IT Infrastructure in India


Dr. Sudhindra Bhat
Management Faculty, Consultant and Corporate Trainer
Acharya Institute of Management and Sciences
1st Cross, 1st stage, Peenya industrial Area, Bangalore-560 058

The slow down in the US economy and the overall dip in IT spending are a recent phenomenon. But the unprecedented amount of media coverage and speculations that it received has led many industries observes to scan critically the revenue growth of Indian IT companies. Convergence of computer, media and telecommunication industries has been the most significant trend in the few years, after the emergence of e-Commerce. The consolidation continues in the e-Commerce industry, with many alliances and buyout among online and offline business.  With sluggishness in the consumer PC market, major computer companies are investing in Internet infrastructure to improve revenues and operational efficiencies. Bandwidth and wireless Internet access have become the focus areas as major players try to remove constraints on performance and exploit the opportunities of mobile e-Commerce.

During the last two decades computer systems in India have improved in many folds in terms of computing power, computing speed, storage capacity and data communication. Due to this improvement pace, the computer Industries has become the main driver for a series of other industries. Free Internet service sounded like a great idea as customer willing to share personal facts were given free unlimited access to the Internet. The no charge Internet service providers were expecting to make money through hefty advertising revenues. With the dotcom crash slowing down advertising revenues, the success of this model looks doubtful as the ad-revenues may not be enough to meet even the telecommunication costs.

In India Sify is the second largest Internet Service Provider (ISP), after VSNL. Sify's acquired B2C portals like Indiaworld, Cricinfo and Indiaplaza at a high cost. The Indian ISP market has heated up, with competitors like VSNL, MTNL and Mantra Online with their competitively priced access packages.  High speed Internet access in another technology, which is yet to achieve the level of penetration once expected.

Indian Software Industry:

The Indian software industry in 1997-98 had revenues of about $3billion. Though small compared to the world market for software, it has been growing at an annual rate of about 50% during the past five years. Most of the Indian firms are small and young, and are involved exclusively in software development. In India the growth of software development companies are comparatively higher than the hardware companies. Table below shows the data regarding growth in software design, development and services in the past few years.






200-04   %













Total Software






Growth in Indian Software Industry

Today Indian IT industry is growing at a vertiginous rate. Indian software output is nearing to world software and it has reached up to $16billion (Countries like Ireland and Israel are also doing equally well). The growth in software Industry has created over a million jobs for professionals and many more at the support level.

A decade ago, the entire country hosted just four or five IBM mainframe computers.  Last year the industry notched up sales of $16 billion, three-quarters of which went abroad, according to NASSCOM, by 2008, the annual sales are likely to surpass $50 billion.

The beginning India's competitiveness in IT goes back to the late 1980s, when American firms such as Texas Instruments and Motorola came to Bangalore for the local talent. Following this the other American firms, such as Hewlett-Packard, American Express, Citibank and Dun & Bradstreet, followed these pioneers, setting up their own "captive" Indian IT organizations in the 1990s.

The Indian Companies got more and more demands during Y2K crises at the turn of millennium. The western IT giants such as IBM, Accenture and EDS ran out of Technical man power to check old code and subcontracted some of the work to Indian firms instead. The competency among the Indian software professionals paved the way to enter into the global market and once India had saved the world from this critical issue, they set out to conquer it. IT companies like Wipro, TCS, Infosys and their peers grabbed a growing share of the global giants' business. They made inroads in the routine but costly business of maintaining business-software applications from vendors such as PeopleSoft and SAP remained with the forging giants.

As the Indian firms grew, the captive operations of foreign firms in India became less competitive, and most of them have now sold out. Dun & Bradstreet led the field, with its captive transforming itself into Cognizant in 1994. More recently, Citibank sold some of its Indian IT operation to an Indian financial-software specialist called Polaris. Deutsche Bank sold its captive to HCL, another Indian firm. The big western IT specialists, meanwhile, have squared up to the new, low-cost competition by hiring in India themselves.

Still, the outline of a distinct brand of Indian competitiveness in software development is being carefully defined in a business firm appears to be taking shape. Already, the Indian IT firms, along with some of the foreign captives in India, boast the world's most impressive set of international quality certifications for software engineering. In the longer term, India's success at winning global white-collar work will depend on two things: the supply of high-quality technical and business graduates; and, more distantly, an improvement in India's awful infrastructure.

