The Indian software industry has grown from a mere US $ 150 million in 1991-92 to a staggering US $ 5.

7
billion (including over $4 billion worth of software exports) in 1999-2000. No other Indian industry has
performed so well against the global competition.

The annual growth rate of India’s software exports has been consistently over 50 percent since 1991. As
per the projections made by the National Association of Software and Services Companies (NASSCOM)
for 2000-2001 (April 1, 2000 - March 31, 2001), India’s software exports would be around $ 6.3 billion, in
addition to $ 2.5 billion in domestic sale.

Indian Software Industry 1995-2000

(US $ million)

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01*

Domestic software Market 490 670 920 1250 1700 2450

Software Exports 734 1085 1750 2650 4000 6300

Indian Software Industry 1224 1755 2670 3900 5700 8750

(* Source: NASSCOM Report)

Today, India exports software and services to nearly 95 countries around the world. The share of North
America (U.S. & Canada) in India’s software exports is about 61 per cent. In 1999-2000, more than a
third of Fortune 500 companies outsourced their software requirements to India.

NASSCOM’s survey during 1999-2000 indicates a reversal in the mode of services offered by India. In
1991-92, offshore services accounted 5 per cent and on-site services 95 % of the total exports. However,
during 1999-2000 offshore services contributed over 40 percent of the total exports.

The NASSCOM - McKinsey report on India's IT industry

According to a NASSCOM-McKinsey report, annual revenue projections for India’s IT industry in 2008 are
US $ 87 billion and market openings are emerging across four broad sectors, IT services, software
products, IT enabled services, and e-businesses thus creating a number of opportunities for Indian
companies. In addition to the export market, all of these segments have a domestic market component as
well.

Other key findings of this report are:

• Software & Services will contribute over 7.5 % of the overall GDP growth of India
• IT Exports will account for 35% of the total exports from India
• Potential for 2.2 million jobs in IT by 2008
• IT industry will attract Foreign Direct Investment (FDI) of U.S. $ 4-5 billion
• Market capitalization of IT shares will be around U.S. $ 225 billion

Projected Revenues - 2008

($ US billion)

Sub total
India Based India Centric Domestic Total 1998
(International)
IT Services 23 7* 30 8.5 38.5 2.1
Software Products 8 2 10 9.5** 19.5 0.6
 IT-enabled
15 2 17 2 19 0.4
Service
E-business 4 1 5 5 10 0.2
Total 50 12 62 25 87 3.3

Exports of $50 billion in 2008

* Legacy/client server, ERP and package work and Internet all have different proportions of work outside India where revenues
are not export revenues.
** Resale of imported products included.

Promotion of IT - governmental incentives:

With the formation of a new ministry for IT, Government of India (GOI) has taken a major step towards
promoting the domestic industry and achieving the full potential of the Indian IT entrepreneurs.
Constraints have been comprehensively identified and steps taken to overcome them and also to provide
incentives. Thus for example, venture capital has been the main source of finance for software industry
around the world. However, majority of the software units in India is in the small and medium enterprise
sector and there is a critical shortage of venture capital kind of support. In order to alleviate this situation
and to promote Indian IT industry, the Government of India has set up a National Task Force on IT and
Software Development to examine the feasibility of strengthening the industry. The Task Force has
already submitted its recommendations, which are under active consideration. Norms for the operations
of venture capital funds have also been liberalized to boost the industry. The Government of India is also
actively providing fiscal incentives and liberalizing norms for FDI and raising capital abroad.

Recently, an IT committee was set up by the Ministry of Information Technology, Government of India,
comprising Non Resident Indian (NRI) professionals from the United States to seek expertise and advice
and also to step up U.S. investments in India's IT sector. The committee is chaired by Minister of
Information Technology, Government of India, and the members include Secretary, Ministry of Information
Technology and a large number of important Indian American IT entrepreneurs.

The group will:

• Monitor global IT developments and refine Indian IT policy to meet global requirements.
Specifically, this will help angel investors, venture creators and incubation;

• Promote the growth of human resource development in the IT sector with the aim of creating
quality-based education;

• Promote R&D in the sector by identifying thrust areas and drawing up a blueprint for action.

