Information Technology (IT) in India- the challenges, Future Scope

The Indian information technology sector has been instrumental in driving the nation’s economy onto the rapid growth curve. According to the Nasscom-Deloitte study, the IT/ITES industry’s contribution to the country’s GDP has increased to a share of 5.2 per cent in 2007, as against 1.2 per cent in 1998.

Further, the IT and BPO industries are poised to clock revenues worth US$ 64 billion by the end of fiscal year 2008, registering a growth of 33 per cent with exports expected to cross US$ 40 billion and the domestic market estimated to clock over US$ 23 billion, according to a study. Simultaneously, the Indian IT services market is estimated to remain the fastest growing in the Asia Pacific region with a CAGR of 18.6 per cent.

India’s IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services.


Challenges and Positives:

Can we stay Competitive? In the recent past we have seen that the Globalization 3.0 has resulted in Outsourcing and Off-shoring spreading to various other countries like China, Vietnam, Philippines and the Eastern European countries. In the wake of such competition can we still remain competitive? The answer is pretty much yes. We know that our assets are the talented pool of people who are not only competent technically but also linguistically better at English compared to the other competitors. Also the government support, labor pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy give Indian IT companies and edge. But contradicting this is the Nasscom survey, which states that majority of the graduates coming out of the colleges today are unemployable. We need to introduce training programs in colleges to train the talent pool of students not only technically but also on soft skills. The training should also be imparted to the faculty to generate a better equipped talent force. These measures have already being taken by the IT companies, which also helps in reducing the training costs incurred by the IT companies after recruitment.

Dependency on the US: In the wake of the Sub-Prime crisis and subsequent economic recession in the US, the companies there started cutting down costs and one of them being IT expenditures. Because the majority of the IT companies in India have an export driven business model and majority of it is to the US, the companies have been facing a lot of heat. Some of the clients of these IT companies have gone bankrupt; some others have incurred heavy losses (Citigroup, Bear Sterns, and HSBC etc.) The IT companies should therefore explore options in Europe, the western Asia and Asia-Pacific and reduce direct dependency on the US.

Though it seems paradoxical but recession in the US is only going to make the Industries over there outsource more, primarily to reduce their costs by efficient application of IT, cheaper labor and cost effectiveness.

Indian IT firms outsourced and Off-shored! : It is observed that competitive markets have emerged in Latin America, Eastern Europe and South East Asia. Moreover there are emerging economies present in these areas like Brazil, Russia etc. The IT companies have already forayed in these countries for two primary reasons: First, it provides them to take advantages of cost-effectiveness in these areas due to new talent pool, Lower wages and greater advantage by making their exports cheaper and competitive. Second, places like Mexico have emerged as a major outsourcing and offshore development centre for the IT companies due to the proximity to their major business clientele in the USA. This not only provides cost-effectiveness, but also helping the client in round the clock service providing environment.

Rupee Appreciation and FII: In the wake of US crisis it was observed that the rupee appreciated due to the weakened US economy, Federal bank interest cuts and subsequent FII inflows in the country. Due to this IT companies in India incurred lower profit margins. On the flipside it surely gave them a wake-up call to effectively utilize the resources and bench strength. FII inflows and FDI in the IT sector surely helps in rolling out further expansion plans but excess FII also make the exports incompetent. So the govt. should take steps to manage excess FII inflows into the country and hedge the export driven sectors against the rupee appreciation.

IT SEZ’s: To further make the IT fraternity competitive, the govt. should take steps to develop IT Sez’s. This will reduce the excess tax burden on these IT companies. Moreover STPI (Software Technology Parks of India) have already enabled the IT companies and new startups to carry out the documentation and licensing and tax payment hassles through a single window system. Moreover the govt. should also relax norms for DTA (domestic Tariff Areas) to promote IT spending in the country itself at a lesser cost leading to development of the country.

Diversification In Verticals: In the wake of US crisis, one of the Indian IT company suffered major drop in profits because majority of its clientele in the BFSI (Banking Financial Sector and Insurance). This was the sector which took the brunt of the recession. And the company’ BFSI clients cut down on their IT spending leading to lower profits. Thus the companies should balance their presence in various verticals which will surely make them immune to unforeseen events.

Telecom and 3G: The roll out of 3G of mobile phones in India should be seen as a positive development for the IT companies. In the long run it is going to provide basic communication facilities in the rural areas of the country. Unlike the US where 3G brings luxury, In India it is going to provide basic communication and broadband access to the rural youth. This will result in dissemination of information and creating further talent pool for the country. We have already seen the IT industry moving to Tier-II and Tier-III cities to tap local talent and maintain cost-effectiveness. Moreover Growth in Telecom industry also demands greater IT application in terms of VAS (Value Added Services), Telecom Billing Solutions, IVRS etc.