India's most often-cited advantage is its large English-speaking population, which has helped to fuel the call-centre and BPO boom. The market for call-centre workers is tightening as pay and staff turnover are shooting up as operators poach staff who have already undergone costly "accent neutralization" training at rival firms. Even the best call-centre operators in India lose about half of their employees every year (however the turnover in British call-centers is about 70%) which raises a question to think seriously on the reason behind the high turnover.

Initially in India BPO industry started with foreign captives. The pioneers were GE, American Express and British Airways, during 1990s. Some of the major multinational IT giants in collaboration with Indian IT companies also has started these call centers.  These companies were joined by home-grown call-centre operators such as 24x7, vCustomer, Spectramind and Daksh. Spectramind has since been bought by Wipro, and Daksh by IBM are the top BPO industries in India.

Technical support is another area where these BPO activities are getting concentrating is Technical Support Outsoaring. Technical support outsourcing involves transitioning the technical support function from a vendor to an external service provider.

Some Vendors offering Technical Support Outsourcing are:

* 24/7 Customer
* Accenture Services Pvt Ltd
* Daksh Services Pvt Ltd
* eFunds International
* GE Capital International Services
* HCL Technologies BPO Services Ltd
* InterGlobe Technologies Pvt Ltd
* MsourcE India Pvt Ltd
* Patni Computer Systems (P) Ltd
* Progeon Ltd
* Wipro Spectramind Services Pvt Ltd
* WNS Global Services Pvt Ltd

With this success story, it is also a fact that the Indian companies also face competition from specialist American call-centre companies trying to reduce the outsourcing jobs to the Indian competitor. By far the most successful of these foreign firms has been America's Convergys, having 60,000 employees is the biggest call-centre operator in the world. The fourth wave of BPO start-ups, funded by American venture capitalists, has been experimenting with the remote delivery from India of all sorts of work, which ranges from hedge-fund administration to pre-press digital publishing.

Every year, India produces about 300,000 IT engineering graduates, against America's 50,000. The best Indian IT firms fight over the top 30,000-40,000 graduates, a pool in which foreign companies such as IBM and Accenture also fish. NASSCOM and other such organizations predict that the way the IT and BPO industries growing, there will be a mismatch between demand and supply in spite of having greater resource pool in the country. This mismatch is also due to the fact the resources available does not meet the requirement of the industry and the carrier aspirants do not have proper knowledge of the potential of this industry.

So there was a move away from the "total outsourcing" of computer systems, to the "discrete" outsourcing of parts of it, including those functions that can be handled remotely. That is where the opportunity lies for Indian firms, with the high speed telecommunications links built for their software businesses and the outsourcing of other business processes.

Some analysts remain skeptical about whether Indian firms are big enough to make much of a then for dependent in this market. The largest of them make annual revenues of not more than $1 billion compared with about 20 times as much at EDS. The American TPI put fourth that, however the Indian IT and BPO companies' makes effort, their wining making share would be marginal.

But the remote business is being more infrastructure intensive, is not catching up with the required face in spite of having the potential to deliver the quality service. However Gartner and Deutsche Bank predict a trebling in exports related to managing computer infrastructure to $1 billion in three years; NASSCOM goes for $1.5 billion-2 billion in five years. But NASSCOM has also forecast that India's total information technology and related exports will exceed $50 billion in 2008 that makes one to think on how this could be made possible.

Software firms earned more per client last fiscal with a steep growth in revenue generated by a software company's. Among theses Wipro Technologies has recorded the largest increase of 24% in average revenue per client between March 2003 and March 2004, iGate Global Solutions has posted a jump of about 72% on the same count for the recently concluded year.

The companies mentioned in the table below have experienced a slump in percentage revenue contribution from the top 10 client between March 2003 and March 2004. Only Infosys has maintained a consistency in the growth. These companies have also seen revenues from clients other than those in the top 10 are growing faster. iGate saw the greater difference between revenue from the top 10 clients and that from the rest in terms of growth percentage point.

