Title: IT Services in Developing Nations
1IT Services in Developing Nations
- Mark Tegtmeyer
- Stephanie Schmitt
- Aarti Dinesh
- Vijay Gummadi
2Overview
- IT Globalization
- Offshoring
- Country Comparison
- Why India
- Demographics Advantage
- Culture Education
- IT Parks/Government Support
- Piracy
- Indian Infrastructure
- Telecommunications/Power/Roads
- IT Industry
- Major IT Suppliers
3- As we approach the twenty first century,
globalization of markets and strategies, and the
increasing mobility of capital and know-how
characterize the business and economic process
worldwide. The movers and shakers behind this
change are the innovative global information and
communication technologies with implications on
trade and business. - Source Sherif Famel, Maha Hussein The emergence
of e-commerce in a developing nation.
4Offshoring of US Business
- Considerations in offshoring business
processes revolve around strategic business
decisions. - Many nations have developed around other
nations decisions to offshore business
processes.
5What is Compared?
- Business conditions
- Physical infrastructure
- IT infrastructure
- Financial institutions
- Government support
- Labor characteristics
6Business Conditions
- Lasting cost savings and advantages
- Matching functions
- Goals, objectives and metrics
- Reliability
- Relationship maintanence
- Start up and sunk costs
- Rising competition and wages
- Scalable
- Favorable contract terms
- International access for both parties
7Physical Infrastructure
- Power and backup
- Technological exploitation
- Telecommunications
- International transportation access
- Urban transportation
- Access to supported information
8IT Infrastructure
- International bandwidth
- Telecom capabilities
- Common infrastructure
- Disaster recovery capabilities
- Business continuity capabilities
- Technical certification
- Network storage
- Security management
- Future-proof technology
9Financial Institutions
- Strong banking institutions
- International banking relationships
- Stable currency markets
- Venture capital
- Ownership mechanisms
10Government Support
- Regulatory compliance
- Statutory guidelines
- Software piracy
- Copying processes
- Criminal safeguards
- International relationships
- Taxation
- Local government issues
- Stable political arenas
- Independence and lasting self control
11Labor Characteristics
- Training Experts and keeping them
- Adequate employment pools
- Domain knowledge
- Employee turnover
- Diversity of skills
- Dual training
- Strikes/ boycotts/ interruptions
- 24x7 support
- Quality of service
- Cultural understanding
12- If you analyse the responsibility of the
current-day CIO of a large corporation, his task
is nothing but like the spaghetti nightmare,
which he has to unbundle. - Source Steve Faris, Vice-President, Asia
Pacific, BEA Systems
13IT Globalization
- IT has dramatically impacted developing nations
in recent years - Led to rapid globalization
- Enabled developing countries to become a more
active force in global society
14 - Biggest impact on developing countries has been
offshoring - US companies are now focusing on what they are
best at and outsourcing everything else
15(No Transcript)
16Offshoring
- Relocating business processes to an overseas
country - Human capital is most important aspect to attract
offshore business - Telecommunication infrastructure
- Government support
- Tax development incentives
- Technology parks
17Problems with Offshoring
- Language Barriers
- Cultural Differences
- Work Ethic
- Coding Documentation
- How Meetings are Conducted
- Control
- SLAs
- Support Costs
- Telecommunication Travel
Source www.american.edu/initeb/js5518a/Pitfalls.
html
18Source Vashistha, Atul and Vashistha, Avinash,
The Offshore Nation, McGraw Hill, New York,
2006
19Global Outsourcing Country Comparison INDIA
- By far, handles majority of outsourcing work
- Exports 12.2 billion in IT services each year
- Government agencies designed to make India an IT
superpower - Original problems were poor communication
problematic government policies procedures - Want to achieve 60 billion US dollars in
software exports by 2008
Source www.outsource2india.com/why_india/article
s/india_outsourcing.asp
Vashistha, Atul and Vashistha, Avinash, The
Offshore Nation, McGraw Hill, New York, 2006
20India Continued
- Of 23 firms worldwide to be CMM-5 rated in
software development, 15 of them are Indian firms - India is 1 offshore destination due to
- Offshore Experience
- Huge English-speaking college-educated
population - Government support (Ministry of Information
Technology) - McKinsey report suggests that if work is
contracted to India, there is a cost savings of
40-60, quality improvement of 3-8 and
productivity increases of 20-150
Source www.american.edu/initeb/js5518a/Country-a
nalysis-india.html
www.samachar.in/biz/featarchives/2612003.html
21Global Outsourcing Country Comparison CHINA
- Immature market similar to India 10-15 years
ago - High piracy rates upwards of 90
- Large pool of workers, but small amount of
experienced managers - Most programmers are capable of low
level coding and maintenance of
existing systems
Source www.american.edu/initeb/js5518a/Country-a
nalysis-china.html
22China Continued
- Reputation for reliability and credibility has
not been achieved yet - Do not have quality control systems India has
- Only one Chinese company is CMM-5 certified
- Being used by India Japan
- Biggest problem How to make US and European
customers trust and choose Chinese companies over
Indian firms
Source www.american.edu/initeb/js5518a/Country-a
nalysis-china.html
23Global Outsourcing Country Comparison
PHILIPPINES
- Strengths are in areas of human resources and
call center operations - Highly westernized country 3rd largest English
speaking nation (US protectorate for 50 years) - Lacks size and scale of India in terms of
landscape and human capital has roughly 30
software companies in comparison to 800 in India - None of the software companies have CMM-5
certification
Source www.american.edu/initeb/js5518a/Country-a
nalysis-philippines.html
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25 26India
Why India Beckons ?
