Wednesday, September 8, 2010

Ohio has banned outsourcing of government IT and back-office projects to offshore locations such as India, raising fears of similar moves by other American states struggling to cope with high unemployment rates!

Virtual Reality Baloon and Inflated Indian Economy of Ethnic Exclusive Cleansing Economy All Set to be Blasted OFF as  Ohio has banned outsourcing of government IT and back-office projects to offshore locations such as India, raising fears of similar moves by other American states struggling to cope with high unemployment rates!

Ohio outsourcing ban is discriminatory & trade barrier: India Inc

UID has inbuilt security and privacy component

Indian Holocaust My Father`s Life and Time - Four Hundred SEVENTY SEVEN

Palash Biswas

The Indian IT sector, which gets 60 per cent of its export revenue from the US, today said the move by the state of Ohio to ban outsourcing by government departments to offshore locations like India is discriminatory and amounts to a trade barrier.

Through an executive order last month, Ohio Governor Ted Strickland prohibited the expenditure of public funds for services provided offshore.

The US state of Ohio has banned outsourcing of government IT and back-office projects to offshore locations such as India, raising fears of similar moves by other American states struggling to cope with high unemployment rates.I am afraid that in view of the growing Unemployment rate and JOBLOSS in United States of America, other states would Follow suit. The Governemt of India has Killed Natural Livelihood and Natur Associated Production system,inclusive of UNSKILLED Illiterate Labour localised, specifically Agriculture to boost IT based Economy. Indian Economic growth is hyped so much so that Growth in Agriculture is reduced al low as 2.5. IT has also killed Higher Education and Research in India. Indian Education is now all about Vocational education dependent on Information Technology and the Generation next is indulged in Three Four Five G Spectrum Virtual reality which is Synonymous to INFLATED ECONOMY as well as Shining Nuclear Zionsit Brahaminical India.

The move comes ahead of the impending visit of US President Barack Obama to India in November.It also follows a controversial legislation (border security law) increasing H-1B and L1 visa fees, hitting India's over USD 50 billion IT industry.

The Indian industry will take up the issue with its US counterparts and seek government support to flag it with the American authorities.

"Nasscom is leading a delegation to the US later this month and will be taking this up with relevant officials in the US," the apex body of the IT and ITES industry said here.

Nasscom said it would also seek support from Commerce and Industry Minister Anand Sharma, who is visiting the US later this month. Sharma is likely to take up the matter with the US Trade Representative and other senior officials.

It said since international trade is a federal subject in the US, Nasscom is studying the legality of such an order by a state government.

"Ohio's ban on outsourcing can only be viewed as counter -productive to the US government thrust on reducing public deficit... It only reinforces our stand on discrimination," it said.

Nasscom said it would not be surprised if more such "electoral rhetoric" follows in the run-up to the November elections to the US Congress and Ohio Governorship.

Infosys Technologies, the country's second largest software exporter, said, "We are concerned... about banning offshore outsourcing by Ohio State government departments."

Ganesh Natarajan, the chairman of the CII national committee on IT and the CEO of Zensar Technologies, said that while the Ohio development would not have much of a financial impact on IT firms, the issue would be taken up with the US trade mission visiting India this month. Indian IT firms earn most of their revenue from the private sector in the US.

Despite these irritants, the US would remain the major market for Indian IT firms, he said.

Assocham said the Ohio ban amounts to a trade barrier and the move would be against the US's interest.

However, the stock market shrugged off the developments, with shares of TCS, Infosys and Wipro moving up today.

Infosys, the country's second largest software company, on Wednesday expressed concern over the Ohio state government's move to ban IT outsourcing to offshore locations such as India [ Images ].

Infosys [ Get Quote ] CEO and Managing Director Kris Gopalakrishnan said, "We are concerned about the recent news from US about banning offshore outsourcing by Ohio State government departments.

"Infosys' initiative in the Public Services sector is focused on creating a domestic delivery center in the US hence this should not be affected."

India Inc.

From Wikipedia, the free encyclopedia
                    Jump to: navigation,                     search                
India Inc. is a common term used by the Indian media to refer to the corporate sector of the nation.
The Companies Act 1956 allows a variety of formations in the mixed economy of India.. The Ministry of Company Affairs estimates that as of 31 October 2005, there were 712,800 companies registered in India (excluding foreign companies) as detailed below:
Category Non-government Government Total
Private companies limited by shares 628,957 612 629,569
Public companies limited by shares 78,473 724 79,197
Companies limited by guarantee 3,530 7 3,537
Companies with unlimited liability


[edit] See also

[edit] External links

  • India Inc.: Aiming Higher by Susan Kitchens (
  • India Inc., Still Going Strong by Jaikumar Vijayan (
  • India Inc. arrives overseas by Vipul Mudgal for HT Research (
    * This article related or pertaining to the economy of India is a stub. You can help Wikipedia by expanding it.
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    Categories: Economy of India | Indian economics and finance stubs
    7 Sep, 2010, 02.33PM IST,PTI

    UID has inbuilt security and privacy component

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    Topics »uid|national security|nandan nilekani|data bank
    BANGALORE: The UID system has an inbuilt security and privacy component which ensures that information from the data bank could not be accessed except on grounds like national security, Unique Identification Authority of India Chairman Nandan Nilekani said.

    The Unique Identification data base could not be read except for authentication and could not be accessed easily, he said.

    He was speaking at the launch of the forum for revitalising of public services (FRPS), a collaborative effort between National Academy of Customs and Excise and Narcotics and the direct taxes regional training institute (DTRTI).

    The project, which attempts to give a unique identity number to the country's over billion people and expected to be rolled out shortly, would help in delivery of government's welfare schemes, boost financial inclusion, beside enabling other service providers like banks, insurance companies to tap on the UID for authentication purposes.

    He said the UID could also help in setting up of micro ATMs as part of the government's objective to bring in financial inclusion. Through the UID, a grocery store in a village could help a beneficiary of welfare scheme to withdraw cash by simply providing the UID number.

    The store, could authenticate the beneficiary through the UID number. "This way we could have micro ATMs everywhere," he said.

    "It could give acknowledged existence to those currently out of the system," he said referring to thousands of homeless people or those without birth certification or other identification proof.

    He also enlisted the other ways the UID number could help in terms of banking, public distribution system, employment schemes, healthcare and education. The UID number could eliminate bogus beneficiaries, he said.

    Talking about his experience while working for the UID since he took over the job, he said, "I am like a trainee. I had to learn a lot of things but the most important one being how to ensure due processes and documentation were in place before a decision making unlike the private sector."

    "The private sector could learn from the rigorousness of the government sector," he added.

    He also advocated short service commission to get more people drawn into the public service sector.

    "There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore," Ohio governor Ted Strickland said in an executive order passed last month.

    The move is yet another blow to the Indian IT industry, which is facing higher visa costs and rising protests against outsourcing in other US states.

    Offshoring work to India is a $50-billion industry, and the Indian tech industry has benefitted immensely from American firms wanting to take advantage of its low wages and top-quality skills. The industry employs about three million people across India and has largely been responsible for the sea change in the West's perception about the country.

    Last month, the US Congress passed a controversial legislation increasing visa fees for funding the country's Mexico Border Security program. States such as Virginia are facing a massive backlash against outsourcing that could further affect the prospects of Indian IT firms.

    Last week, the West Virginia Public Workers Union filed a lawsuit against proposed outsourcing of IT jobs by the state's office of technology.

    Though Indian companies largely rely on private companies for the bulk of their business and orders from state governments are rare, that approach has slowly been changing.

    TCS is the only Indian company to operate in Ohio. It employs 300 people and gets $19 million in tax credit for creating local jobs. India's second-biggest software exporter, Infosys, has already identified the government outsourcing market as the next big opportunity and established a focussed subsidiary—Infosys Public Services, headed by Eric Paternoster—in June this year.

    Rival Wipro also has a nine-year, $407-million outsourcing contract from Missouri for delivering healthcare services.

    Ohio's move adds to the perception that outsourcing is risky and that it involves serious loss of jobs. Indian companies have been at pains to point out that offshoring work actually improves the health and efficiency of American companies and government departments.

    They have also been making serious efforts to hire more Americans and keep much of the work stateside. But that does not seem to have helped. The latest curb could, if replicated by other states, mean increased hiring of local staff in the US for delivering services, affecting the profitability of Indian companies.

    Such measures would also make Indian firms less attractive for awarding multi-billion-dollar government outsourcing contracts, experts and officials tracking the sector said.

    Anti-outsourcing in US, a 'worrying trend'

    Times - ‎7 hours ago‎
    The Indian Information Technology (IT) industry has criticised the move by Ohio state in the US to ban outsourcing. In a major blow for Indian IT companies ...

    Indian IT's concern: Will rest of US follow Ohio's footsteps? - ‎3 hours ago‎
    ... In the wake of Ohio banning outsourcing of government IT and back-office projects to offshore locations such as India, the Indian Information Technology ...

    Nasscom issues statement on US state Ohio's decision to ban outsourcing

    InformationWeek India - ‎3 hours ago‎
    Globally governments are beginning to see the benefits that can be reaped out of employing Information Technology in public services. India too is opening ...

    In an effort to cope with the fast growing unemployment rates, the U.S. state of Ohio has banned outsourcing of government IT and back-office projects to offshore locations such as India. This in turn has raised fears of similar moves by other states as they feel this can bring in more jobs to the local youths, reports N Shivapriya & Harsimran Julka from Economic Times.

    "There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore," Ohio governor Ted Strickland said in an executive order passed last month.

    The move is yet another blow to the Indian IT industry, which is facing higher visa costs and rising protests against outsourcing in other US states.

    Offshoring work to India is a $50-billion industry, and the Indian tech industry has benefitted immensely from American firms wanting to take advantage of its low wages and top-quality skills. The industry employs about three million people across India and has largely been responsible for the sea change in the West's perception about the country.

    Last month, the US Congress passed a controversial legislation increasing visa fees for funding the country's Mexico Border Security program. States such as Virginia are facing a massive backlash against outsourcing that could further affect the prospects of Indian IT firms.

    Last week, the West Virginia Public Workers Union filed a lawsuit against proposed outsourcing of IT jobs by the state's office of technology.

    Though Indian companies largely rely on private companies for the bulk of their business and orders from state governments are rare, that approach has slowly been changing.

    TCS is the only Indian company to operate in Ohio. It employs 300 people and gets $19 million in tax credit for creating local jobs. India's second-biggest software exporter, Infosys, has already identified the government outsourcing market as the next big opportunity and established a focused - subsidiary Infosys Public Services, headed by Eric Paternoster - in June this year.

    Rival Wipro also has a nine-year, $407-million outsourcing contract from Missouri for delivering healthcare services.

    Ohio's move adds to the perception that outsourcing is risky and that it involves serious loss of jobs. Indian companies have been at pains to point out that offshoring work actually improves the health and efficiency of American companies and government departments.

    They have also been making serious efforts to hire more Americans and keep much of the work stateside. But that does not seem to have helped. The latest curb could, if replicated by other states, mean increased hiring of local staff in the US for delivering services, affecting the profitability of Indian companies.