Again companies between March 2003 and March 2004 earlier revealed that, for several companies' absolute revenue from top 10 clients were growing faster than that from the rest. The growth can be evaluated, based on the increase in the number of similar clients.  Companies have to maintain a percentage growth in the market for this sector. 


Top 10 Client contribution  %

Per Client revenue
Rs. Lakh

Absolute growth %


March 04

March 03

March 04

March 03

Top 10









Wipro Technologies




























HCL Infotech














Software export from Karnataka State:

Karnataka is considered as "SILICON VALLEY" and also the IT hub of India. Software export from Karnataka state has grown up to 46% amounting Rs.18,100 Crore during 2003-04. This is attributed due to aggressive growth in investment in the ITES / BPO sector, with an investment of Rs.1916 Cror during the year compared with the previous years, of Rs.512crors.  The employment opportunities in these sectors have reached to an extent of 60,000. Similarly the Hardware export is also grown up to 21% amounting Rs.1700crors. To enhance this organizations such as, Software Technology Park of India (STPI) and Electronic Hardware Technology Park (EHTP) jointly working with the government in improving training standards for enhancing the employment opportunities in these areas.

Further there is a move by MNC companies in India shell out and create more job opportunities in IT/ITES sectors (up to 3000) and sign a historic outsourcing contract worth Billion Dollars. Unisys sets up center in Bangalore with $180 million investment and with an objective of creating over 2000 job opportunities over next five years. Yahoo! Sets up a network operation center in Bangalore, AMD sets up India Engineering Center and expects to invest $5 million in 3 years. Flextronics to partner with Insilica for SOC (System of Chips) solutions, 3 COM starts R&D center in Hyderabad, Nokia plans CDMA & R&D center in Mumbai. Hard disk manufacturer Quantum starts India R&D operation in Hyderabad. The French IT firm ValTech sets up Bangalore IDC.

Telecom FDI crosses Rs.10, 000crors. BSNL the public sector telecom slashes long distance tariff by 25%. 1.6 million Handsets sold in Indian as per Indian Cellular Association (ICA). Samsung offers handsets with Hindi, Tamil and Marti scripts. Bharthi & VSNL to share long distance network in an Rs.500cror deal. VSNL to commission Chennai Singapore 3000 plus Kilometer long under sea cable with 320 GBPS speed to start with (ultimately 5.12 Terabit capacity) by late 2004. IT and ITES takes up more space with Bangalore (2million), Mumbai (1.9million) Pune (1.4 million) Chennai (0.6million) and Hyderabad (0.5million) in 2004 alone and country has created 20 million sq.ft spaces for this industry with just a million people.

It is expected that during late 2004 there is an exponential growth in frontline companies in the software services. TCS, Infosys Technologies and Wipro Technologies the $ 3 billion listed companies have recorded a handsome 10-15% sequential growth both in revenue and earning.

Off shoring is an unstoppable mega trend for the Indian IT companies.  Few key trends that are reshaping the Off shoring industry and are poised to super growth in the front line software companies in the next few years. These key trends are;

1. The combined incremental revenue of these 3 players which are expected to grow over 40% in 200-2005.
2. Top 3 companies servicing a fair number of $5 million clients, which have grown from $1 million in the fast few years.
3. Three companies among them adding nearly 12,000 13,000 employees in the last quarter, which is the highest number of employees hire in any quarter. This is largely representative of the robust volume growth expected in the next year.

Hardware Industry:

The Hardware in India is more into assembling the components, which are imported from the other countries.






(2000-04) %



















Hardware Services


















Growth of Indian Hardware Industry

It is predicted that the PC prices are expected to be slashed by as much as 14% due to tax cuts which would boost the estimated PC sales for the fiscal of 3 million units by over 5%. This proves the way to start the domestic computer hardware industry.  It is a benefit to the Computer manufacturers as well as to the end users. The Tax cut will also help the Hardware industry to move towards becoming globally competitive. However the price decrease could make the gray market for PCs very unattractive. This will discourage the unorganized computer sectors as narrowed price difference between assembled and branded PCs well. While we encourage customers to bye branded computer backed with after sales supports. Also acts a disadvantage to the unorganized Hardware Industry. In spite of all this the available PC sales in the country has registered a growth of 32% during calendar year 2003 aided by a sharp fall in computer price. According to the forecast there will be a 50% growth in the PC unit shipment 2004 and about 1.2 million additional PCs would be sold during the year with a total volume of 3.5 million units.