India’s most prized resource in in today’s knowledge economy is its readily available technical work
force. India has the second largest English-speaking scientific professionals in the world, second only to
the U.S. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions
and polytechnics, which train more than 67,785 computer software professionals every year.
Government of India is stepping up the number and quality of training facilities in the country to capitalize
on this extraordinary human resource. It is the knowledge industry that will help take the Indian economy
to a sustained higher rate of growth and the policy makers are fully aware of this.

Information Technology is one of the most important industries in the Indian economy. The IT
industry of India has registered huge growth in recent years. India's IT industry grew from 150
million US Dollars in 1990-1991 to a whopping 50 billion UD Dollars in 2006-2007. In the last
ten years the Information Technology industry in India has grown at an average annual rate of
30%.

The liberalization of the Indian economy in the early nineties has played a major role in the
growth of the IT industry of India. Deregulation policies adopted by the Government of India
have led to substantial domestic investment and inflow of foreign capital to this industry. In
1970, high import duties had forced IBM to leave India. However, after the early nineties, many
multi national IT companies, including IBM, have set up their operations in India. During the ten
year period 1992-2002, the Indian software industry grew at double the rate as the US software
industry.

Some of the major reasons for the significant growth of the IT industry of India are -

• Abundant availability of skilled manpower

• Reduced telecommunication and internet costs
• Reduced import duties on software and hardware products
• Cost advantages
• Encouraging government policies

Some of the major companies in the IT industry of India are -

• Tata Consultancy Services (TCS)

• Infosys
• Wipro
• IBM
• HP
• HCL
• Cognizant Technology Solutions (CTS)
• Patni
• Satyam
• NIIT

India's IT industry caters to both domestic and export markets. Exports contribute around
75% of the total revenue of the IT industry in India. The IT industry can be broadly
divided into four segments -

• IT services
• Softwares (includes both engineering and Research and Development)
• ITES-BPO
• Hardware

HR Software
Cost effective payroll and HR software solutions from KCS.
Information technology, and the hardware and software associated with the IT industry,
are an integral part of nearly every major global industry.

The information technology (IT) industry has become of the most robust industries in the world.
IT, more than any other industry or economic facet, has an increased productivity, particularly in
the developed world, and therefore is a key driver of global economic growth. Economies of
scale and insatiable demand from both consumers and enterprises characterize this rapidly
growing sector.

The Information Technology Association of America (ITAA) explains 'information technology'

as encompassing all possible aspects of information systems based on computers.

Both software development and the hardware involved in the IT industry include everything
from computer systems, to the design, implementation, study and development of IT and
management systems.

Owing to its easy accessibility and the wide range of IT products available, the demand for IT
services has increased substantially over the years. The IT sector has emerged as a major global
source of both growth and employment.

Features of the IT Industry at a Glance

• Economies of scale for the information technology industry are high. The marginal cost
of each unit of additional software or hardware is insignificant compared to the value
addition that results from it.

• Unlike other common industries, the IT industry is knowledge-based.

• Efficient utilization of skilled labor forces in the IT sector can help an economy achieve a
rapid pace of economic growth.

• The IT industry helps many other sectors in the growth process of the economy including
the services and manufacturing sectors.

The role of the IT Industry

The IT industry can serve as a medium of e-governance, as it assures easy accessibility to

information. The use of information technology in the service sector improves operational
efficiency and adds to transparency. It also serves as a medium of skill formation.
MAJOR STEPS TAKEN FOR PROMTION OF IT INDUSTRY

Domain of the IT Industry

A wide variety of services come under the domain of the information technology industry. Some
of these services are as follows:

• Systems architecture
• Database design and development
• Networking
• Application development
• Testing
• Documentation
• Maintenance and hosting
• Operational support
• Security services

Future of Indian IT Industry

The current scenario in the IT industry of India and the tremendous growth registered in recent
years has generated much optimism about the future of the Indian Information technology
industry. Analysts are upbeat about the huge potential of growth in the Information Technology
industry in India.