    Such measures would also make Indian firms less attractive for awarding multi-billion-dollar government outsourcing contracts, experts and officials tracking the sector said.
    However, the US state governments are increasingly pushing for legislations aimed at creating more local jobs, as they cope with high unemployment rates of almost 10%.

    The Ohio order asks all government and government agency procurement contracts to incorporate standard language where service providers will have to disclose the locations where the services will be performed, including those by sub-contractors. In addition, they will have to disclose any shift in location and the principal location of all the contractors and sub-contractors.

    Nasscom, on its part, said at a time when top American firms such as IBM and Accenture are gaining more business from the Indian government's IT spend, such measures by US states are discriminatory.

    "The issue here is that when India doesn't discriminate between American and Indian firms when doling out billion-dollar e-governance contracts, US should also reciprocate. This is about services, but state governments in India do not discriminate too, when procuring products like IT hardware between Indian or American firms. It's setting a wrong trend, firstly with the visa issue and now this," said a Nasscom spokeswoman.

    6 Sep, 2010, 06.46AM IST,ET Bureau

    Indian IT funding cash-strapped client projects

    BANGALORE: Indian software companies such as Infosys Technologies and Wipro are entering the unfamiliar area of vendor financing, at the urging of cash-strapped US customers, by using reserves accumulated over years to invest in so-called software platforms that run activities like payroll processing.

    The country's $50-billion outsourcing industry has flourished for close to two decades by maintaining the IT systems of US companies at sharply lower costs by writing software application codes in India.

    But as customers such as JPMorgan, Philips and Citibank attempt to cope with lower IT budgets by avoiding expensive licensed software, they are asking vendors to invest in building systems and to link payment to the number of transactions.

    "We will have to bite the bullet now—if we wait, there may be no option left for us to have such conversations with customers later," said Subhash Dhar, Infosys' global head of sales and marketing and a member of the company's executive council.

    "All said and done, if you look at balance sheets and profit and loss, ours look better than them. And by and large, if you look at all the industries, tech is looking pretty okay from all the way from chip to software companies, they are looking good, so why not?" added Mr Dhar, referring to the demands of customers that software companies invest their own money to build platforms or what the industry refers to as software solutions.

    This sort of investment is different from traditional vendor financing because companies like Infosys are not offering credit to their customers.

    Nonetheless, it is a distinct shift from selling software to users and, at least to some extent, is similar to that of companies like IBM, which bundle computer hardware, software and services together in large outsourcing contracts, according to a consultant.

    "The IBM issue was really around freeing up cash during hard times, and the overall value to the company was getting cash while over the long term, IBM probably made a return on the financing they did for that specific customer," said Rodney Nelsestuen, senior research director at US-based TowerGroup.

    Mr Nelsestuen, who consults with top vendors and customers about their new outsourcing strategies, said the Indians were doing it a little differently.

    This (what Indian companies are doing) is different in that the value to the vendor is often recovered by both selling the service to that individual company and to others as well," he added.

    The investments are not large, anywhere between $1 million and $10 million, depending upon the number of user licences to be bought and the extent to which the software has to be tweaked for individual users. Software for running routine functions such as payroll systems or to monitor attendance does not vary too much between companies.

    "You are used to (building) training centres and large campuses and that is your investment capital expenditure. Now you have to make this new capex, which is a challenge, but the opportunity is you are going to hook the client," said Mr Dhar.

    Indian vendors are buying licences from business software makers such as SAP and Oracle, and are developing a ready stack of solutions that can be offered on a pay-as-you-go basis. Going forward, these vendors can even rope in hardware makers such as IBM or HP and offer bundled solutions, thereby reducing capital expenditure for customers even more significantly.
    12 Aug, 2010, 03.00AM IST, Pankaj Mishra,ET Bureau

    Cognizant in sniffing distance of TCS, Infosys and Wipro

    BANGALORE: Numbers tell the story better. At the end of June 2008, the gap between the quarterly revenue of Wipro and Cognizant was a striking $383 million. Wipro was way ahead in the technology business and Cognizant was just another emerging company.

    In the three months ended June 2010, that gap has narrowed to a mere $99 million. Till now, Infosys, India's software bellwether, had only TCS to beat when it came to the size of the banking and financial services business.

    Last week, however, Infosys executives watched in amazement as Cognizant notched up revenues of $470 million, perilously close to its own figure of $490 million. There is a reason why India's Big Three software firms are keeping a wary eye on the rear-view mirror. A new competitor is emerging. In the past few years, Cognizant has outpaced the country's top three tech firms — Tata Consultancy Services (TCS), Infosys Technologies and Wipro, quarter after quarter, forcing the companies to rethink their strategy and tweak their sales models.

    In the quarter ended June, Cognizant grew its revenue sequentially by 15.2%. The Big Three struggled to get into double-digits with only TCS growing the fastest, by 6.4%. "We are definitely amazed and concerned," said a senior executive at one of the top three Indian tech firms. "Cognizant is doing what we did to IBM and Accenture many years ago — we need to watch our back more carefully," he added, requesting anonymity as he did not want to be quoted on Cognizant's strengths. For Wipro, the threat is real.

    Not only has Cognizant narrowed the gap with the third-largest software exporter, but its earnings guidance of 36% for 2010/11 indicates a mindset determined to snatch market share. "Cognizant is increasingly becoming the talk point during every assessment we do — they seem to have tweaked our offshore model with much stronger front end and done some things better than us," admitted the sales head at one of the top five companies.

    So, what's really behind Cognizant's growth? After the company decided to invest back any margin in excess of 20% into the business way back in 1998, Francisco D'- Souza who was Cognizant's CEO then, established what was called "two-in-a-box" structure.

    For every customer account, Cognizant has a senior account manager onsite and a dedicated delivery head. Some 800 client facing professionals today form the company's "two-in-a-box" team, helped by the same number of staff in delivery locations such as India. This helps Cognizant focus on fewer customers such as JPMorgan Chase and UBS, and increase share of their outsourcing spend.

    Wipro Infotech announces launches of FluidState Data Centres

    Wipro Infotech, the India, Middle East and Africa, IT Business of Wipro Ltd and a leading provider of IT and business transformation services, Thursday announced the launch of its FluidState Data Centers targeted at small, medium and enterprise businesses.

    Based on its model-driven engineering framework for next generation Data Centers called FluidState, the FluidState Data Center from Wipro is essentially a predesigned, prefabricated Data Center which can be setup in less than a week - almost 10 times faster than a conventional Data Center.

    With technology powered by Cisco, HP, Hitachi and EMC,among others, the FluidState Data Center offers a contemporary modular design, optimized for efficiency, cooling, power and space, a release said.

    Wipro has implemented FluidState Data Center for the Indian Institute of Management, Bangalore (IIMB).
    14 Aug, 2010, 06.04PM IST,AGENCIES

    India outsourcers angered by US job visa hike

    NEW DELHI: India's flagship outsourcing industry reacted angrily on Saturday to a new US law tightening security at the Mexico border with measures paid for by steep hikes in American work visa fees.

    The $600 million legislation, signed into law Friday by US President Barack Obama, will nearly double visa fees for some Indian information technology workers entering the United States.

    "The US is giving a very strong signal foreigners are not welcome," said Som Mittal, president of the National Association of Software and Services Companies (NASSCOM), which represents India's leading software exporters.

    "The law is discrimination," Mittal said.

    The row comes as India readies to host Obama later this year and as anti-outsourcing anger in the United States has been stoked by high unemployment.

    The law, passed in the run-up to November US polls, earmarks funds from the visa fee hike to pay for the US government's plans to boost security along its border with Mexico to crack down on illegal immigration and drug smuggling.

    "While the need to secure greater funding for strengthened security along the US-Mexico border is well understandable, illegal immigration issues are not linked to the temporary movement of skilled professionals," said Chandrajit Banerjee, head of leading business body the Confederation of Indian Industry.

    Banerjee noted India and the United States in April launched a "strategic partnership" to promote economic ties and said "a protectionist pushback" does not help the partnership.

    The US legislation affects those skilled workers brought in by companies whose employees are more than 50 percent foreign, a move that largely affects India's IT and outsourcing industries.

    US high-tech firms such as Microsoft, which bring skilled immigrants into the United States on the same visas, will not be hit the vast majority of their workforce is American.

    NASSCOM says the measures will boost annual US visa costs for the outsourcing industry by $200-250 million annually.

    "Any new fees should have been required of any firms using the (visa) programs. This would have been fair and equitable," Mittal said.

    More than half of the world's top 500 companies outsource work to India which has become the world's back office where Western firms have set up call centres and number-crunching and software development outlets to cut costs.

    But the $50 billion revenue industry also flies employees each year to the United States to work at their clients' locations as on-site technicians and engineers,

    Sponsors of the bill said the law would hike fees for particular Indian firms -- naming Wipro, Infosys, Tata and Satyam -- which they accused of seeking to "exploit" visas to "import foreign workers into the United States."

    Under the law, the fees for non-immigrant "H1B" and "L" visas go up by $2,000 for firms with more than a 50 per cent non-American workforce. The current fee is $2,500.

    The Indian outsourcing sector has been particularly upset with statements by the bill's champions calling the industry a "body shop" because it provides Indian professionals to US companies rather than employing Americans.

    Offshoring - What is Offshoring?

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    So, what is offshoring? Offshoring is a type of outsourcing. Offshoring simply means having the outsourced business functions done in another country. Frequently, work is offshored in order to reduce labor expenses. Other times, the reasons for offshoring are strategic -- to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically.

    India has emerged as the dominant player in offshoring, particularly in software work. Three factors came into play to make this possible. First, in the 1970s the Indian government put in place regulations that mandated that all foreign ventures have Indian majority ownership. Fearing government takeover, many large U.S. corporations, such as IBM, departed, leaving India in the position of fending for itself to maintain its technical infrastructures. This quickly forced the creation of schools to train students in technology.

    Next came the global ubiquity of the Internet and massive telecommunications capacity, which enabled companies to get computer-based work done seemingly anywhere, including India.

    Third, as the year 2000 approached, organizations hired service providers to update their legacy program code. Much of this work was handled in India, where English was commonly spoken, where there was a large and highly trained population of software engineers, and where labor costs were much lower than in developed countries. Y2K work proved the merits of an offshore labor force, and companies have continued tapping the talents and skills (and cost savings) made available by Indian offshore service providers. Major companies working as offshoring service providers in India include Tata Consultancy Services (TCS), Infosys and Wipro.

    Russia, Ireland, Czechoslovakia and Poland have also surfaced as popular offshoring destinations for specific types of software expertise.

    The Philippines, which has a highly literate and educated population, as well as language and cultural affinities with the United States, has become a popular offshoring region for call center and customer support work.

    The dominant location for much of the manufacturing outsourcing (in the form of offshoring) by U.S. companies is China, which has made a push in recent years to also become a provider of services. The Chinese central government has made the "third industry" -- services -- a priority for its national development plans in the coming decades. English is taught in China starting in the third grade, and its technical schools and colleges graduate tens of thousands of software engineers annually.

