INDIA'S SOFTWARE EDGES

By N ZindalThe Economic Times

The Indian software export industry has transformed into a mature, internationally competitive one. The quality of human resources combined with an extremely sophisticated vendor base, world class delivery model, improvements in local infrastructure, cost advantage and supportive government policies have put it ahead of other destinations. The export revenue earned by the sector has grown 300 fold in 15 years from $100 million in 1991-92 to $32 billion in 2006–07. India now accounts for about 65% of global market in offshore IT and about 46% in offshore ITES market. The growth of this sector has led to tremendous pay-offs in terms of high quality employment generation, wealth creation, transforming the image of India to one of the engines of the world economy and India emerging as a high-tech manufacturing, R&D and knowledge hub. The software export sector currently accounts for over 20% of the country’s exports and about 4% of the country’s GNP. The sector is providing direct employment to about 1.3 million IT and ITES professionals. Every direct job in this sector leads to generation of three times indirect and induced employment. Over 95% of software exports are currently from seven metros — Bangalore, Chennai, Hyderabad, Mumbai, Pune, Kolkata and Delhi NCR. Exports from software SMEs (turnover up to $25 million) have grown substantially over the last few years. During 2006-07, about 5,000 SME units exported 40% of total software exports and employed about 68% of the total IT workforce. Tier II/III cities are the key to keep infrastructural, wage and other operational costs low and remain competitive. Much of the requisite infrastructure is in place and all new units/expansion should now come up at these locations. Scale is the key for low-end IT services/BPO work. Some large units have acquired the scale and are reaping the benefits. Many large units started as SMEs. Apart from favourable market environment, innovation has been the key in their spectacular growth. The government should help much more to promote innovation through policy support and facilitation in terms of capital and working capital financing, incubation support, venture capital and seed/ angel funding, R&D funding and friendly government funded/assisted patent filing etc. The average software export revenue per IT professional is still very low and unless, we quickly move up the value chain, India would face formidable competition at the lower end of value chain.