Domestic Markets: Dalian in China has been growing as the major IT hub there. If actually compared China’s IT spending is five times that of India, most of it being domestically. This could be also seen in the organization of retail sector in China showcasing the presence of Retail majors like Wal-Mart there. Hence IT companies should also focus more on the domestic markets with major projects lining up inside the country as well for instance the Railways ERP project, the BSNL systems integration, networking projects, IT work from ministry of finance and private telecom companies, banks and others are offering multi-year contracts that are over US$ 100 million. Moreover multinationals have been lining up in India further strengthening the IT growth in India.

Capgemini, Europe’s largest consulting and computer services firm is gradually moving its internal support services to India.

After sourcing IT applications from some IT firms last year Wal-Mart will now expand its existing operations given India’s impressive IT capability to cover more firms and augment its work in the United States.

Intel-the globally renowned chip maker is looking to invest more than US$ 1 billion in India over the next three years in partnership with Indian and foreign hardware firms to prepare light weight personal computers.

Cisco posted over 100 per cent year-on-year growth in its SME business in India.

Oracle is expecting over 100 per cent growth in India for its CRM business on the back of increased technology awareness and need for cost-effective customer servicing.

Yahoo! Inc and Tata Sons subsidiary firm Computational Research Laboratories (CRL) have entered into a joint agreement to make available-EKA, a supercomputer (the fourth fastest) in the world for cloud computing research in India.

Dell India witnessed 80 per cent sales over last year with revenues to the tune of US$ 700 million.

World’s leading chip designer firm ARM is expanding its India design centre to make it the largest outside Britain.

IT biggies like Microsoft, IBM, Cisco, Oracle and a host of other IT entities are working overtime to tap the smaller and medium businesses.

Conclusion: Thus we observe that the Indian IT industry has been facing some challenges but if effective steps are taken then it will surely help it to remain competitive in the future as well.




  1. i want to make career in IT .name some reputed colleges in india that have given excellant professionals in IT and what is the salary given to fresh IT graduates from reputed institute.

  2. In a recent lecture, my teacher rightly said- “The job of Information Technology is to eliminate the middle-man and if implemented in governance, we will have tremendous growth!” Let me elaborate. IT eliminates the middleman by supporting a process and hence automating it. May it be ATMs or eBay, or the Wikipedia- IT serves as a link between the user and the resources.

    However, in governance, especially in India, we terribly lack the application of IT. Railway and airway reservation system are fairly automated. Same holds good with most banks. There are even provinces where driving licenses or land records can be accessed online. All this progress has led to the elimination of the corrupt middleman. A common man need not bribe the clerk anymore to access his land records certificates. This has just started, and slowly this void is filling up. Nilekani’s project UID is a strong step towards making this happen. The biggest hurdle in this growth process is the lack of expertise staff in the governance. Just imagine, how much easier it would be for the government to implement its policies, if proper IT infrastructure is in place! Then why is it not happening?

    The answer lies in the very basic mindset of we Indian students. A medico always tries to develop better tools to automate complicated surgeries but hardly finds time to think of the basic health care facilities. A mechanical engineer designs hi-speed automobiles but never gets his hands dirty in improving the standards of our age-old bullock carts. The civil engineer of my country thinks of building towers and dams but hardly heeds to building comfortable, affordable homes. We IT engineers join these MNCs and spend our lives rendering to their demands, never do we realize, how much value we can add to the basic lifestyle of the people of our country. Let’s not get carried away by credit cards and dollars. Our knowledge is worth more than that!


    1. The scope of IT is likely to reduce in future because of oversaturation resulting in companies running after useless developments for which there is no real need or only a cosmetic need.-P.K.Sen

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  5. hi my name is Aneta am in 4th stage in information technology department plz i want to give me any idea in oracle program to do my graduation project this year plzzzzzzzzzzzzzzzzzzzzzzzzz

  6. i am doing my 3 rd engineering in I.T. and i am really afraid of what the sorrounding atmosphere speaks about the future prospects of I.T. Will i be jobless after my engineering or will i be shining after my engineering in the perspective field of I.T.?

  7. Hii…Friends plz tell me,what i do??? i am complet my diploma in EXTC and i get admission to IT BE,so at time i am confuse what i get EXTC or IT,n plz tell me which filds has more schop????????????

  8. i want to become my future in IT field as i am not from that field i have done my graduation in mass communication but i had knowledge about hardware and software and also networking which i have gained from jetking institute and right now i am pursuing MBA from IT so what should i do to get a job only in this field and also tell me is there any scope in this or not if yes then how should i able to do this and where should i start ?

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