    At the same time that other countries were coming to the forefront in areas such as software and call center work, the United States was experiencing an economic downturn that struck in 2000 and 2001. The resulting job losses and insecurities created an offshoring backlash, especially among technical workers.

    Both the potential for negative publicity and concerns about data security and privacy have prevented some companies from taking work offshore. However, that doesn't always prevent them from outsourcing. Rural sourcing -- having work done in domestic locations where salaries and operating expenses are lower (such as the Midwest for the United States) -- is an alternative for companies that want to avoid the negative aspects of offshoring.

    Other Dimensions of Offshoring

    Nearshoring is taking the outsourced work to a nearby country (such as Canada, in the case of the United States). Nearshoring is a popular model for companies that don't want to deal with the cultural, language or time zone differences involved in offshoring.

    Captive Centers are offshore companies set up by organizations to provide internal services and in some cases to sell those same services to clients. Often U.S. and European organizations set up captive centers for their outsourced work.

    Multinational corporations (MNC) are service providers with offices in many countries, which enable them to serve a global market of clients and tap the labor arbitrage available by offshoring certain types of work. Among this category are IBM, EDS, CSC, HP, ACS, Accenture and Keane.

    Working Paper*: Getting Hired in a Flat World

        * Do you want to join an Indian Offshoring firm Onsite? Infosys, TCS, Wipro, Satyam, Cognizant, Patni and other Tier-1
        * Indian software service firms are (selectively) hiring in North America

    American economy and consequently the global economy seem to be going through a rough patch though experts are divided on whether we are in true recession. Downturn or not, a sector that will continue to thrive in good times and bad is offshoring. Regardless of what politicians and policy makers say or do, businesses continue to find immense cost-benefits in offshoring, which means that the trends are not reversible. This also means that individuals trying to weather a downturn by seeking recession-proof opportunities are looking for jobs with offshoring firms.

    A simple search will tell you that over 1600 jobs posted on and 2000 jobs on today* require some familiarity with Offshore outsourcing! Professionals with knowledge of the dynamics of offshoring and globally distributing work, and those comfortable in managing geographically distributed teams have a distinct edge in the marketplace. Though a few academic institutions have evolved training programs around offshore outsourcing, there is no substitute for hands on exposure. A gig with an Indian service company is a great option for those looking to experience offshoring first hand. However, landing a job is not as straightforward as it sounds. This is because offshoring firms are extremely selective in hiring, a practice necessitated by business drivers. Case in point, the Fortune write-up "Harder than Harvard" analyzes the core challenge of joining Infosys. Though the article focuses on recruitment offshore, in India, many find that it is equally challenging to be hired by offshoring firms in the US, Canada or elsewhere in the west.

    During the past few years, I have referred several of my former colleagues and acquaintances to my employer, a tier-1 offshoring leader. I have also counseled a few of my peers on some of the internal dynamics at Indian software service firms and their recruitment strategies for those in the West. Getting hired by an Offshoring firm requires an understanding of two key dimensions:

        * Organizational structure, dynamics and management style
        * Organicational Culture

    Interestingly, the operational structures, Culture and 'management style' is similar across Tier-1 offshoring firms, with subtle variations in titles, designations and acronyms for business units.

    Organizational Structure: Business units and functions at offshoring firms

    As with most service and consulting firms, there are distinct business units that support massive operations internally and for clients. The "big 3" - TCS, Infosys and Wipro- alone currently employ over 80,000 people each. Although firms position the strengths and uniqueness of their operating structures - e.g IBUs at Infosys or SBUs at TCS or Wipro -- the functional areas at most firms continue to be similar:

    Business Enabler Functions ( BEF): At offshoring firms, roles in BEFs involve a wide array of jobs ranging from corporate functions (including specialized areas like marketing, finance, HR management, legal, administration etc) to support functions like internal IS (Information Systems), communications, facilities management etc.. Staff for these roles are generally hired from top schools and academies 'back home,' though a few are hired by local offices too. Subcontracting is also resorted to: for instance, the receptionists at the Dallas office may be contracted out from a local staffing firm, or a PR firm may be contracted out for a specific marketing campaign. Staff in enabler functions are routinely deputed from home office to global locations, some of whom go on to become resident specialists. An example is that of finance managers, most of whom are Chartered Accountants or accounting specialists from India, who join the firm offshore and are deputed long-term. Many eventually acquire local credentials (e.g. of CPA) while continuing with the firms.
    Challenge for Prospective Onsite Hires in this role: Identifying the few opportunities in such enabler functions, primarily by networking.

    Operations, a.k.a "Delivery Stream": At the most basic level, this is the part of the firm that earns revenue and involves the majority of people who work on client projects, engagements and initiatives in myriad technologies ranging from old workhorse - mainframes- to cutting edge Web 2.0, SOA, on esoteric tools. The 'complexities' of business arise because of various dimensions including managing people working across geographic locations and with clients from across geographies, cultures and business verticals ranging from Death Care, Hospital Management to financial sector and everything in between. (a topic which I have dealt with extensively in my book*) The staff roles in operations fall into a few (mutually exclusive) categories

        * Developers: Essentially staff at the 'bottom of pyramid' as Prof. C.K. Prahlad would call them. This category includes people with titles like Programmers, Programmer Analyst, Software Engineers, Test Engineer, QA analyst etc. Slightly more 'senior' employees may be given more fancy titles like 'lead.' The bulk of recruitment for these roles happens offshore for obvious reasons: cost arbitrage. This is a pool of people that is eager and willing to pack their suitcase (literally) given a days notice and fly to a distant corner of the globe to earn living allowances and bonuses in foreign currencies. This is also the category mythologized by the business and technology media. How many articles have you read that focus on "hiring programmers in India, who might make a fifth of what programmers do in the U.S"? The truth here is that developers may "make a fifth" of what programmers do but they are not content with that. Articles also fail to report that the same programmers when deputed in the U.S would make almost similar to what a local programmer would.
         Challenge for Prospective Onsite Hires in this role: Are you globally mobile? Are you willing to "make a fifth" if you are deputed to India? A few firms are selectively taking in interns and students in their internship programs [ref: "Infosys recruits & trains US guys". Examples of internship programs include TCS, Infosys [Youtube of Infosys], Wipro

        * Project/Program/Delivery Management: The vast army of Developers [a.k.a 'resources'] employed by offshoring firms necessitates a complex management layer sometimes spanning four or five ranks. The work in this management layer focuses on tactical channenges of keeping the operations running: gathering client requirements, interfacing with client staff, translating requirements into codable specifications (specks), ensuring that developers code to the speck, reporting on the effort (time/cost/people) expended, ensuring compliance with standards, ensuring smooth communication between onsite-and-offshore teams, among other tasks. Most developers aspire to (and eventually do) take on management roles at offshoring firms, ensuring a healthy (read aggressive) competition for 'promotion'
         Challenge for Prospective Onsite Hires in this role: What is it that you bring to the table in this role, as against someone who has grown into it from within the firm? What is your Unique Selling Proposition: Think You, versus a deputee from offshore eager for the role.


         Account / Relationship / Engagement Management: Account and Engagement managers are essentially counterparts of the offshore Project Manager role (described above) but are resident at client locations. Many grow into the role when deputed to client locations and take on some sales responsibilities though the primary focus is to ensure that they are the 'onsite face' of the firm to the client. Engagement managers become more sales focused as the "account" (business relationship) with the client grows. Account managers and Engagement managers have a lot of operational responsibility of billing and invoicing, and are responsible for ensuring that deputees from offshore are eased into their onsite gigs. The most common challenge for people in this role is when they sell more than their offshore counterparts can deliver, which requires an understanding of subtleties of people working offshore and their capabilities.
         Challenge for Prospective Onsite Hires in this role: What is it that you bring to the table? How much do you understand the internal organizational dynamics?

         Sales support: Sales support staff are the rainmakers, essentially people who focus on bringing in new clients and converting prospects into clients. Onsite sales support roles are also complemented by offshore pre-sales staff that helps with proposals, documentation and other back-end client research tasks. They may also be supported by technical sales specialists.
         Challenge for Prospective Onsite Hires in this role: Are you a rainmaker who also understands global delivery? Do you have a pre-existing relationship at Fortune 500, Global or other target clients? Can you translate your contacts and network into concrete revenue?
        * Other Miscellaneous Roles: Offshoring firms have other roles including 'R&D,' software alliance management and other enabler functions that may coordinate with the different business units, sometimes with external software product firms (examples include Infosys' Microsoft alliance or a list of Wipro's alliances Most of the alliance management is done from offshore offices though a few specialists may be deputed to work onsite with the software/product firms too. Alliance sales support staff may also be deputed to support sales teams onsite.

        * Technology and consulting: Consulting is the holy grail of offshoring firms, ever eager to 'move up the value chain.' To their credit, Tier-1 sourcing firms - Infosys, Wipro, TCS, Satyam et al - have either organically formulated their consulting groups or made small acquisitions. Sourcing firms are desperately building a perception of Chinese-walls between their consulting divisions and 'Delivery' arms. Although the consulting divisions aim to provide value-added services to clients, their focus continues to be around ensuring 'downstream' Application Development and Maintenance (ADM) work for their firms. A few niche consulting areas include:
             o Sourcing consulting: These try to compete with pure-play souring advisory firms
             o Technology Strategy and Architecture consulting: These units, staffed by architects and technologists provide architectural consulting services, and compete with Technology Strategy consulting services of IBM, EDS, Accenture et al. [Note: The author leads a group in the North American Technology Strategy Consulting practice for his employer]
             o Domain consulting: This continues to be a challenge for offshoring firms though a few firms have made inroads [eg. Wipro's AMS Energy buyout and units of Infosys Consulting]
        * Challenge for Prospective Onsite Hires in Consulting roles: Do you have a unique brand (of your own) that you can help sell you and your services for your prospective employer? Identifying the right group, role and niche where you can bring in your consulting expertise while learning the ropes around offshoring and globalization is perhaps the biggest challenge. The challenge is equal for sourcing firms that are trying hard to attract world-class talent with the right credentials.

    The Culture at Offshoring Service firms

    The culture at offshoring service firms is distinct, and an understanding of some of the aspects may help you position yourself (or reflect on where you see yourself in such firms)

        * Bottom-up Culture: Most tier-1 software service firms have designed well oiled boot-camp like machinery that ensures a steady inflow of trained personnel at the bottom rungs recruited out of engineering school and academies "back home" [E.g "This year (2007-08), Infosys Technologies Ltd, Wipro Ltd, Tata Consultancy Services Ltd (TCS), HCL Technologies Ltd and Satyam Computer Services Ltd will together spend $438 million, according to estimates provided by the firms."] Service firms have been hiring tens of thousands of entry-level engineers a year. [TCS plans to hire 30,000 employees this year, Infosys 20,000 and Wipro 25,000- The Hindu] This isn't exactly breaking news, either. And it is not just Indian firms. IBM, Accenture, EDS and others are also hiring tens of thousands of entry level software engineers in India. It is therefore not surprising that a bulk of recruitment and retention strategies are focused on hiring entry level staff and not on recruiting overseas.
         Challenge for Prospective Onsite Hires: Typical hiring cycle for oversesas/lateral recruits is extremely long drawn, requiring many layers of interviews and approvals, taxing all but the most determined candidates.

