Outsourcing feeds India’s computer industry

Tata Consultancy Services is India's biggest computer services' company swissinfo.ch

Information management and business application companies are flourishing in India, thanks to the country’s booming outsourcing market.

The $13 billion (SFr17.6 billion) sector employs an estimated 750,000 people and includes giants like Infosys, Tata Consultancy Services (TCS) and Wipro.

“India is beginning to make its mark as a global service provider,” said Phiroz Vandrevala, a director at TCS.

“Our main obstacle is the artificial barriers put up by industrialised nations, which block the free movement of people.”

With 24,000 employees, offices throughout the world and an annual turnover last year of more than $1 billion, TCS has become India’s leading information services group.

Its closest competitor, Infosys, expects to break the same turnover threshold by the end of 2003, while the nation’s third largest information systems company, Wipro, isn’t far behind.

Booming industry

In addition to these three big players, India boasts around 2,000 relatively large information technology companies.

Their biggest export market is the United States, followed by Europe, and to a smaller extent, Japan.

In an effort to cut costs, a growing number of western companies have begun outsourcing their administrative and information management jobs to India, where the work can be done for one fifth of the cost at home.

“An Indian computer engineer earns around $20,000 per year,” said Nestlé India CEO, Carlo Donati.

Highly skilled

But financial savings aren’t the only reason foreign companies are turning to India.

They’re also discovering the country has a highly skilled workforce of computer scientists and programmers, thanks to an education system that has stood the test of time.

“The father of modern India, Nehru, was the one who developed and promoted computer science training,” explained the head of the Swiss Agency for Cooperation and Development (SDC) in New Delhi, Kurt Fögele.

India is home to six urban technical colleges – similar to Switzerland’s Federal Institutes of Technology in Lausanne and Zurich – as well as 32 regional engineering schools and 320 universities.

“The selection process for getting into one of these schools is ruthless,” said Ranjit Mathew, who works for a computer programming company in New Delhi. “But the number of applicants is incredible.”

India’s universities and technical schools turn out an estimated 200,000 computer science graduates per year.

Obstacles

Plagued by electricity black outs and inconsistent telephone coverage, the country does have a number of infrastructure obstacles to overcome, according to Basheerhamad Shadrach, an executive at Oneworld.net in India.

“Our software industry is completely oriented towards exportation,” he told swissinfo. “The applications are largely insufficient for the needs of this country.”

The Swiss government’s economic advisor in India, Jacques Derron, agrees with Shadrach that the country still has a way to go before it catches up with industrialised nations.

“There are some business sectors in India that have reached the same level of competitiveness as those in industrialised countries,” he said. “But other areas of the economy, like agriculture, have not benefited from this growth.”

Historic opportunity

But specialists like Mathew don’t see these obstacles as barriers to success.

In fact, he argues that business applications and information management are just the tip of the iceberg when it comes to the country’s economic potential.

“For the first time, information technologies are giving us the chance to catch up with rich nations,” said Mathew.

“International competition is pushing our companies to respect global quality standards, which is having a positive impact on the country’s entire economy.”

swissinfo, Frédéric Burnand in New Delhi (translation: Anna Nelson)

In brief

Around 750,000 people are employed in India’s $13 billion business application and information management sector.

By 2010, the industry is expected to generate net revenues of more than $70 billion and employ 2.5 million people.

By the end of the decade, computer services are expected to make up 35 % of the country’s exports.