The major areas of benefit that the future growth in the IT industry can generate for
the Indian economy are -
 Exports - The IT industry accounts for a major share in the exports from India.
This is expected to grow further in coming years. The information technology
industry is one of the major sources of foreign currency or India.

 Employment - The biggest benefit of the IT industry is the huge employment it

generates. For a developing country like India, with a huge population, the high rate
of employment in the IT sector is a big advantage. The IT industry is expected to
generate employment of 2.2 million by the end of 2008 which is expected to
increase significantly in coming years.

 FDI (Foreign Direct Investment) - High inflow of FDI in the IT sector is

expected to continue in coming years. The inflow of huge volumes of FDI in the IT
industry of India has not only boosted the industry but the entire Indian economy in
recent years. 
he Nasscom- McKinsey report on the IT industry of India projects that the Indian IT industry
will reach 87 billion US Dollars by the end of 2008. 2.2 million Employment is expected to be
created in the IT industry according to this report. The report also projects 50 billion US Dollars
of IT exports from India by the end of 2008.

Software exports from India are expected to grow in coming years. New markets for software
exports from India have opened up in the Middle East, South and Southeast Asia, Africa, and
Eastern Europe. The reputation that India has earned as a major destination for IT outsourcing
has opened further possibilities. Many developing countries are now using the Indian model for
growth in the IT sector.

Another important area of future growth for the IT industry of India is the domestic market.
While exports dominate the IT industry at present, there is huge scope of growth in the domestic
market which can be tapped in the future.

The US recession has had its share of negative impacts on the Indian IT industry. However, the
industry has faced the challenges posed by the global market and is sustaining its rate of growth.
The focus for the future is to ensure that the benefits of the IT industry percolate to the grassroot
levels.

Challenges before Indian IT Industry

At present there are a number of challenges that are facing the information
technology industry of India. One of the major challenges for the Indian information
technology industry was to keep maintaining its excellent performance standards.

The experts are however of the opinion that there are certain things that need to be
done in order to make sure that India can maintain its status as one of the leading
information technology destinations of the world. The first step that needs to be
taken is to create an environment for innovation that could be carried for a long
time

The innovation needs to be done in three areas that are connected to the
information technology industry of India such as business models, ecosystems and
knowledge. The information technology sector of India also has to spread the range
of its activities and also look at the opportunities in other countries.

The improvement however, also needs to be qualitative rather than just being
quantitative. The skill level of the information technology professionals is one area
that needs improvement and presents a considerable amount of challenge before
the Indian information technology industry.
The Indian information technology industry also needs to co-ordinate with the
academic circles as well as other industries in India for better performance and
improved productivity. The experts are of the opinion that the business process
outsourcing service providers in India need to change their operations to a way that
is more oriented to the knowledge process outsourcing. One of the most important
crises facing the Indian information technology industry concerns the human
resources aspect. The problems with outsourcing in countries like the United States
of America are posing problems for the Indian information technology industry as
well.

n the recent times a bill has been passed in the state of New Jersey that allows only
the citizens or legal non-Americans to be given contracts. This legislation has also
affected some other states like Missouri, Connecticut, Wisconsin and Maryland.
These states are also supposed to be considering these laws and their
implementation. This is supposed to have an adverse effect on the outsourcing that
is the source upon which the information technology industry of India thrives. The
information technology professionals who aim at working in the country are also
likely to be hindered by the legislation as a significant amount of these
professionals have been going to work in the USA for a long time.

Top Players in Indian IT Industry

The leading companies in the information technology industry of India are Wipro
Ltd, Aditya Technologies, NIIT Ltd, Asset Infotech Ltd, Patni Computer Systems (P)
Ltd, Atari Informatics Ltd, Polaris Software Lab Ltd, Baan Info Systems India P Ltd, B-
commerce Infosystems Pvt Ltd, HCL Infosystems Ltd, Cerulean Information
Technology Pvt Ltd, Hexaware Technologies Ltd, Iflex Solutions Ltd, CMC Ltd, Igate
Global Solutions Ltd, HCL Corporation Ltd, Infosys Technologies Ltd, Satyam
Computer Services Ltd, Larsen & Toubro Ltd, Tata Consultancy Services, Tata
Infotech Ltd and Mastek Ltd.