        * Onsite travel is a huge perk: For a vast majority of new recruits, going Onsite is a big perk. Offshore employees are more than motivated to pack a suitcase and travel globally for any opportunity to earn in dollars, pounds or any esoteric 'foreign' currency. And the aggressive competition ensures that service firms have a steady pool of people able and willing to travel to client locations at extremely short notice, mitigating the need to hire locally. The only impediment to such travel is the local governmental regulations (e.g. the annual H1 Visa cap in the US). Managers and leaders at offshoring firms leverage this 'perk' extremely effectively in motivating staff by formulating onsite-rotation strategies that include periodic travel etc. Offshoring firms have also evolved extremely sophisticated travel/visa management processes, a core competency for some of them, if you will.
         Challenge for Prospective Onsite Hires: How willing are you to pack your suitcase and travel from Boston to Bogota at a day's notice? Are you willing to earn in Rupees or Chinese Renminbi when deputed East?
        * Fast-paced 'growth' oriented culture: Many analysts talk about the mythical 15% raises at offshore firms, pointing it out as a challenge for India Inc. The reality is that the periodic 'raise' comes with rapid and vertical growth for individuals in a distinctly rank-based culture. One can perhaps draw a parallel here to the tenure based promotions at the lower rungs of military's officer cadre. This is akin to what the author in an article says "One of the aspects of being an Army officer that people find very attractive is the structured promotion system". However, I guess even this is still not the best example: the difference here is that unlike in the army, there is no concept of enlisted men (and women). A few developers in Offshoring firms remain (or like to remain) hands-on 'Software Engineers' merely a few years after cutting their teeth in the industry: a challenge of running an army of Commissioned Officers if you will. This culture is distinctly different from the workforce in traditional data processing departments or IS careers in the west where gray haired programmers are just as happy coding in Cobol, Java or other technologies 15-20 years into their career in Information Technology.
         Challenge for Prospective Onsite Hires: Finding a niche in a hierarchical, homegrown organization is difficult for many laterals, more so when they have to contend with dynamics of working across cultures and in characteristically rank based culture.
        * Homegrown leadership: Another distinct characteristic of the culture at software service firms is that most of the leadership is homegrown: most Offshoring firms continue to be lead by founders or those who joined during the startup phases. Such a trend is not necessarily radical or unique, as companies like GE have refined the art of grooming a cadre of middle-managers in-house, promoting and nurturing talent from within. To their credit, many homegrown leaders at offshoring firms have contributed to the astronomical growth during the past decade. Some have been instrumental in the tremendous sales and market penetration that offshoring firms have enjoyed in recent years, while others have helped customize and refine offshoring strategies, and Global Delivery Models for their firms. The pool of internal leadersip talent includes alumni of offshoring firms who move across competing firms. Though Offshoring firms have strong non-poaching agreements, Engagement Managers and account managers routinely move from, say, TCS to Infosys to Wipro.
         Challenge for Prospective Onsite Hires: With a strong inward looking management culture, offshoring firms are not desperate for external leaders: So, what do you bring to the table?
        * Costs budgeted in rupees: Many Indian software service firms continue to be headquartered in India, consequently their cost and operations are budgeted in rupees. Though they operate globally and also report their finances according to U.S. GAAP standards, few have grown to be truly multinational. Listing in western markets is by means of American Depositary Receipts (ADRs) [For Examples Infosys: INFY, Wipro: WIT, Satyam: SAY are listed in Indian markets and their ADRs in American stock exchanges]. Subsidiaries of service firms in North America operate as Business Units (or branches) with local managers enjoying an element of Profit and Loss (P&L) responsibility, albeit without true autonomy for hiring-and-firing. In that sense, Country/Regional managers of Indian service firms don't enjoy the same autonomy as, say, a 'Partner' or General Manager of other multinational firms.
         Challenge for Prospective Onsite Hires: Onsite hiring is budgeted in Rupees, which means competitive hiring in local markets will involve preparing extremely strong business case. Unless there is a strong business driver, preparing such a business case is an overhead most managers running operations in onsite locations would like to avoid (Read between the lines: would it not be easier to get someone like Raj to travel onsite instead of hiring someone locally?)
        * Visas and Immigration: The fact remains that Indian software service firms - Infosys, Wipro, TCS, Cognizant, Satyam, Patni et al - continue to grab the maximum number of coveted H1B visas. Which means the face of these companies remains Brown. While the H1 and similar work visas in other countries helps tactical business operations, it also has longer term consequences. For instance, Indians who migrated to the US, Canada, Europe and other western nations in the nineties on H1 and work visas, acquired Green Cards and other permanent residence statuses; and over due course some naturalized to Citizens of their adopted lands. This fact also adds to an element of fuzzy math about hiring 'natives' in America. For example, if Infosys sponsored an H1 visa for an employee, say Kumar, in 1997 and also his US Green Card petition in 1999

    Offshore Outsourcing to India


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    What is offshore outsourcing?

    What is offshoring? Offshoring is a type of outsourcing. Offshoring simply means having the outsourced business functions done in another country. Frequently, work is offshored in order to reduce labor expenses. Other times, the reasons for offshoring are strategic -- to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically. India has emerged as the dominant player in offshoring, particularly in software work.
    Read the rest of the article here.

    How To Outsource to India

    Offshore Outsourcing Models
    Crawl, Walk, Run Strategy Leads to Success in Offshore Outsourcing
    How To Make Your India Site Visits More Effective
    How To Reduce Offshore Hidden Costs
    How To Set Up an Offshore Development Center in India
    Fine-tuning the Offshoring Model
    Offshore R&D Center of Excellence: Myth or Reality
    The Biggest Staffing Mistake Companies Make When They Enter Developing Countries
    Strategy Based on Price Never Wins
    Hybrid Outsourcing Model Reduces Offshore Management Headaches for Encyclopaedia Britannica
    Hybrid Model: Domestic Management and Offshore Operations
    Dealing with Data Theft and Misuse when Offshoring to India
    Optimizing Your India Captive Center Company
    What We've Learned about Working with Lawyers in India

    Trends and Research on Outsourcing to India

    Everest Research: Trends in Offshoring
    McKinsey: India IT and BPO Business To Grow 25% Annually Through 2010
    India-based Attrition Rates as High as 60%
    The Size of the Offshoring Market
    Tier 3 cities: The next battleground for talent
    The Drive Behind US and India Outsourcing Acquisitions

    Software Outsourcing in India

    The Developer-to-Developer Model in Software Offshore Outsourcing
    One Programmer's Encounter with Outsourcing
    Tighten Up Your Partnership: The Costco/US Tech Approach
    How To Hire Best-of-Breed Programmers for Your Project
    Gaming Goes Global
    The New Game in Town: Game Offshoring to India

    Cross Cultural Training, Working with Indians, Working with Americans

    Working with India: What To Know before You Go
    6 Tips for Improving the Cross-Cultural Competency of Offshore Teams
    Cultural vs. Operational Issues in Offshoring
    Change Management and How It Can Help
    Indians Love Their Job Titles!
    5 Challenges India Offshore Teams Face in Working with Americans
    Never Say, No!
    The Basics of Communicating with Your India Team
    Webcast: Working with India: What To Know before You Go

    BPO, Business Process Outsourcing in India

    Reducing Operational Risk in Business Process Outsourcing
    Knowledge Process Outsourcing: The Big Game
    Why India's BPO Industry is Such a BIG Deal
    Cyberabad – The BPO capital of the World
    The Business Value Chasm in BPO
    Karvy Global Services Applies Its Thinking to BPO and KPO
    Pharmaceutical Outsourcing Landscape in India
    Healthcare Outsourcing to India
    Automotive Design Offshoring to India
    Legal Process Outsourcing of First Level Document Review
    How an Immigration Law Firm Is Outsourcing Back Office Processes

    Companies in India

    Intel Pumps Up India Investments
    Dell to Expand Operations in India
    Apple Tunes Out Bangalore
    Google Uses Contest To Attract Writers in India
    Microsoft and JP Morgan Share Expansion Plans for India
    Infosys Is in the Learning Business Too
    GE Spin-off Pulls Rug Out from Competitors; Signs Wachovia as Client
    Details from GM's IT Outsourcing Awards

    Additional Resources

    Discussion Boards: Outsourcing to India
    Post your questions here.
    Service Providers
    India Holidays
    How Exchange Rates Affect Outsourcing
    7 Sep, 2010, 06.51AM IST, Pankaj Mishra & N Shivapriya,ET Bureau

    ABN to renew $1 bn IT outsourcing deals

    BANGALORE/MUMBAI: In what could potentially bring outsourcing projects worth $1 billion to India over the next five years, Dutch banking major ABN Amro is set to renew its contracts for managing the bank's software applications and computer hardware systems with IBM, Tata Consultancy Services (TCS) and Infosys Technologies.

    The original contract signed by ABN Amro in 2005 was worth $2 billion, spread over five years, and had five vendors — IBM, Accenture, TCS, Infosys and Patni. The bank had then aimed to save nearly $250 million every year by working with fewer vendors and consolidating its IT infrastructure.

    Now, having gone through several restructuring itself, including its merger with Fortis Bank and nationalisation, the bank plans to cut the vendor base further, and drive the integration of different banking systems through outsourcing.

    According to at least three people familiar with ABN Amro's outsourcing decision, the bank has retained IBM for managing communication networks, desktops and computer servers, and plans to reduce the number of software application outsourcing vendors to two from the current three.

    "TCS has already started handling incremental and new projects, and Infosys too has deep relationship with the bank, especially with Finacle. This leaves Patni and Accenture in a tight spot," said one of the persons familiar with ABN Amro's outsourcing.

    He requested anonymity because the bank has not yet officially announced the renewal of contracts. He added that around 300 Fortis employees would get transferred to IBM's payroll as part of this transaction.

    IBM is also working on an integration plan for ABN Amro and Fortis, and aims to consolidate the IT systems by 2012, another person familiar with the process added. Officials at TCS and Infosys declined to offer any specific comments on Monday. ABN Amro officials had not responded to an email query sent by ET.

    In a year when top outsourcing firms are hoping that customers would revive their tech spending, this could be the beginning of a series of such renewal opportunities being pursued by almost every vendor.

    Outsourcing experts from research firms such as Ovum said around 500 contracts worth nearly $37.5 billion are set to expire by September this year, ranging anywhere between $1 million and $1 billion each. Among them, while China Mobile plans to adopt a total outsourcing model by giving away computer hardware and application development activities to a set of vendors, Verizon is looking to lower its operational costs by sending out some work overseas.

    Larger offshore vendors, which now include the likes of HP, IBM and Accenture, are likely to bid for a number of contractual opportunities, Jens Butler, principal analyst at Ovum said in a recent interview with ET. "Cost-cutting is not the only theme, it is a component of client requirements ," added Mr Butler, who is based in Sydney, Australia.

