1. IT Services in Developing Nations
Mark Tegtmeyer
Stephanie Schmitt
Aarti Dinesh
Vijay Gummadi

2. Overview IT & Globalization Why India Indian Infrastructure 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.”

4. Offshoring 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.

5. What is Compared? Business conditions Physical infrastructure
IT infrastructure
Financial institutions
Government support
Labor characteristics

6. Business 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

7. Physical Infrastructure
Power and backup
Technological exploitation
Telecommunications
International transportation access
Urban transportation
Access to supported information

8. IT Infrastructure International bandwidth Telecom capabilities
Common infrastructure
Disaster recovery capabilities
Business continuity capabilities
Technical certification
Network storage
Security management
Future-proof technology

9. Financial Institutions
Strong banking institutions
International banking relationships
Stable currency markets
Venture capital
Ownership mechanisms

10. Government 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

11. Labor 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

13. IT & 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

16. Offshoring 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

17. Problems with Offshoring
Language Barriers
Cultural Differences
Work Ethic
Coding Documentation
How Meetings are Conducted
Control
SLA’s
Support Costs
Telecommunication & Travel
Source:

18. Source: Vashistha, Atul and Vashistha, Avinash, “The Offshore Nation,” McGraw Hill, New York, 2006

19. Global 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:
Vashistha, Atul and Vashistha, Avinash, “The Offshore Nation,” McGraw Hill, New York, 2006

20. India 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 %
Source:

21. Global Outsourcing Country Comparison: CHINA
Immature market – similar to India 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:

22. China 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:

23. Global 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:

26. India
Why India Beckons ?

27. Why India Beckons????? Population- 1,080,264,388 (July 2005 est.)
Largest democracy in the world
Middle class expanding by million every year
GDP growth set to continue at 6-8% ;GDP per capita (PPP): $3,400 (2005 est.) 1
GDP (purchasing power parity): Trillion (2005 est.)
Source: and

28. Why India Beckons????? (Cont’d.)
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:

29. Trained 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 R&D infrastructure and technical and marketing services
India has spent US$ 19 billion in , putting it among the top ten countries with the highest R&D spend.
Source:

30. Major 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 - don’t 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.

31. Trivia:
Source:

32. Glimpse of Indian Culture & People
Sikhs culture
Holi - festival of color
Hindu Ritual
Festival of Rakhi
Muslim- Secular country
Sacred Animal

33. Government 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:

34. Government Tax Laws and Regulation- IT Pro (Cont’d.)
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:

36. Virtual Tour of a Tech Park
It is home for so many Indians who spend maximum amount of their time at these Tech parks.

37. Piracy Magnitude of Piracy rates Statistical Inference of Piracy
Impact of Piracy in developing nations and IT Globally
Bill Gates optimistic forecast on piracy

38. Piracy rates world wide and the losses thereof :
Source: Second annual BSA and IDC Global Software Piracy study

39. Cost 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

40. Estimate calculation of Piracy rates
Source: Second annual BSA and IDC Global Software Piracy study

42. Infrastructure 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 million by the end of December 2005.
.Total number of mobile telephony grew by 58.17% to touch 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 % to reach subscribers .
Source:

44. .India is the worlds 6th largest power generator
.Installed capacity of 124,311 MW as of January 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:

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.

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:

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 is expected to be around $28 billion.
. Sector growing at 31% is expected to account for 4.1% of the national GDP during FY
. North America and Europe remained key export markets contributing around 69% and 23% respectively to the overall IT-ITES export revenue during FY
Source:

52. Overview Tata Consultancy Services Ltd . Over 59,000 Associates
. 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:

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:

55. Infosys Technologies Limited . Established 1981
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:

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 “India’s 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:

58. Wipro Technologies Limited Overview
. Established 1980
. Over 50,000 employees
. Revenues during FY USD 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 R&D house
.Worlds 1st IT company to use Six Sigma
Source:

59. Industries Served by Wipro
. Automotive
. Avionics
. Computing Industry
. Consumer Electronics
. Energy & Utilities
. Finance
. Government
. Insurance
. Manufacturing
. Media & Entertainment
. Retail
. Telecom
. Travel & Transport

60. . Wipro is best suited for large – scale
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:

61. Testimonials
Jack Welch General 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:

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.

63. IT Services in Developing Nations
Mark Tegtmeyer
Stephanie Schmitt
Aarti Dinesh
Vijay Gummadi