Aditya Technologies was established on the 25th of October, 1988. The firm is
primarily a specialist in the field of making and selling of official equipments. A
member of the small scale industrial fraternity of India the company has offices all
over the country. Asset Infotech Ltd deals in the provision of education as well as
solutions in the field of information technology. Atari Informatics Ltd was
incorporated in 2000.

he company provides a number of services including - consultancy services,

providing education and training on life insurance and non life insurance services
and products and total solutions. It also operates a number of specialized and
professional training institutes as well.
Baan Info Systems India P Ltd is based in the city of Mumbai. It provides a number
of products and services to its clients like third party reporting software that
includes Safari and Crystal Reports manufacturing, projects, finance, exchange,
supply chain, EDI, sales, front office, distribution, e-commerce and DEM. HCL
Infosystems is one of the major software companies of India. It was established in
1976 and deals in a number of products and services like desktops and notebooks,
security products, workstations, storage solutions, servers, HCL storage solutions,
chipsets, HCL IGL NAS servers, sun servers, SUN storage solutions, thin clients, EMC
storage solutions, display products, solutions, networking products and software
licenses.

Hexaware Technologies Ltd is one of the major global information technology

services providers in India. The company is based in the United States of America
and was incorporated in 1990 by Atul Nishar. It counts among the most prominent
business process outsourcing companies as well. The information technology
services and products of Iflex Solutions Ltd are provided only to companies that
deal in financial services. As such their main clients are UBS, Banco de Chile,
Citibank, Shinsei Bank and International Monetary Fund. The prominent partners of
Iflex Solutions Ltd are Sun Microsystems, IBM, Hewlett Packard, Oracle, Intel and
Microsoft.

Contribution of India's IT Industry to

Economic Progress
The contribution of India's IT industry to economic progress has been quite significant. The
rapidly expanding socio-economic infrastructure has proved to be of great use in supporting the
growth of Indian information technology industry.

The flourishing Indian economy has helped the IT sector to maintain its competitiveness in the
global market. The IT and IT enabled services industry in India has recorded a growth rate of
22.4% in the last fiscal year. The total revenue from this sector was valued at 2.46 trillion Indian
rupees in the fiscal year 2007. Out of this figure, the domestic IT market in India accounted for
900 billion rupees. So, the IT sector in India has played a major role in drawing foreign funds
into the domestic market.

The growth and prosperity of India's IT industry depends on some crucial factors.
These factors are as follows:
 India is home to a large number of IT professionals, who have the necessary skill
and expertise to meet the demands and expectations of the global IT industry.

 The cost of skilled Indian workforce is reasonably low compared to the developed
nations. This makes the Indian IT services highly cost efficient and this is also the
reason as to why the IT enabled services like business process outsourcing and
knowledge process outsourcing have expanded significantly in the India has a huge
pool of English-speaking IT professionals. This is why the English-speaking countries
like the US and the UK depend on the Indian IT industry for outsourcing their
business processes.

The emergence of Indian information technology sector has brought about sea
changes in the Indian job market. The IT sector of India offers a host of
opportunities of employment. With IT biggies like Infosys, Cognizant, Wipro, Tata
Consultancy Services, Accenture and several other IT firms operating in some of the
major Indian cities, there is no dearth of job opportunities for the Indian software 
professionals. The IT enabled sector of India absorbs a large number of graduates from general
stream in the BPO and KPO firms. All these have solved the unemployment problem of India to
a great extent. The average purchasing power of the common people of India has improved
substantially. The consumption spending has recorded an all-time high. The aggregate demand
has increased as a result. All these have improved the gross production of goods and services in
the Indian economy. So in conclusion it can be said that the growth of India's IT industry has
been instrumental in facilitating the economic progress of India.