    For vendors seeking to renew an existing outsourcing contract, the pressures of doing more with less is a perennial challenge , experts say.

    "Right now, suppliers' leverage is weak in the market, and in general the supplier doesn't gain as much in renewals as when signing the deal for the first time," said Ameet Singh, vice-president , global delivery , at outsourcing advisory firm Everest. "Billing rates are likely to remain same or go up slightly in most renewals given the soft environment. Buyers will look to drive more efficiency, which could be in terms of increased scope of work and better productivity ," he added.


    The original deal signed by ABN Amro in 2005 was worth $2 b, spread over five years, and had five vendors The bank had then aimed to save $250 m every year by working with fewer vendors and consolidating its IT infrastructure It's learnt that the bank has retained IBM for managing communication networks, desktops and computer servers, and plans to reduce the number of software application outsourcing vendors to two from the current three Around 500 contracts, worth nearly $37.5 b, are set to expire this month, ranging between $1 m and $1 b each, say experts
    6 Sep, 2010, 08.19PM IST,PTI

    Satyam accused allowed to argue his case tomorrow

    HYDERABAD: The Special Court dealing with multi-crore Satyam fraud case today granted permission to G Ramakrishna, an accused who was vice president of the firm, to argue his case tomorrow prior to the framing of charges.

    The XXI Additional Chief Metropolitan Magistrate (ACCM) court on September 3 had allowed the petition of Ramakrishna, who worked as Vice-President (Finance) in the IT firm, to plead the case himself.

    Ramakrishna today sought time till Tuesday to argue his case which was granted but the Magistrate asked him to restrict his argument only to the charges made by the CBI.

    Later, the court heard the arguments on the discharge petitions by Satyam's former MD Rama Raju and former employee Prabhakar Gupta.

    Ravinder Reddy, the counsel of Rama Raju, told the court that there was prima facie no evidence against his client in the case.

    Reddy contended that Ram Raju, brother of Ramalinga Raju, prime accused in the case, was implicated by the investigating agency and framed charges without any concrete evidence.

    The counsel for Prabhakar Gupta, a former employees of Satyam Computers, said section 420 and 120-B of IPC did not hold in case of his client who was only an employee of the firm.


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    IT Outsourcing India - Replicating the magic...

    The world is discovering the fact that India is a super power when it comes to developing IT solutions. Swept by the current of the latest trend "IT outsourcing to India", we find many fortune 500 companies like Microsoft, Oracle, Citibank, Morgan Stanley, Wal-Mart, AT&T, General Electric, Reebok, General Motors, Sony, Boeing, Coca-cola, Pepsi, Swissair, United Airlines, Philips, IBM, Lucas and British Aerospace beneficiaries.

    A closer look at the factors fanning the potentials of IT outsourcing in India.

    1. India's human resources

    Being the world's second highly populated country, human resources are a boon by itself. Just as the Gulf is renowned for its natural resource of crude oil, and South Africa for its diamonds, India is proud of the abundance and easy availability of its highly qualified and technically skilled English speaking computer professionals; who are key to success in the field of IT outsourcing to India.

    2. Cost efficiency of IT outsourcing in India

    Significant cost saving can be achieved by IT outsourcing to India, owing to the wide gap between the personal costs in India and that of the developed countries. Offshore outsourcing to India offers considerable economical benefits for those who are prepared to exploit the advantages of outsourcing.

    3. Standard quality that firms doing IT outsourcing in India guarantee

    The Indian companies involved in IT outsourcing in India provide high quality work, meeting international standards and complying with the ISO & SEI-CMM standards. Three out of every four SEI-CMM 5 companies worldwide is located in India. Thus India promises quality - IT outsourcing in India as it has the potential to furnish these services perfectly.

    4. The reliable communication facilities

    Excellent telecom, ISP, and cellular networks are available in all cities & towns in the country. India prides in the reliable satellite and submarine communication links that facilitate good band connectivity with the rest of the world. Thus companies engaged in IT outsourcing to India, can be in touch with the vendors without any connection hurdles. This plays a significant role in determining the success of offshore IT outsourcing to India.

    5. Technologically advanced outsourcing firms in India

    India's technologies offer excellent software solutions. The applications include E-commerce, Business Process re-engineering, System Migration, Maintaining Legacy system, System integration etc. India prides in outsourcing facilities that are required to compete with others; which is yet another reason as to why the world prefers It outsourcing to India.

    6. Galloping growth in Indian economy

    The service sector in India contributes 51% of the GDP. Computer software export was prominent with a growth rate of 40%-50% per year during the 90s. India being the second largest software exporter in the world its large business houses and public sector units are growing steadfastly towards raising economic growth..

    7. Stable government facilitating IT growth

    India has a stable pro - IT government whose policies, economy, GDP growth, taxation, power, telecom, industrial parks & special zones have been helpful in improving the infrastructure as well as communication. The government proves to be a great support for software firms by further providing all the basic facilities required for an outsourcing company to flourish thus playing a major role in contributing to the success and well-being of IT outsourcing to India.

    8. Indian government policies

    • IT is regarded as one of the top 5 priority industries in India. IT is a part of the national agenda, and policies are framed so as to obtain maximum benefit out of IT outsourcing to India.

    • The liberalization and deregulation initiatives taken by the government are aimed at supporting growth & integration with the global economy. These reforms have enabled the entry of foreign companies to the Indian market. FDI investment from NRI's including Overseas Corporate Bodies (OCB's); owned by the NRI's are warmly welcomed in India.

    • The new National Telecom Policy has invited private participants to the Indian telecom sector.

    • The IT bill passed in 2000, gives a legal framework for the recognition of electronic contracts, prevention of computer crime and electronic filing of documents. NASSCOM along with the government is playing a notable role in protecting the interests of the IT sector. Thus with all these help, IT outsourcing to India has reached a point of no turning back.

    Tax system in India.

    The well structured tax system in India, with the authority to levy taxes is divided between the Central & State Governments. Direct taxes, like personal income tax, corporate tax and indirect taxes like customs duty are collected by the Central Government while State Government levies local and state sales tax. Tax revenue as a percent of GDP has been constantly on the rise.


    A domestic company having entire management and control in India is bound to pay 35.7% tax to the Central Government. The nonresident Corporation has to pay 48% of the income derived in India from Indian operation; income that is accounted to arise in India and income that is received in India. Minimum Alienate Tax (MAT) is at the rate of 7.65% of book profit of the companies.

    Tax Incentives

    The tax incentives offered to the investors by the Government of India are a boon for firms involved in IT outsourcing to India. The incentives that facilitate economic growth and development are:

    1. Infrastructure:

    A 10 years tax holiday to ventures engaged in developing and / or maintaining and operating an infrastructure facility.

    2. Power:

    10 years tax holiday to undertakings, which generate and / or distribute power.

    3. Telecom:

    5 years tax holiday for companies providing telecom services including Internet services and broadband services. Also 30 % deduction from profits for the next 5 years in any 10 continuous years out of first 10 years is also offered.

    4. Industrial Parks and Special Economic Zones

    10 years tax holiday is applicable to ventures that develop and /or operate or maintain in notified IT parks and special economic zones.

    5. Other Industries:

    5-year tax holiday is available for new industrial units to be set up in backward states and districts.

    6. Incentives for Exports:

    Tax is deducted on exporters profits for unit set up on EPZs, STPs, EHTPs, FTZ and SEZs.

    7. Other Incentives:

    Tax concessions are allowed for FTI and a weighted deduction of 150% for scientific research and development expenditure have been offered. 10 years tax holiday is available for R&D companies engaged in scientific and industrial research.

    The Quality Accreditation offered to firms engaged in IT Outsourcing to India.

    Yet another prominent reason behind Indias glittering success in the global IT market is the maintenance of quality. In the recent years, India has been able to offer IT software products and services, which match global standards of quality.
    As on 31 March 2002, 42 IT outsourcing companies in India achieved SEI-CMM Level 5 assessments. 316 Indian outsourcing companies have achieved quality certifications. More and more IT outsourcing firms are striving for it. Moreover, the Indian software industry has accepted and adopted newly emerging People - Capability Maturity Model (People-CMM). As per 27 June 2002 statistics, India has 85 companies at SEI-CMM Levels assessment for this. These statistics indicate the fact that almost all the companies in the Indian IT sector have realized the value of quality and its accepted standards and that they are vigilant towards achieving it. It will be interesting to take a look at the Global Accreditation, which the Indian IT players have won.

    1. ISO 9000

    • The International Organisation for Standards (ISO 9000 series).
    • International set of documents on quality assurance. Written by members of a worldwide delegation, ISO/Technical Committee 176.
    • 3 core quality systems documents
    • Models of quality assurance.

    2. SEI-CMM Model

    • SEI (Software Engineering Institute) established in 1984 at Pitts berg, USA.
    • The CMM (Capability Maturity Model) of SEI is a framework that describes the key elements of an effective software outsourcing process.
    • CMM - composed of 5 maturity levels.
    • Each level facilitates a layer in the foundation for continuous process improvement.
    • Achieving each level of the model institutionalizes a different component in the software process, resulting in an overall increase in the process capability of the organization.

    3. People Capability Maturity Model (People-CMM)

    • Process targeted at managing and developing an organization's workforce and adopts the maturity framework of the CMM.
    • Aim - to radically improve the ability of software organizations to attract, develop, motivate, organize and retain the talent needed to continuously improve software development capability.
    • Contains 5 maturity levels.
    • Lay foundations for continuously improving talent, effective teams, and successfully managing the people assets of the organizations.

    4. CMM Model

    • Aim - to guide organizations in improving ability and processes in development, acquisition and maintenance of products and services.
    • Places proven practices into a structure, which aids to measure the firms maturity and process area capabilities.
    • Establishes priorities for advancement and guides the implementation of these environments.

    A brief look on Nasscom Manpower Resource Survey

    Nasscom conducted a survey in the year 2001-2002, on the IT work force status in the country. These were the issues under study.
    • To ascertain the present quarter of IT work force in the country.
    • To make future projections about supplying IT-manpower resources needed to meet the industry demand.
    • To frame a strategy for the same.

    The survey revealed that:

    • The number of employed IT software and services professionals showed an increasing trend. (A whooping 522,000 by the end of 2001-02 compared to 280,000 employed in the year 1998-99.
    • This figure covers professionals, who are engaged in application software, IT services and IT enabled services including professionals engaged in software development units in user organization.
    • South India ranked the highest in hiring of new IT professionals amounting to 41% while the Eastern region was ranked the lowest with 6%.
    • 25.6 years was the overall median age of software professionals.
    • 44% of them had over 3 years of working experience.
    • Interestingly male domination was seen among the software professionals in Indian IT firms; with ratio of 79:21 (male: female); which is likely to continue to 65.35 by the year 2005.
    • The areas that required skills are
    • Software engineering/programmers/analysis
    • Database administrations.
    • E-commerce and Internet application
    • Digital media.
    • Web based applications.
    • Java
    • Communication engineers and Network specialists.
    • Networking application.
    • Data ware housing.
    • Project management.
    • Business applications of software development.
    • Client networking.
    • Quality assurance and technical writing.
    • Legacy systems etc.

