coined the term ―outsourcing to
describe the growing dependence by firms on outside providers for on-going IT support. As
of now, the word outsourcing has just become a synonym for company’s recurring internal
functions with outside vendors. The end meaning of the widely used terminology of
outsourcing is that the vendor rents his skills, knowledge, technology, service, and

MS STUTI TRIVEDI 31
 manpower for an agreed price and period to perform functions that the client no longer finds
it beneficial to perform it himself. And this is exactly possible only when both parties involved
agreed upon a fixed price for the agreed service. The external service contributor in roll
manages the process in observance of some measurable performance metrics. And can
be hired or delivered nationally or internationally.

Management gurus and theories have an opinion that one should always concentrate on
its core functions, and the functions towards which it does not possess the expertise, one
should hire a specialist for the same and this gave birth to the concept called outsourcing.
It is also perceived as a make versus buy decision which has its definition in in economic
history as a relative benefit the firm gets on taking a decision of whether to manufacture or
to rent that particular service from outside. And this gave the firms the confidence of
essentially meant that the organizations should transfer non-core functions to a specialist
and focus on its core functions.

But this was not an easy for Indian IT-ITES sector as this had to bring a lot of grass root
changes in the Indian economy in the development and prospering of IT sector and eventual
percolation to BPO industry. As India was too much involved into the mixed economy which
till date had not brought any right environment to boost up entrepreneurship and
competitiveness. Similarly, the country was passing through the crucial stage of two-digit
inflation rate, reduced industrial growth and high lending of finance from financial
borrowings like World Bank and international monetary fund. And then arrived the situation
where India had than to consider the concerns of bodies like World Bank and the
International Monetary Fund (IMF) agreed to bail out India on the condition that it changed
from a regulated regime to a free market economy by bringing the new era of liberalization,
where the government announced a series of changes in the economic policies starting
with the devaluation of the rupee, followed by new industrial, fiscal, and trade policies. A
more liberal policy was than welcomed at the banking sector and foreign investments with
many of the welcomed reforms. With these many radical steps, the economy becomes more
(xxxv).
dynamic and vibrant, and foreign reserves have gone up significantly Budhwar et al,
The outsourcing industry had come to be viewed as the primary engine of the country’s
development over the next few decades, contributing broadly to GDP growth, employment
growth, and poverty alleviation.

MS STUTI TRIVEDI 32
 These reforms opened the gate for India to launch itself as a superpower in the IT-ITES
industry in the early twenty-first century. Adding fuel to the fire task was done by widely
available technically sound and English-speaking resources ready to be used and fetched
up. The IT giants were able to offer a wide spectrum of services primarily leveraging on the
broad skill sets and global clientele. There has been a remarkable improvement in the type
of services being offered by Indian companies from the simple beginnings. The reach of IT-
ITES sector has now limited to with around 784 Indian IT-ITES companies registered with
NASSCOM, areas covered by the Indian IT-ITES organizations include customer care, help
desk, and sales support; finance and administration, data analysis, medical transcription,
insurance claim processing, and inventory management; HR and payment services
including payroll, credit-card services, cheque processing, and employee leasing.

The Indian IT-ITES industry has established and grown across time within a mere two
decades of time. It is famously known as the housekeeper of world’s most outsourcing
services and with this, the industry had grown to reach nearly US$ 59 billion in export
revenues, employing around two million employees, and accounts for approximately 55 %
of the worldwide BPO market as per NASSCOM-2011, Strategic Review (xxxvi). With the
tremendous support of the government it has expanded into engineering and design,
animation, market research, network consultancy and management, remote education, and
content development i.e., digital content, LAN networks, and application maintenance. BPO
activities, where knowledge processing is required are on the increase. Some examples of
KPO include intellectual property research, legal and medical research, R&D, analytical
services like equity research, information security services such as risk assessment and
management, bioinformatics, for example, genome sequencing, protein modeling, and
toxicology studies procurement and global trade.

Summary
Present chapter gave the brief about introduction of the research study, detailed
introduction to IT-ITES industry, the chapter also gave about the status of IT-ITES industry
in world’s scenario and also about Indian scenario about IT-ITES industry and in Indian
scenario about the industry, it gave details about market growth and segmentation about
industry, major investments done by Indian Government in the industry, major Government
initiatives taken in the industry, contribution of industry in boosting Indian economy and its
impact on economy, challenges faced by IT-ITES firms and justification of industry as

MS STUTI TRIVEDI 33
 driving force towards the country’s economy, the place of industry as Gujarat State
perspective and importance of HR practices in industry, about most important Outsourcing
and its importance in Indian IT-ITES industry. Chapter 2 will be a briefing about empirical
views on the impact of HR practices on Employee Performance as well as Organizational
Productivity.

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