27Why India Beckons?????
- Population- 1,080,264,388 (July 2005 est.)
- Largest democracy in the world
- Middle class expanding by 30 - 40 million every
year - GDP growth set to continue at 6-8 GDP per
capita (PPP) 3,400 (2005 est.) 1 - GDP (purchasing power parity) 3.678 Trillion
(2005 est.)
Source www.american.edu and www.cia.gov
http//www.rediff.com/news/2004/feb/04inter.htm
28Why India Beckons????? (Contd.)
- Geographical advantage 24/7 operations
- The Indian Economy work when the Indian
government sleeps- abc news- Good morning
America - Low-cost, high quality
- Acceleration of the privatization process and
restructuring of public enterprises - Language
- Hindi is the national language and primary tongue
of 30 of the people there are 14 other official
languages - Proficiency in English The Times of India
sells more copies than the USA Today - Source http//www.blr.stpi.in/indiaglance_advant
ages.htm - http//www.embassyofindiajakarta.org/conten
t.php?sid172
29Trained Labor Force
- Well-organized educational system, with
internationally recognized excellence in some
areas of higher education - World's 3rd largest brain bank - Availability of
around 2.5 million technical professionals - Well developed RD infrastructure and technical
and marketing services -
- India has spent US 19 billion in 2000-01,
putting it among the top ten countries with the
highest RD spend.
Source http//www.embassyofindiajakarta.org
30Major Cities and Culture
- Bangalore- World IT Hub
- Hyderabad, Kolkata,Noida,Puna, Mumbai, Gurgeon,
Kanpur, Chennai, Delhi. - A tremendously diverse and heterogeneous
multi-lingual, multi-ethnic and multi-racial
country - dont believe the stereotypes - Family oriented society- Believe in the concept
of Joint family and arranged marriages - Major income disparities and contrasts
- Indian Cinema is a window to 3hrs of Blissful
entertainment. India most the largest movie
Industry in the world.
31Trivia
Source http//www.cia.gov/cia/publications/factbo
ok
32Glimpse of Indian Culture People
Sikhs culture
Holi - festival of color
Hindu Ritual
Festival of Rakhi
Muslim- Secular country
Sacred Animal
33Government Laws and Regulation- IT Pro
- Reduced import duty on computer software from a
high 114 percent to nil - Conducive foreign investment environment that
provides freedom of entry, investment, location,
choice of technology, import and export - Deduction under sections 10A/ 10B of Income tax
Act, 1961 (IT Act) in respect of profits
derived from export of computer software - Dividends from Indian companies tax free in the
hands of the shareholders - Corporate tax rate for the domestic companies
reduced to 30 percent from existing rate of 35
percent - Source www.nasscom.org
34Government Tax Laws and Regulation- IT Pro
(Contd.)