    Outsourcing bags the future.

    India needs to increase the workforce, at least 10 fold by 2008, to keep in pace with the growing competition. Quoting the 1999, Nasscom-MaKinsey report, India needs to have at least 2.2 million knowledge workers in IT software and services related areas by 2008. To achieve this goal India must focus on taking the following key steps to increase the number of IT experts in the outsourcing field. This will turn influence the growth of IT outsourcing to India remarkably.

    1. Establishing IIT/IIIT in each state

    • Indian Institute of Technology, is renowned for providing fresh IT graduates / post graduates.
    • Indian Institute of Information Technology (IIIT) a 4 year old institute is a joint initiative by the government and the industry, which aims to give both computer software engineering degrees as well as conduct short-term courses. These institutes allow private sector companies affiliation with their own schools.
    • Nasscom recommends the allocation of at least Rs.15, 000 crores in the 10th five year plan towards establishing at least one IIT in every Indian state.

    2. Course-ware in IIT/IIITs

    • Areas like Project Management, E-commerce, Java, Software Engineering, etc. are to be given more focus.
    • The syllabus must take into account the changes in the industry.

    3. Setting up of IIITs

    • Quick steps should be taken to set up IIITs (Indian Institute of Information Technology) in every state while giving deemed University status to IIT's without insisting on the mandatory stipulation period of 3 years.

    4. Providing more PhDs

    • To bring out high quality task force in IT field; India needs to have more number of PhDs at all levels ranging from the faculty to R&D.

    5. Bridge courses

    • Courses offered in Engineering Colleges throughout the country must be restructured so as to accomodate lessons on computer science programming in at least one semester. Whatever the field, computer knowledge will help those who pass out from these institutions to serve the software industry. Moreover, the industry needs more engineering professionals from different backgrounds too.

    6. Graduation Courses with IT modules

    • The graduation courses offered by universities and colleges countrywide must include computer related courses.
    • Special IT modules must be introduced with a mission to impact the society. IT is a productivity-enhancing tool in a broad range of work situations.

    7. Restructuring the courses

    • Existing institutions like IIT, IISc; RECs; and MCA courses must be moulded in such a way so as to have the maximum output in minimum time.

    8. Program to train teachers

    • A combination of physical and virtual training programmes to train teaches (3T program) at all levels ranging from Primary and Secondary School levels to post and under-graduate courses and Engineering colleges has to be established, to train teachers.

    9. Inter Linking Educational Institutes

    • To facilitate the sharing of high quality education and library resources, the universities, engineering colleges, medical colleges, other educational institutes and R&D organizations must be brought under one network.

    10. Retraining

    Expert service is needed to lead and support IT projects in areas like CRH/e-CRM implementation (front office automation, supply chain management, custom relationship management etc.) and to provide ITES such as finance and accounting, HR, engineering design. For meeting these current requests, the corresponding industry experts must be given a good training; facilitating them with IT knowledge.
    Grooming with IT outsourcing in India, the government of India needs to concentrate on destroying the cobwebs of regulatory hurdles in emerging service lines like IT- enabled services; unlocking growth in domestic market and proactively addressing the potential infrastructure and talent bottlenecks to make sure that the country is ahead in the competition. The government has to ensure 100% of its support in the field of IT outsourcing to India. Nasscom must also sharpen its focus in moulding India as a "Global Services Sourcing Hub".

    A few steps more for IT Outsourcing in India.

    Firms equipped in IT outsourcing to India have their own unique strengths and capabilities. Indian outsourcing firms look at their businesses differently, behave differently, and do different things from that of the past. Maximise on the benefits of outsourcing with IT Outsourcing India, the team prepared to confront challenges from any part of the globe.

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    connect2web - Intelligent IT Outsourcing

    connect2web provides complete IT solutions to empower your business and capitalise on available opportunities. Our complete solutions consist of all or some of the following: � Business Solutions � Infrastructure � Web Solutions � Software Development � Mobile Solutions � Training � Security � Maintenance and Support � Strategic Outsourcing

    Cygnet Infotech - IT Outsourcing India

    Cygnet Infotech is an India-based IT outsourcing company providing Quality Website Design, Software Development, Delphi Development, Portal Development, E-learning Solutions, E-Recruitement Solutions, ASP Development, Shopping Cart Development and Multimedia Design Services.

    Incoda Corporation - Offshore Software Development Resource Center USA

    Incoda Corporation�s Offshore Software Development Resource Center provides all the tools and information you need to find the best software vendor for your next custom application development project. The online Internet portal includes a database of the top offshore outsourcing suppliers, business and journal articles, search tools, and more.

    Shinetech - Software Outsourcing China

    Shinetech Software Development is an offshore outsourcing and offshore software development provider of information technology solutions and services, with headquarters located in Beijing, China. Shinetech provides reasonably priced high quality software outsourcing, testing and offshore development services to companies in the US and Europe.

    SaM Solutions - Offshore Software Development, Eastern Europe

    Offshore software development company SaM Solutions offers software outsourcing services. We offer business and technical expertise, ISO 9001 certified methodology for software development, and reasonable offshore outsourcing rates. Established in 1993 we are located in Eastern Europe.

    ABT Solutions - Offshore Development Ukraine

    ABT Solutions is an experienced team of professionals with passion for delivering of high quality, cost effective, delivered-on-time Web development, Web design, offshore outsourcing, offshore software development and Website maintenance services.

    NeST - Embedded Software Services USA

    NeST is a CMMI Level 5 and ISO 9000:2001 company providing services for Software Development, Hardware Design, R&D, and Manufacturing from across 15 locations around the globe. Focussing on embedded systems development, NeST offers ODM services in Process Automation, Consumer Electronics, Digital Home Solutions, Medical Instrumentation, Broadband and Wireless Networking Solutions, and Avionics.

    E-Vector - IT Outsourcing, USA & Ukraine

    E-Vector is an Offshore IT Outsourcing company with US and European presence. We offer a variety of services including software development, Web application development, Web design, programming, e-commerce, site promotion and all spectrums of business Internet solutions, using an offshore approach.

    cyberThink InfoTech - IT Solutions India

    cyberThink InfoTech is an ISO certified India-based company providing solutions for Web, Software, Graphics, Multimedia and BPO. We are affiliated with cyebrThink NJ, USA and have a branch office in the...  Read More

    IBS Software Services - Software for Global Transportation & Logistics India

    IBS Software Services is a world-class provider of software services to the global Travel, Transportation and Logistics business domain. We have business operations in USA, Europe, Middle East and Asia...  Read More

    WebChroma - Logo & Web Design, e-Commerce Nepal

    WebChroma is one stop solution on e-Commerce, web application, web design and logo design for small to medium size businesses. Software development is our business. At Webchroma, we develop software that satisfies our clients in terms of quality and price. Our well experienced and dedicated work team always strives to serve the clients at their best.

    N3X Professionals - IT Outsourcing Romania

    N3X is a Bucharest, Romania-based outsourcing company providing IT services, software development, graphic design and other creative services.

    Digital Prophets - Software Development & IT Services India

    Located in Bangalore, India, Digital Prophets provides IT Services that support software applications/products, marketing, sales, events, training, and other corporate business processes. Digital Prophets also specializes in Application Development and IT Consulting Services that leverage our technology expertise and low overhead to save you money, while ensuring compliance with quality standards and processes.

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    Pringle Software Technologies India provides offshore development, custom application development, Web development, search engine optimization, web hosting, wireless application development, Web server certificate services, secure e-commerce solutions, data entry, data conversion, HIPAA solutions, and Amazon merchant integration solutions.

    iBilt Technologies Ltd. - IT Outsourcing India

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    Business process outsourcing

    From Wikipedia, the free encyclopedia
                        Jump to: navigation,                     search                
    * This article is written like a magazine article; it does not use the direct, balanced tone expected of an encyclopedia. Please discuss this issue on the talk page. Editing help is available. (December 2008)

    * This article contains weasel words, vague phrasing that often accompanies biased or unverifiable information. Such statements should be clarified or removed. (December 2008)

    Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain.[1]. In the contemporary context, it is primarily used to refer to the outsourcing of services.
    BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customer-related services such as contact center services.
    BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called nearshore outsourcing.
    Given the proximity of BPO to the information technology industry, it is also categorized as an information technology enabled service or ITES. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.



[edit] Industry size

India has revenues of 10.9 billion USD[2] from offshore BPO and 30 billion USD from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year, despite the industry growing 38% in India last year, other locations like Eastern Europe, Philippines, Morocco, Kenya, Egypt and South Africa have emerged to take a share of the market[citation needed]. China is also trying to grow from a very small base in this industry. However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline. Important centers in India are Bangalore, Hyderabad, Chennai, Kolkata, Mumbai, Pune and New Delhi.
The top five Indian BPO exporters for 2006-2007 according to NASSCOM are Genpact, WNS Global Services, Transworks Information Services, IBM Daksh, and TCS BPO.[3]
According to McKinsey, the global "addressable" BPO market is worth $122 – $154 billion, of which: 35-40 retail banking, 25-35 insurance, 10-12 travel/hospitality, 10-12 auto, 8-10 telecoms, 8 pharma, 10-15 others and 20-25 is finance, accounting and HR. Moreover, they estimate that 8% of that capacity was utilized as of 2006

[edit] BPO Benefits and Limitations

An advantage of BPO is the way in which it helps to increase a company's flexibility. However, several sources[which?] have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways.
Most services provided by BPO vendors are offered on a fee-for-service basis[citation needed]. This can help a company becoming more flexible by transforming fixed into variable costs.[4] A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible.[5] Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental changes[citation needed].
Another way in which BPO contributes to a company's flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic restraints.[6] Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm's core businesses.[7] The key lies in knowing which of the main value drivers to focus on – customer intimacy, product leadership, or operational excellence. Focusing more on one of these drivers may help a company create a competitive edge.[8]
A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Using techniques such as linear programming can reduce cycle time and inventory levels, which can increase efficiency and cut costs[citation needed]. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company.[9]
Finally, flexibility is seen[who?]as a stage in the organizational life cycle. BPO helped to transform Nortel from a bureaucratic organization into a very agile competitor[citation needed]. A company can maintain growth goals while avoiding standard business bottlenecks.[10] BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation.[11]
A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time.
Although the above-mentioned arguments favor the view that BPO increases the flexibility of organizations, management needs to be careful with the implementation of it as there are a issues, which work against these advantages. Among problems, which arise in practice are: A failure to meet service levels, unclear contractual issues, changing requirements and unforeseen charges, and a dependence on the BPO which reduces flexibility. Consequently, these challenges need to be considered before a company decides to engage in business process outsourcing[12]
A further issue is that in many cases there is little that differentiates the BPO providers other than size. They often provide similar services, have similar geographic footprints, leverage similar technology stacks, and have similar Quality Improvement approaches.[13]

