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February, 2012

IT & ITeS in India - Brief Introduction

India's Information technology (IT) and information technology enabled services (ITeS) segments are aligned in a way that the growth in one avenue has ripple effects on another. The IT & ITeS industry, as a whole, is the mainstay of Indian technology sector as it has driven growth of the economy in terms of employment, revenue generation, standards of living etc and has played a major part in placing the country on the global canvas.

National Association of Software and Services Companies (Nasscom) president Som Mittal believes that software exports would be in tune with the estimates and are projected to grow 15-17 per cent to generate about US$ 70 billion in 2011-12 as against US$ 59 billion in 2010-11.

Furthermore, Internet and Mobile Association of India (IAMAI) has stated that internet users in the country have crossed the 100-million mark (owing to increasing internet penetration and affordability for personal computers (PCs), of which 17 million are online shoppers. It estimates that the number of Internet users in India will triple by 2015.

Rural India Calling

Rural business process outsourcing (BPO) units account for over US$ 10 million towards India's IT-BPO revenues. Many big IT-BPO companies in India are getting attracted towards hinterlands due to availability of immense untapped talent and lower costs. Attrition rates in rural areas are just about 3-5 per cent as against a high of 50 per cent in urban BPOs. Employee costs in rural BPOs is almost half as against that of urban BPOs which bring overall operational costs down by almost 30-40 per cent for IT companies. Nasscom has further stated that employee base in these areas would expand by over 10 times by 2013-14 from 5000 in 2009-10.

Wipro BPO, the BPO arm of Wipro Technologies had launched its first rural BPO centre at Manjakkudi Village in Tamil Nadu in August 2011. In October 2011, Infosys BPO had inked an agreement with the Government of Andhra Pradesh to open rural BPO centres in 22 districts. Rural Shores is another firm that had opened a BPO centre in Bagepalli district of Karnataka and serves over 20 clients including HDFC, Infosys, Wipro Technologies and Genpact. It aims to recruit more than 10, 000 youth by 2014.

IT & ITeS - Key Developments and Investments

Between April 2000 and November 2011, the computer software and hardware sector received cumulative foreign direct investment (FDI) of US$ 10.93 billion, according to the Department of Industrial Policy and Promotion (DIPP).

  • Network equipment maker Cisco Systems Inc.'s Indian unit is vying for a bigger share of the IT spending by small and medium enterprises (SMEs) in 14 non-metro markets. The company is planning to increase the amount of investments on its distribution network in the smaller cities in 2012. It has also intensified its research activities in order to develop India-specific products that in some cases may cost just 20 per cent of the global product.
  • California-based IT services company UST Global is expanding its footprints in India's IT capitalBengaluru. The company already operates in Thiruvananthapuram and Kochi in Kerala. In Thiruvananthapuram also, the company is building a 3 million sq ft campus which would be a major hub for offshore IT services offered by the company.

Online Retailing on a High

Emergence of internet retailing and e-commerce as a completely new space is driving the growth of number of online shoppers. As a result, the internet retailing companies are getting attracted towards Indian markets which are poised to grow leaps-and-bounds in the years to come. There are about 17 million online shoppers in India and the number is projected to grow over three times in the years to come.

  • Seattle-based world's largest internet retailer has recently launched its website with a view to harness burgeoning online shopping market in India which is expected to triple in size by 2015. has partnered with several Indian online and offline retailers like HomeShop18, Hidesign, Dabur Uveda, the Bombay Store and others. It has also formed alliances with online players like Snapdeal, Univercell, Saholic (a Spice Group firm) and
  • India's largest and most-funded e-commerce company Flipkart Online Services Pvt. Ltd has acquired, the country's second-largest online electronics retailer, for an undisclosed amount. The move reflects Flipkart's strategy of becoming a major player through acquisitions and eventually grabbing a substantial pie of ever- increasing Indian online retailing space.