- Rates of tax applicable on non-residents/ foreign
companies earning royalties/ fees for technical
services reduced -
- STPI registration
- Income tax holiday 90 till 2010
- Customs and excise duty exemption 100
- Central Sales Tax reimbursement
- Fiscal benefits under other policies
- Exemptions from stamp duty
- Minimum floor rate on sales tax
- Exemptions from octroi duty
- Exemptions from electricity duty
- Reduction in property tax
- Service tax exemption
- IPR (Intellectual Property Rights ) laws in place
35 Location attractiveness of Key Indian States for
IT-ITES
Source www.nasscom.org
36Virtual Tour of a Tech Park
37Piracy
- Magnitude of Piracy rates
- Statistical Inference of Piracy
- Impact of Piracy in developing nations and IT
Globally - Bill Gates optimistic forecast on piracy
38Piracy rates world wide and the losses thereof
Source Second annual BSA and IDC Global
Software Piracy study
39Cost Impact of Piracy in Developing Nations
20 Countries with the Highest Piracy Rates
Ranking (2004) Software Piracy Losses
Source Second annual BSA and IDC Global
Software Piracy study
40Estimate calculation of Piracy rates
Source Second annual BSA and IDC Global
Software Piracy study
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42Infrastructure Scenario
- Overview
- Credit for India's rapid growth in IT software
and ITES/BPO domains must go in part to the
availability of a robust infrastructure
- Telecom
- Power
- Roads
- Civil Aviation
-
43 Telecommunications
- .Total number of telephone connections grew by
34.34 to reach 124.78 million by the end of
December 2005. - .Total number of mobile telephony grew by 58.17
to touch 75.94 million by the end of December
2005. - . Mobile tariffs in India are the lowest in the
world. On average about 3 million subscribers
were added every month during 2005 2006. - . By the end of December 2005 Internet
subscribers base grew 22.94 to reach 6.70
million and the Broadband connections grew by
1821.28 to reach 0.903 subscribers . - Source http//www.trai.gov.in/Report2020Dec-05
20Part201.pdf - http//www.trai.gov.in/report31jan
06.pdf
44 - Power
- .India is the worlds 6th largest power generator
- .Installed capacity of 124,311 MW as of January
2006. Plans to add 100,000 MW capacity by year
2012 - .Thermal power accounts for 66.4 of the
capacity, Hydroelectric power accounts for over
25 of capacity, nuclear plants and
non-conventional plants account for 2.7 and 4.9
percent respectively. - .Power consumption has been having a compounded
annual growth rate of 9. - .Demand has always been higher that supply.
- Source http//www.nasscom.org/artdisplay.asp?cat_
id403 - http//powermin.nic.in/JSP_SERVLETS/i
nternal.jsp
45 - Roads
- .India has the second largest road network in the
world totaling more that 3.3 million Km. - .The traffic on the roads is growing at 7 to 10
percent and vehicle population is growing 12
annually. - . National highways account for only 2 of the
total road network in terms of length and carry
around 40 of the total traffic. - . National Highway Development Project
- .Started in 1999, is one of the highway
projects in the world. - Source Ernst Young, Doing Business in India.
http//www.ey.com/global/content.nsf/India/Home
46 - Civil Aviation
- .India is one of the fastest growing markets in
the world for both passenger and cargo traffic,
second only to china. - .The entry of no-frills flights which are 30 to
35 percent cheaper that the regular flights, has
changed the profile of the air passengers. - .Domestic and international traffic grew by 24.2
percent and 18percent respectively, in
April-December, 2005. - .Indian aviation market is estimated to grow to
45 million passengers by 2010. - . Top six air ports are
- Bangalore, Chennai, Hyderabad, Mumbai,
New Delhi and Kolkata - Source http//indiabudget.nic.in/es2005-06/chapt2
006/chap98.pdf - http//news.bbc.co.uk/2/hi/south_as
ia/4626810.stm
47 - IT - ITES Industry
- . The Indian IT-ITES industry is broadly
categorized into IT services and software, ITES -
BPO and Hardware segment. - . Aggregate revenue for FY 2004-2005 is expected
to be around 28 billion. - . Sector growing at 31 is expected to account
for 4.1 of the national GDP during FY 2004-2005. - . North America and Europe remained key export
markets contributing around 69 and 23
respectively to the overall IT-ITES export
revenue during FY2004-2005 - Source http//www.nasscom.org/artdisplay.asp?cat_
id794
48 49 50 51 52 - Tata Consultancy Services Ltd
- Overview
- . Established 1968
- . Over 59,000 Associates
- . FY 2004 revenues of USD 1.56 bn, FY 2005
revenue of USD 2.24 bn - . First company in the world to receive an
integrated Enterprise wide CMMI Level 5 and PCMM
Level 5 assessment - . Global presence Operations in 47 countries,