[edit] Threats

Risk is the major drawback with Business Process Outsourcing. Outsourcing of an Information System, for example, can cause security risks both from a communication and from a privacy perspective. For example, security of North American or European company data is more difficult to maintain when accessed or controlled in the Sub-Continent. From a knowledge perspective, a changing attitude in employees, underestimation of running costs and the major risk of losing independence, outsourcing leads to a different relationship between an organization and its contractor.[14][15]
Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a Business continuity management (BCM) model is setup. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.[16]
Another framework, more focused on the identification process of potential outsourceable Information Systems, identified as AHP, is explained.[17]
L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT- processes.[18]

[edit] See also

[edit] References

  1. ^ Tas, J. & Sunder, S. 2004, Financial Services Business Process Outscourcing, Communications of the ACM, Vol 47, No. 5
  2. ^ Cover Story
  3. ^ NASSCOM Announces Top-15 ITES-BPO Exporters Rankings for FY 06-07
  4. ^ Willcocks, L., Hindle, J., Feeny, D. & Lacity, M. 2004, IT and Business Process Outsourcing: The Knowledge Potential, Information Systems Management, Vol. 21, pp 7–15
  5. ^ Gilley, K.M., Rasheed, A. 2000. Making More by Doing Less: An Analysis of Outsourcing and its Effects on Firm Performance. Journal of Management, 26 (4): 763-790.
  6. ^ Kakabadse, A., Kakabadse. N. 2002. Trends in Outsourcing: Contrasting USA and Europe. European Management Journal Vol. 20, No. 2: 189–198
  7. ^ Weerakkody, Vishanth, Currie, L. Wendy and Ekanayake, Yamaya. 2003. Re-engineering business processes through application service providers - challenges, issues and complexities. Business Process Management Journal Vol. 9 No. 6: 776-794
  8. ^ Leavy, B. 2004. Outsourcing strategies: opportunities and risk. Strategy and Leadership, 32 (6) : 20-25.
  9. ^ Tas, Jeroen, Sunder, Shyam. 2004. Financial Services Business Process Outsourcing. COMMUNICATIONS OF THE ACM Vol. 47, No. 5
  10. ^ Fischer, L.M. 2001. From vertical to Virtual; How Nortel's Supplier Alliances Extend the enterprise [online]. Strategy+Business, Available from [Accessed 5 February 2008]
  11. ^ (Leavy 2004, 20-25)
  12. ^ Michel, Vaughan, Fitzgerald, Guy. 1997. The IT outsourcing market place: vendors and their selection. Journal of Information Technology 12: 223-237
  13. ^ Adsit, D. (2009) Will a Toyota Emerge from the Pack of Me-Too BPO's?, In Queue
  14. ^ Bunmi Cynthia Adeleye, Fenio Annansingh and Miguel Baptista Nunes. "Risk management practices in IS outsourcing: an investigation into commercial banks in Nigeria", International Journal of Information Management 24 (2004): 167-180.
  15. ^ K. Altinkemer, A. Chaturvedi and R. Gulati. "Information systems outsourcing: Issues and evidence", International Journal of Information Management 14- 4 (1994): 252- 268.
  16. ^ Forbes Gibb, and Steven Buchanan. "A framework for business continuity management", International Journal of Information Management 26- 2 (2006): 128- 141.
  17. ^ Chyan Yang and Jen-Bor Huang. "A decision model for IS outsourcing", International Journal of Information Management 20- 3 (2000): 225- 239.
  18. ^ L. Willcocks, M. Lacity and G. Fitzgerald. "Information technology outsourcing in Europe and the USA: Assessment issues", International Journal of Information Management 15- 5 (1995): 333- 351.

[edit] External links

Retrieved from ""
Categories: Business process | Business terms | Information technology management

Economy of India

From Wikipedia, the free encyclopedia
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Economy of The Republic of India
Modern Indian notes

Rank 11th (nominal) / 4th (PPP)
Currency 1 Indian Rupee (INR) ( Paise
Fixed exchange rates USD = 46.9100 INR
(August 27, 2010)
Fiscal year Calendar year (1 April — 31 March)
Trade organizations WTO, SAFTA, G-20 and others
GDP $1.250 trillion (nominal: 11th; 2009)[2]
$3.526 trillion (PPP: 4th; 2009)[2]
GDP growth 8.8% (2010, Q1)[3]
GDP per capita $1,031 (nominal: 139th; 2009)[2]
$2,941 (PPP: 128th; 2009)[2]
GDP by sector agriculture (17%), industry (28.2%), services (54.9%) (2009)
Inflation (CPI) 9.97% (July 2010)[4]
Food inflation (9.53%) (Aug 2010)[4]
below poverty line
42% (456 million earn below $1.25 per day) (2010 est.)[5]
Gini index 36.8 (List of countries)
Labour force 467 million (2nd; 2009)
Labour force
by occupation
agriculture (52%), industry (14%), services (34%) (2009 est.)
Unemployment 10.7% (2010 est.)[6]
Main industries telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology, pharmaceuticals
Ease of Doing Business Rank 133rd[7]
Exports $176.5 billion (18th; 2009)
Export goods software, petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures
Main export partners US 12.3%, UAE 9.4%, China 9.3% (2008)
Imports $287.5 billion (15th; 2009)
Import goods crude oil, machinery, gems, fertilizer, chemicals
Main import partners China 11.1%, Saudi Arabia 7.5%, US 6.6%, UAE 5.1%, Iran 4.2%, Singapore 4.2%, Germany 4.2% (2008)
FDI stock Home: $161.3 billion (24th; 2009)
Abroad: $77.4 billion (24th; 2009)
Gross external debt $223.9 billion (31 December 2009 est.)
Public finances
Public debt 58% of GDP (2009 est.)[8]
Revenues $129.8 billion (2009 est.)
Expenses $214.6 billion (2009 est.)
Economic aid $1.724 billion (2005)[9]
Foreign reserves $282.84 billion (6th; Aug 2010)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars

Throughout this article, the unqualified term "dollar" and the $ symbol refer to the US dollar.
The economy of India is the eleventh largest economy in the world by nominal GDP[2] and the fourth largest by purchasing power parity (PPP).[10] Following strong economic reforms from the socialist inspired economy of a post-independence Indian nation, the country began to develop a fast-paced economic growth, as free market principles were initiated in 1990 for international competition and foreign investment. India is an emerging economic power with a very large pool of human and natural resources, and a growing large pool of skilled professionals. Economists predict that by 2020,[11] India will be among the leading economies of the world.
India was under social democratic-based policies from 1947 to 1991. The economy was characterised by extensive regulation, protectionism, public ownership, pervasive corruption and slow growth.[12][13][14][15] Since 1991, continuing economic liberalisation has moved the country towards a market-based economy.[13][14] A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate. In recent years, Indian cities have continued to liberalize business regulations.[7] By 2008, India had established itself as the world's second-fastest growing major economy.[16][17][18] However, the year 2009 saw a significant slowdown in India's GDP growth rate to 6.8%[19] as well as the return of a large projected fiscal deficit of 6.8% of GDP which would be among the highest in the world.[20][21]
India's large service industry accounts for 55% of the country's Gross Domestic Product (GDP) while the industrial and agricultural sector contribute 28% and 17% respectively.[22] Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%.[22] The labor force totals half a billion workers. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish.[23] Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, information technology enabled services and pharmaceuticals.[23]
India's per capita income (nominal) is $1,030, ranked 139th in the world,[24] while its per capita (PPP) of US$2,940 is ranked 128th.[25][26] Previously a closed economy, India's trade has grown fast.[13] India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade inclusive of export and import was $143 billion. Thus, India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. India's trade has reached a still relatively moderate share 24% of GDP in 2006, up from 6% in 1985.[13]



[edit] History

Main articles: Economic history of India and Timeline of the economy of India

The spice trade between India and Europe was one of the main drivers of the world economy[27] and the main catalyst for the Age of Discovery.[28]

India's economic history can be broadly divided into three eras, beginning with the pre-colonial period lasting up to the 18th century. The advent of British colonisation started the colonial period in the early 19th century, which ended with independence in 1947. The third period stretches from independence in 1947 until now.

[edit] Pre-colonial

The citizens of the Indus Valley civilisation, a permanent settlement that flourished between 2800 BC and 1800 BC, practiced agriculture, domesticated animals, used uniform weights and measures, made tools and weapons, and traded with other cities. Evidence of well planned streets, a drainage system and water supply reveals their knowledge of urban planning, which included the world's first urban sanitation systems and the existence of a form of municipal government.[29]

The 1872 census revealed that 99.3% of the population of the region constituting present-day India resided in villages,[30] whose economies were largely isolated and self-sustaining, with agriculture the predominant occupation. This satisfied the food requirements of the village and provided raw materials for hand-based industries, such as textiles, food processing and crafts. Although many kingdoms and rulers issued coins, barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rulers, while its craftsmen received a part of the crops at harvest time for their services.[31]

Religion, especially Hinduism, and the caste and the joint family systems, played an influential role in shaping economic activities.[32] The caste system functioned much like medieval European guilds, ensuring the division of labour, providing for the training of apprentices and, in some cases, allowing manufacturers to achieve narrow specialization. For instance, in certain regions, producing each variety of cloth was the specialty of a particular sub-caste.

Estimates of the per capita income of India (1857–1900) as per 1948–49 prices.[33]

Textiles such as muslin, Calicos, shawls, and agricultural products such as pepper, cinnamon, opium and indigo were exported to Europe, the Middle East and South East Asia in return for gold and silver.[34]

Assessment of India's pre-colonial economy is mostly qualitative, owing to the lack of quantitative information. One estimate puts the revenue of Akbar's Mughal Empire in 1600 at £17.5 million, in contrast with the total revenue of Great Britain in 1800, which totalled £16 million.[35] India, by the time of the arrival of the British, was a largely traditional agrarian economy with a dominant subsistence sector dependent on primitive technology. It existed alongside a competitively developed network of commerce, manufacturing and credit. After the decline of the Mughals, western, central and parts of south and north India were integrated and administered by the Maratha Empire. The Maratha Empire's budget in 1740s, at its peak, was 100 million. After the loss at Panipat, the Maratha Empire disintegrated into confederate states of Gwalior, Baroda, Indore, Jhansi, Nagpur, Pune and Kolhapur. Gwalior state had a budget of 30M. However, at this time, British East India company entered the Indian political theatre. Until 1857, when India was firmly under the British crown, the country remained in a state of political instability due to internecine wars and conflicts.[36]

[edit] Colonial

An aerial view of Calcutta Port taken in 1945. Calcutta, which was the economic hub of British India, saw increased industrial activity during World War II.

Company rule in India brought a major change in the taxation environment from revenue taxes to property taxes, resulting in mass impoverishment and destitution of majority of farmers and led to numerous famines.[37] The economic policies of the British Raj effectively bankrupted India's large handicrafts industry and caused a massive drain of India's resources.[38][39] Indian Nationalists employed the successful Swadeshi movement, as strategy to diminish British economic superiority by boycotting British products and the reviving the market for domestic-made products and production techniques. India had become a strong market for superior finished European goods. This was because of vast gains made by the Industrial revolution in Europe, the effects of which was deprived to Colonial India.

The Nationalists had hoped to revive the domestic industries that were badly effected by policies implemented by British Raj which had made them uncompetitive to British made goods.