"Ten years out in terms of actual hardware cost we can almost think hardware being free, It may not be considered as absolutely free, but in terms of the power of the servers, the power of the network will not be a limiting factor" Bill Gate said referring to the networked computer and advances in the speed of the Internet indicates the future trends in the Hardware Industry.

Impact of ICT Development:

The development of Information and Communication Technology (ICT) have introduced a proportionate opportunities for the development in every area. Since it has broken the barriers, such as boundaries, cost, distance and time, it offers tremendous potential to address the issues of social and economic empowerment. Some of the Indian ICT initiatives to improve the e-Governance are:

  • Bhoomi Project of Government of  Knarnataka
  • Community Information Center Project of Department of IT for the benefit of North-East part India.
  • E-Governance Project undertaken by NIC
  • Village Knowledge Center Project of MS Swaminathan Research Foundation in Pondichery.
  • AGMARKNET Project of NIC for farmers.

The government still has to promote ICT applications under major initiatives for all the areas like, e-Governance, e-Learning and e-rural prosperity and monitor the impact with quantifiable measures. Table given below shows the comparison of ICT among the three non- English countries of Asia.


Telephone % Population

Mobile Phone % Population

% CAGR Mobile Phone

%Mobile to Telephone

Internet user % population

PC  % Population






















The facts and figures shown in the table being glamorous and attractive. The reality is different; we need to rethink on the provision of ICT infrastructure across the country emphasizing rural and semi-urban areas.


The technological and subsequent paradigm shift has brought success and failure specific to this domain posing challenges to the experts. The ICT hype is one side of the coin leading to digital divide and with the present growth trend it will take at least another 5-6 years to become pervasive in the society. This is due to focus on software industry than hardware. Any technology to become pervasive demands the hardware support and also the software applications that satisfy the local needs. However efforts are made by few in making a simple device 'simputer' we could not commercialize it for various reasons. Unless affordable device is not available, the efforts of CDAC in bringing 'GIST card' which facilitates multilingual application will not be of any use. Though Government of India launched a well thought out program on TDIL (Technology Development for Indian Languages) it has to extend its support in all the components that range from hardware, software, network and telecommunication so that Ambani's dream 'KAR LO DUNIYA MUTTI ME' can be realized.

The Internet with all path breaking technological developments gives us all the opportunity to act as partner in global community crossing all the borders. But the intense volume of information and the simplicity of its transfer cause problems. Traditional legal systems have great difficulty in keeping pace with the rapid growth of the Internet and its impact throughout the world. The IT Act of India has some loop holes that need to be addressed especially when we deal with cross border issues.

More emphasis needs to be given for bandwidth and data communication speed available enable to compete with any giant in the market. However, India is emerging as 'service hub' of the world with 24% share of the offshore ITES market, its investment share of the global IT/ITES is low at 0.8%. This shows a contradictory state probably the major cause for the gap is supplying the demand for workforce in IT/ITES sector. While some of the countries are moving towards High speed Internet 2 technologies, it is our turn and time for both public and private stakeholders to work on these technologies and invest to reach nook and corner of the country. Increase in Internet bandwidth will facilitate electronic based transactions enabling an efficient value chain model and management.


1. S. Beardsly, I Beyer von Morgenstem, Telecommunication sector reforms A prerequisite for networked readiness in the global information technology report 2001-2002.
2. S. Bhatnagar and R. Scheware eds. Information and Communication Technology in Rural development, case studies from India World Bank institute working paper.
3. S. Cecchini and M Raina Warana. The case of an Indian Rural community Adopting Information & Communication Technology in Information Technology in developing countries Volume 12, No1. April 2002.
6. Bangalore report.

Dr. Sudhindra Bhat
Management Faculty, Consultant and Corporate Trainer
Acharya Institute of Management and Sciences
1st Cross, 1st stage, Peenya Industrial Area, Bangalore-560 058

Source: E-mail August 3, 2005


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