160 offices across the globe. - . First and Largest
- . Software R D center in India
- . Software Exporter in India
- . Indian software company to 2
billion mark in revenues. -
- Source http//tcs.com/investors/downloads/TCS20I
R20Presentation-Jan202006.pdf
53 - Business Areas served by TCS
- . Banking
- . Financial Services
- . Insurance
- . Telecom
- . Manufacturing
- . Media and Entertainment
- . Retail and Consumer goods
- . Transportation
- . Healthcare and life sciences
- . Energy Utilities
- . S-Governance
-
54 - International Recognition
- .UK 2005
- . Top Ten ICT Employer
- . Investor in People
- . Hungary 2005 Hewitt Best Employers Survey
2005 - . Ranked 16th in the large company
category - . American Society for Training and Development
2005 - . Ranked 9th in ASTD best Awards program
- Vision
- .Global Top 10 by 2010
- Source http//tcs.com/investors/downloads/TCS20I
R20Presentation-Jan202006.pdf
55 - Infosys Technologies Limited
- Overview
- . Established 1981
- . Over 49,000 employees
- . Revenues for LTM Sep 2005 USD 2.09 billion
- . Attained SEI-CMM Level 5 in 1999
- . Global presence 36 sales offices in 17
countries and 37 global development centers - . Execution excellence drove 95 repeat business
in FY 2005 -
- Source http//www.infosys.com/investor/pdfs/IR_Pr
esentation.pdf - http//www.infosys.com/about/quick_f
acts.asp
56 - Industries served by Infosys
- .Aerospace and Defense
- .Automotive
- .Banking and Capital Markets
- .Communication services
- .Consumer package goods
- .Discrete manufacturing
- .Energy
- .Healthcare
- .High technology
- .Hospitality and Leisure
- .Insurance
- .Life sciences
- .Media and Entertainment
- .Retail
- .Transportation services
57 - Infosys in News
- .Infosys ranks No. 10 on the BusinessWeek IT 100
(June 2005) - .Infosys wins Indias Best Managed Company
Award based on a study conducted by Business
Today and A.T. Kearney (March 27, 2005) - .Wired Magazine has ranked Infosys Technologies
at No. 9 on its Wired 40 list for 2005 -
- Source http//www.infosys.com/about/awards.asp
58 - Wipro Technologies Limited
- Overview
- . Established 1980
- . Over 50,000 employees
- . Revenues during FY2005-2006 USD 1.813 bn
- . Currently serves over 412 clients in 35
countries through global delivery centers in 38
locations - .1st company outside the USA to receive IEEE
award - .Wipro is the worlds largest independent RD
house - .Worlds 1st IT company to use Six Sigma
- Source http//wipro.com/aboutus/fact_file.htm
59 - Industries Served by Wipro
- . Automotive
- . Avionics
- . Computing Industry
- . Consumer Electronics
- . Energy Utilities
- . Finance
- . Government
- . Insurance
- . Manufacturing
- . Media Entertainment
- . Retail
- . Telecom
- . Travel Transport
60 - Analyst Reports
- . Wipro is best suited for large scale
- global SAP projects Forrester
- .Wipro has the strongest IMS offering among the
offshore firms Forrester - .4th largest in the world in terms of market
capitalization in IT services - Source www.wipro.com
61 - Testimonials
- Jack WelchGeneral Electric"A truly global
company will be one that uses the intellect and
resources of every corner of the world. India is
a developed country as far as intellectual
capital is concerned. The opening of (offshore)
development centers mark a new level of
commitment by GE in India." -
John Chambers,CISCO Systems"We are
expanding our presence in India to take advantage
of the ample research and development talent
available...our Global Development Centre is a
critical component of our future success."
Bill Gates,Microsoft"Three years ago, during
my visit to India, the country was emerging as an
IT superpower. Today, the country is handling the
most sophisticated projects in the world...I am
impressed with the talent we have in our India
Development Centre and the quality of software
being developed.
Michael Dell,Dell Computers"India can become a
major part of Dell's operations and a major
source of the human capital that Dell takes on as
a company...and we are looking for further
opportunities to take advantage of skilled
labor."
Source http//www.nasscom.org/artdisplay.asp?cat_
id27
62 Conclusion
- . The world is transforming into a global
village. - . Developing nations like China and India will
continue to play a major role in the world
economy. - . Companies should go into developing countries
not only for low cost labor but to trap the huge
local market. - The Indian Perspective
- .The IT-ITES industry bound to grow
by leaps and bounces. - . Efforts should be made to further
reduce unwanted bureaucracy and invest heavily in
infrastructure. -
-
63IT Services in Developing Nations
- Mark Tegtmeyer
- Stephanie Schmitt
- Aarti Dinesh
- Vijay Gummadi