IT enabled Services

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. According to the National Association of Software and Service Companies (NASSCOM), the IT/ITeS industry's contribution to the country's gross domestic product (GDP) has grown from 1.2 per cent in FY 1998 to an estimated 5.5 per cent in FY 2008. The net value-added by this sector, to the economy, is estimated at 3.3-3.9 per cent for FY 2008.

The Indian IT-ITeS sector (including hardware) grew by 33 per cent in FY 2008 to reach US$ 64 billion in aggregate revenue. Of this, the ITeS/BPO sector contributed US$ 12.5 billion as against US$ 9.5 billion in FY 2007, an increase of 31 per cent.

The Indian ITeS-BPO exports grew significantly from US$ 8.4 billion in FY 2007 to US$ 10.9 billion in FY 2008 while the revenues of domestic BPO grew to US$ 1.6 billion in FY 2008 from US$ 1.1 billion in FY 2007. The sector provided direct employment to 700,000 in FY 2008 up from 553,000 in FY 2007.

ITeS, which started with basic data entry tasks over a decade ago, is witnessing an expansion in its scope of services to include increasingly complex processes involving rule-based decision making and even research services requiring informed individual judgment. It now offers services such as knowledge process outsourcing (KPO), legal process outsourcing (LPO), games process outsourcing (GPO) and design outsourcing among others.

Realising its potential, after IT Parks and IT SEZs, the government has cleared a proposal for creating much larger Information Technology Investment Regions (ITIRs) to give a fillip to the country's growing IT and ITeS sector.

Moving up the Value-chain

The number of patent filings from Indian R&D centres has been growing over the years. More and more cutting-edge products are being developed in India. While outsourcing lower level technical jobs to India has been a practice of multinational technology firms, the increasing reliance on Indian R&D operations is a growing trend.

• Aviation majors like Boeing and Lockheed Martin are looking at setting up captive IT-related technological R&D centres in India.
• India has emerged as the largest developer location for companies such as Sun Microsystems and Nokia. Sun Microsystems has 760,000 developers in India – the largest such community in the world for the firm. The world's largest handset maker Nokia works with over 140,000 independent developers in India, again the largest.

India with its natural competitive advantage is likely to play a huge role in various segments of the ITeS industry.

• The Indian animation industry is rapidly growing as a major outsourcing hub with a growth rate of 30 per cent.
• The Indian KPO sector is estimated to become a US$ 10-billion industry by 2012, from the current size of US$ 4 billion according to a report on the "Future Course of KPO Industry".
• India is fast becoming a hot destination for outsourced e-publishing work. As per a Confederation of Indian Industry (CII) report, the industry is growing at an annual rate of 35 per cent and India's outsourcing opportunities in the value-added and core services such as copy editing, project management, indexing, media services and content deployment will help make the publishing BPO industry worth US$ 1.46 billion by 2010.
• A recent CRISIL research study on the outsourcing industry has concluded that engineering services outsourcing (ESO) is poised to be the next big opportunity in the Indian outsourcing services industry. The ESO sector is likely to grow at a compounded rate of 26 per cent and post revenues aggregating around US$ 7.5 billion by 2012.