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The last decade saw the tremendous growth of a sector in India which expertly utilized the talent pools across the globe and picked up the right set of people at low cost. The Indian IT Industry which contributes to 5.19% of country’s GDP and employees more around 2.5 million people was born in 1967 with the partnership of Tata Group with Burroughs. Later on, due to pioneering work by major companies like Infosys,TCS,Wipro the annual revenue of the IT-BPO sector have now surged to $76 Million(2009).IT is now an inseparable element of our life and it is been applied in healthcare,sports,medicine,education,defence etc, so the health of the IT industry is very important for any nation’s prosperity. The major market of Indian IT service Industry is US. The Indian companies which primarily do software support and maintenance based work flourish because of the cost advantage. This gap may reduce as salary hike of Indian IT workforce amounts to 10% annually(Forbes Report).Outsourcing has been banned in some states of US and Visa Costs to the Indian IT professionals has been hiked to prevent Jobs in Us. Tax is being levied on the company which sets up outsourcing unit in other countries Projects are being outsourced to China due to their lower infrastructural costs and due to the fact that English has been made the second language in schools. Bleum is one of companies in China which manages the work outsourced from US. So, due to so much of threat looming around, India along with service based work should develop its own software products. Product based companies are a risky venture and may require huge investment but the returns are high, of which Google is the biggest example. Product based companies also require lesser manpower of which India has a shortage. According to NASSCOM, IT-BPO industry could bring $60 billion revenue in 2010 which can only be a dream due to shortage of .5 million quality workforce unless remedial medial measures in public education & corporate training are taken. India should look on building more customized software and try to move up in value chain. Sectors like Mobile Development ,Robotics ,Climatic Change, Energy & Environment should be touched. This sector has the potential to generate $225 billion dollars by 2020(NASSCOM) if we take care of a few mitigating factors like poor tertiary education standards which leads to low employability rate among graduates, with figure being only 26%.(26% of the engineers are employable in technology services of the IT industry).Also better infrastructural facilities can be provided by the government. The prospect of IT Industry in India looks good. Companies like Infosys has taken the initiative and developed products like Onscan –online web based scanner and have a banking product in the market. Many software firms are shifting to branded products as that gives them a niche market and a blue ocean to explore, while the service based firms battle it out in the red ocean. Cranes Software make statistical tools,while Polaris,3i Infotech,Nucleus Software and Ramco produce financial products. India is now a investment hub, and companies like Microsoft, Dell etc. are now investing in India.Recently,Bharti Airtel has teamed with Savvis to provide cloud services. The Indian Government is planning to spend close to 10 billion $ on National E-governance plan.Post recession, the Indian companies are hiring and the market is looking good.But for the long run India should promote technical innovations in spectrums like health care,medicine,space and in the fields of energy,environment,automation.If India has to emerge as an economic super power then the IT sector will have a vital role to play.