Size of India’s IT Industry

The size of India's IT industry has grown significantly over the years. The size of this sunshine
industry of India grew from 150 million US Dollars to 50 billion US Dollars between 1990-1991
and 2006-2007. The growth of the IT industry has been very high in the last few years. The size
of the Information Technology industry of India was 5.7 billion US Dollars in 1999-2000. After
the turn of the century the industry experienced exponential growth to reach the 50 billion mark
by 2006-2007.

The size of the IT industry grew consistently during the period - 1995-2000

1995-1996 - 1224 million US Dollars

1996-1997 - 1755 million US Dollars
1997-1998 - 2670 million US Dollars
1998-1999 - 3900 million US Dollars
1999- 2000 - 5700 million US Dollars
2000-2001 - 8750 million US Dollars
According to the NASSCOM- McKinsey report on the IT industry of India, the projected
revenue of the IT industry of India for the year 2008 is 87 billion US Dollars. The projected
exports or the year 2008, accord to this report, is 50 billion US Dollars.

Some of the important aspects of the NASSCOM- McKinsey report related to the size of India's
IT industry are -
 • There is potential of 2.2 million people being employed in the IT industry of India by the
end of 2008.
• Contribution of software and services to the total GDP of India will be more than 7.5%.
• FDI (Foreign Direct Investment) of 4.5 billion US Dollars expected in the IT industry by
the end of 2008.
• 35% of total exports from India will be from IT exports.
• 225 billion US Dollars worth of market capitalization from IT shares.
• Softwares and services are exported to bout 95 companies from India. North America
accounts for 61% of the software exports from India.
• The projections about the size of India's IT industry present a very optimistic picture. The
industry is expected to grow to double its current size by the year 2012. India's IT
industry is expected to grow at an annual average rate of 18% in the next five years. The
industry is also expected to cross the 100 billion US Dollar mark by 2011. One of the
major areas of growth for the IT industry of India is by tapping the potential in the
domestic market. The IT industry of India is largely dependant on the export market.
Penetrating more into the domestic market would create further opportunities of growth
for the IT industry.

Growth of India's IT Industry

India's IT industry has recorded phenomenal growth over the last decade. During
the period from 1992-2001, the compounded annual growth rate of the Indian IT
services industry has been over 50%. The software sector in India has grown at
almost double the rate of the US software sector.

The statistics of the India's IT industry substantiates the huge momentum acquired
by the IT sector in the recent past. During the financial year 2000-2001, the
software industry in India accounted for $8.26 billion. The corresponding figure was
$100 million 10 years back.

As per the report of a study undertaken by NASSCOM-McKinsey, the software export

from Indian IT industry is likely to reach 50 billion US dollars in the year 2008. This
growth rate of the software sector for the year 2008 has been projected on the
basis of the 35% per year growth rate achieved in the last couple of years.

Export of software and services from India is expected to add almost 41 billion US
dollars to the annual revenue of the Indian government in the current year. The
share of technology industry in India's GDP is expected to reach 5.5% in 2008; while
the corresponding figure in 1998 was as small as 1.2%.The study of NASSCOM has
revealed that the growth of India's IT industry has prompted the growth of Indian
exports by almost 36%. Another favorable effect of India's IT boom is the expansion
of opportunities of employment. By the end of fiscal year 2008, the IT sector of India
is expected to employ around 2 million skilled Indian youths.
The growth of India's IT sector has brought about many other positive changes in
the Indian economy. The purchasing power of a large section of Indian population
has increased dramatically. This has resulted in an increase in the average standard
of living of the majority of population of the country. The increase in purchasing
power of the common people has propelled the growth rate of the other sectors of
the economy as well.

There has been considerable increase in the amount of fund available for venture
capitalism and equity financing. India is now home to a number of IT giants. The
operations of IT firms like Wipro, Infosys, Accenture, Capgemini, Tata Consultancy
Services and many more in different locations of India have changed the entire
scenario of the Indian job market. The ITES sector has also come up to complement
the growth of Indian IT sector.