An estimate by Cambridge University historian Angus Maddison reveals that "India's share of the world income fell from 22.6% in 1700, comparable to Europe's share of 23.3%, to a low of 3.8% in 1952".[40] It also created an institutional environment that, on paper, guaranteed property rights among the colonizers, encouraged free trade, and created a single currency with fixed exchange rates, standardized weights and measures, capital markets. It also established a well developed system of railways and telegraphs, a civil service that aimed to be free from political interference, a common-law and an adversarial legal system.[41] India's colonisation by the British coincided with major changes in the world economy—industrialisation, and significant growth in production and trade. However, at the end of colonial rule, India inherited an economy that was one of the poorest in the developing world,[42] with industrial development stalled, agriculture unable to feed a rapidly growing population, India had one of the world's lowest life expectancies, and low rates for literacy.

The impact of the British rule on India's economy is a controversial topic. Leaders of the Indian independence movement, and left-nationalist economic historians have blamed colonial rule for the dismal state of India's economy in its aftermath and that financial strength required for Industrial development in Europe was derived from the wealth taken from Colonies in Asia and Africa. At the same time right-wing historians have countered that India's low economic performance was due to various sectors being in a state of growth and decline due to changes brought in by colonialism and a world that was moving towards industrialization and economic integration.[43]

[edit] Independence to 1991

Compare India (orange) with South Korea (yellow). Both started from about the same income level in 1950. The graph shows GDP per capita of South Asian economies and South Korea as a percent of the American GDP per capita.

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning.[44] Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s.[45] Capitalism and Private sector did not exist before 1991. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.[46]

Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy. They expected favorable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system.[47][dead link] The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage industries was criticized by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers.[48][dead link] The rate from 1947–80 was derisively referred to as the Hindu rate of growth, because of the unfavourable comparison with growth rates in other Asian countries, especially the "East Asian Tigers".[41]

The Rockefeller Foundation's research in high-yielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution in India, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India. Famine in India, once accepted as inevitable, has not returned since independence.

[edit] Since 1991

Main articles: Economic liberalization in India and Economic development in India

In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans.[49] India asked for a $1.8 billion bailout loan from IMF, which in return demanded reforms.[50]

An industrial zone near Mumbai, India.

In response, Prime Minister Narasimha Rao along with his finance minister and current Prime Minister of India Dr. Manmohan Singh initiated the economic liberalization of 1991. The reforms did away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.[51] Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.[52] Since 1990 India has a free-market economy and emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security.

While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007 by S&P and Moody's.[53] In 2003, Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China. India is often seen by most economists as a rising economic superpower and is believed to play a major role in the global economy in the 21st century.[54][55] In 2009 India purchased 200 Tons of Gold for $6.7 billion from IMF[56] as a total role reversal from 1991.

[edit] Sectors

[edit] Industry and services

See also: Information technology in India, Business process outsourcing in India, and Retailing in India

The prestigious Tidel Park in Chennai. India has Asia's largest outsourcing industry[57] and is the world's second most favorable outsourcing destination after the United States.[58]

India has one of the world's fastest growing automobile industries[59][60] Shown here is the Tata Motors' Nano, the world's cheapest car.[61]

Industry accounts for 28% of the GDP and employ 14% of the total workforce.[22] However, about one-third of the industrial labour force is engaged in simple household manufacturing only.[62][dead link] In absolute terms, India is 16th in the world in terms of nominal factory output.[63]

Economic reforms brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods.[64] Post-liberalisation, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology.[65]

Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output.[66] Ludhiana produces 90% of woolens in India and is also Known as the Manchester of India. Tirupur has gained universal recognition as the leading source of hosiery, knitted garments, casual wear and sportswear.[67] Dharavi slum in Mumbai has gained fame for leather products. Tata Motors' Nano attempts to be the world's cheapest car.[61]

India is fifteenth in services output. It provides employment to 23% of work force, and it is growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It has the largest share in the GDP, accounting for 55% in 2007 up from 15% in 1950.[22]

Business services (information technology, information technology enabled services, business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000. The growth in the IT sector is attributed to increased specialization, and an availability of a large pool of low cost, but highly skilled, educated and fluent English-speaking workers, on the supply side, matched on the demand side by an increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. The share of India's IT industry to the country's GDP increased from 4.8 % in 2005-06 to 7% in 2008.[68][69] In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world.[70] In March 2009, annual revenues from outsourcing operations in India amounted to US$60 billion and this is expected to increase to US$225 billion by 2020.[71]

Organized retail such supermarkets accounts for 24% of the market as of 2008.[72] Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors. There are taxes for moving goods to states, from states, and even within states.[72]

Tourism in India is relatively undeveloped, but growing at double digits. Some hospitals woo medical tourism.[73]

[edit] Agriculture

Farmers work inside a rice field in Andhra Pradesh. India is the second largest producer of rice in the world after China[74] and Andhra Pradesh is the 2nd largest rice producing state in India with West Bengal being the largest.[75]

Main articles: Agriculture in India, Forestry in India, Animal husbandry in India, and Fishing in India

India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 17% of the GDP in 2009, employed 52% of the total workforce[22] and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. However, international comparisons reveal the average yield in India is generally 30% to 50% of the highest average yield in the world.[76]

Paddy fields at Kanyakumari district in Tamil Nadu

India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper.[77] It also has the world's largest cattle population: 193 million.[78] It is the second largest producer of wheat, rice, sugar, cotton, silk, peanuts and inland fish.[79] It is the third largest producer of tobacco.[79] India is the largest fruit producer, accounting for 10% of the world fruit production. It is the leading producer of bananas, sapotas and mangoes.[79]

India is the second largest producer and the largest consumer of silk in the world, with the majority of the 77 million kg (2005)[80] production taking place in Karnataka State, particularly in Mysore and the North Bangalore regions of Muddenahalli, Kanivenarayanapura, and Doddaballapura, the upcoming sites of a INR 700 million "Silk City".[81][82]

[edit] Banking and finance

Main article: Finance in India

See also: Banking in India and Insurance in India

The Indian money market is classified into: the organised sector (comprising private, public and foreign owned commercial banks and cooperative banks, together known as scheduled banks); and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)). The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas, especially for non-productive purposes, like ceremonies and short duration loans.[83]

Mumbai is the financial and commercial capital of India. Shown here is the World Trade Centre of Mumbai

Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfill their social and developmental goals. Since then, the number of bank branches has increased from 10,120 in 1969 to 98,910 in 2003 and the population covered by a branch decreased from 63,800 to 15,000 during the same period. The total deposits increased 32.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of rural branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only 32,270 out of 5 lakh (500,000) villages are covered by a scheduled bank.[84][85]

The public sector banks hold over 75% of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.[86] Since liberalisation, the government has approved significant banking reforms. While some of these relate to nationalised banks (like encouraging mergers, reducing government interference and increasing profitability and competitiveness), other reforms have opened up the banking and insurance sectors to private and foreign players.[22][87]

More than half of personal savings are invested in physical assets such as land, houses, cattle, and gold.[88] Indian has the highest saving rate in the world at 36 percent.

[edit] Natural resources

Main article: Natural resources in India

See also: Energy policy of India

India has the world's fifth largest wind power industry, with an installed wind power capacity of 9,587 MW. Shown here is a wind farm in Muppandal, Tamil Nadu.

India's total cultivable area is 1,269,219 km² (56.78% of total land area), which is decreasing due to constant pressure from an ever growing population and increased urbanisation. India has a total water surface area of 314,400 km² and receives an average annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water utilisation, and comprised 380 km² in 1974, and is expected to rise to 1,050 km² by 2025, with the balance accounted for by industrial and domestic consumers. India's inland water resources comprising rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world's third largest fishing industry.[89]

India's major mineral resources include coal, iron, manganese, mica, bauxite, titanium, chromite, limestone and thorium. India meets most of its domestic energy demand through its 92 billion tonnes of coal reserves (about 10% of world's coal reserves).[90]

India's huge thorium reserves — about 25% of world's reserves — is expected to fuel the country's ambitious nuclear energy program in the long-run. India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years.[91] However, the Indo-US nuclear deal has paved the way for India to import uranium from other countries.[92] India is also believed to be rich in certain renewable sources of energy with significant future potential such as solar, wind and biofuels (jatropha, sugarcane).

[edit] Petroleum and Natural gas

ONGC platform at Mumbai High in the Arabian Sea. As of 2010, India is the world's fifth largest consumer of oil.[93]

India's oil reserves, found in Mumbai High, parts of Gujarat, Rajasthan and eastern Assam, meet 25% of the country's domestic oil demand.[22][94] India's total proven oil reserves stand at 11 billion barrels,[95] of which Mumbai High is believed to hold 6.1 billion barrels[96] and Mangala Area in Rajasthan an additional 3.6 billion barrels.[97]

In 2009, India imported 2.56 million barrels of oil per day, making it one of largest buyers of crude oil in the world.[98] The petroleum industry in India mostly consists of public sector companies such as Oil and Natural Gas Corporation (ONGC), Hindustan Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOCL). There are some major private Indian companies in oil sector such as Reliance Industries Limited (RIL) which operates the world's largest oil refining complex.[99]

[edit] Pharmaceuticals

India has a self reliant Pharmaceuticals industry. The majority of its medical consumables are produced domestically. Pharmaceutical Industry in India is dotted with companies like Ranbaxy Pharmaceutical, Dr. Reddy's Laboratories, Cipla which have created a niche for themselves at world level. India including China, Brazil, Turkey, Mexico, Russia and South Korea are called "pharmerging" countries. [100]

Today, India is an exporter to countries like the United States and Russia. In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at approximately 10% per year. India is unable to capture much of the value as most of the innovation taking place is by non-Indian firms. They are developing products in their own R&D centres or outsourcing to Indian engineering services firms and getting the stuff manufactured at either their own factories or through contract manufacturing, as in pharmaceuticals.[101]

[edit] External trade and investment

Further information: Globalisation in India

[edit] Global trade relations

In March 2008, India's annual imports and exports stood at US$236 and US$155.5 billion respectively.[102] Shown here is the cargo of a container ship being unloaded at the Jawaharlal Nehru Port, Navi Mumbai.

India's economy is mostly dependent on its large internal market with external trade accounting for just 20% of the country's GDP.[103] In 2008, India accounted for 1.45% of global merchandise trade and 2.8% of global commercial services export.[104] Until the liberalization of 1991, India was largely and intentionally isolated from the world markets, to protect its economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment (FDI) was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around US$200 million annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[105] India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialization.

Since liberalization, the value of India's international trade has become more broad-based and has risen to 63,080,109 crores in 2003–04 from 1,250 crores in 1950–51. India's major trading partners are China, the US, the UAE, the UK, Japan and the EU.[106] The exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year.[107] In 2006-07, major export commodities included engineering goods, petroleum products, chemicals and pharmaceuticals, gems and jewellery, textiles and garments, agricultural products, iron ore and other minerals. Major import commodities included crude oil and related products, machinery, electronic goods, gold and silver.[108]

India is a founding-member of