The Indian success story has been a combination of optimum utilization of resources and active encour- agement from a normally interfering government with good timing. By late 1980s, India was progressing
Corporate Governance at Wipro 37
with approximately 150,000 English-speaking engineers and with relatively lesser demand for their servic- es from the rest of the economy. By late 1980s, India was heading towards economic freedom liberaliza- tion. By this time, the information technology revolution in the developed countries like the Unites States, UK, Japan, etc., had started. There were also shortages of skilled programmers and IT professionals. By this time, a lot of Indians were working for US fi rms. Some of them played an important role in fulfi lling the gap and matching the demand–supply gap between the United States and India. Responding to the growing demand, a large number of Indian fi rms bloomed in no time. Contrary to its normal practice, the government encouraged this growth by simplifying the process for obtaining the numerous clearances.
The market leaders in the Indian software fi rms are new to the industry. Further, with a few excep- tions, notably Wipro and Satyam, were the two fi rms which specialized in software alone. This was in marked contrast to early entrants into the industry, who had close links with computer hardware development fi rms. With a growing need for maintenance services, many fi rms entered the industry for providing these services, often by sending software programmers to the client on a temporary basis.
These entrants were of two types. The fi rst type was of existing fi rms diversifying into software, including computer hardware fi rms, like HCL and Wipro. Along with these companies, there were fi rms with large in-house data processing and system integration capabilities such as Larsen & Toubro (LTITL). Others such as BFL, Sonata, Satyam and Birla Horizons began as divisions of industrial groups. The other types of entrants were new start-up companies like PCS, Datamatics, Infosys and Sil- verline. Indeed, managers at a large number of software fi rms had worked in these companies earlier in their career. One of the best-known software exporters, Infosys, was founded by a group of seven PCS managers who went away from PCS. Infosys’s fi rst contract was an S&M (support and maintenance) contract with a client in the apparel industry for whom PCS had completed a large project.
IT and are among the fastest growing sectors, having a cumulative growth rate of 33.6% between 1997–98 and 2002–03 and accounting for about 25% of the country’s total exports in 2007–08.
The share of the Indian IT industry in the country’s GDP increased from 4.8 % in 2005–06 to 7%
in 2008. In 2009, seven Indian fi rms were listed among the top 15 technology outsourcing companies in the world.
Characteristics of the Indian Software Industry
The Indian software segment has many unusual features from an Indian perspective. The most 1.
important one is its export orientation. Exports account for 65% of the total software revenue.
Also software exports have to an extent, grown faster than the domestic market. India exports software and services to approximately 95 countries in the world.
The IT industry of India has served as a launch pad in placing India on the international map.
2.
The industry primarily consists of software experiments, custom application development and maintenance (CADM), network services and IT solutions. As per the analysis done by the annual report 2009–10, prepared by the Department of Information Technology (DIT), “the IT-BPO in- dustry was expected to achieve a revenue aggregate of US$ 73.1 billion in 2009–10 as compared to US$ 69.4 billion in 2008–09, growing at a rate of over 5%. The report even predicts that the Indian IT-BPO revenues may reach US$ 225 billion in 2020.”
According to Nasscom’s analysis in the fi scal year 2009, the Indian IT-BPO industry expanded 3.
by approximately 12% and gained aggregate returns of US$ 71.6 billion. The industry saw an increase of around US$ 7 million in FY 2008–09.
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Size of the industry: India’s growing stature in the IT sector has enabled the country to form 4.
close ties with its largest markets viz. the United States of America and the European Union.
Indian Information Technology industry contributed around 5.9% of the country’s GDP as of 2009. It also provides employment to a signifi cant number of its service sector workforce. In March 2009, annual revenues from outsourcing operations in India was up to US$ 60 billion and this is expected to increase by a signifi cant amount to an estimated US$ 225 billion by the year 2020. The most prominent IT hub is IT capital Bangalore and the other emerging destinations are Chennai, Hyderabad, Mumbai, Pune, NCR and Kolkata.
Domestic and export share: The services exports of the software industry have reached to US$
5.
49.7 billion in 2009–10 as compared to US$ 47.1 billion in 2008–09, with an increase of 5.5%
in dollar terms. Further, the Indian IT industry’s services exports grew from US$ 25.8 billion in 2008–09 to US$ 27.3 billion in 2009–10, with a growth of 5.8 %. In the year 2008–09, the domestic IT attained revenues worth US$ 24.3 billion as compared to US$ 23.1 billion in FY 2007–08, with a growth of 5.4%. The tremendous demand for IT services and goods by India Inc. has majorly strengthened with the expansion of the domestic market as agreements worth extraordinarily to US$ 100 million. Till 2012, the domestic sector is estimated to expand to US$ 1.7 billion against the existing US$ 1 billion. IT exports software and services of India are to nearly 95 countries around the world.
Current Trends
According to market researcher Gartner Inc., India’s biggest software company Tata Consultancy Ser- vices Ltd (TCS) grew nearly 20% last year, outpacing the 5.8% revenue growth of the world’s top 10 companies. Industry revenue stood at 3.6%, highlighting the potential for continued growth. Still, the global market share of the nation’s top 10 software companies account for about half the local informa- tion technology (IT).The software services industry’s worldwide revenue grew by 3.1%.
TCS gained three ranks to move to the 21st position in the global IT services in terms of revenue.
New Jersey-based Cognizant Technology Solutions Corp., which has about 75% of its employees in India, experienced the strongest revenue growth in 2010 (40%), and the greatest absolute dollar value increase (US$ 1.3 billion, or Rs. 5825 crore).
Wipro underperformed compared to its peers, with 16.4% growth and in its most recent quarter (ended 31 December) results were below expectations.
Cognizant’s performance is a refl ection of the investments that the company has made in three areas, which Gartner considers to be the most important competitive differentiators:
“Operational capabilities (global distribution model); industry and business process capabilities; and relationship management,” it said.
Of the top 10 Indian providers, only Mahindra Satyam (Satyam Computer Services Ltd) reported a decline in 2010 revenue (10.2%), as the company was still coming out of the accounting scandal of 2009.
As per a Confederation of Indian Industry (CII) report, the Indian IT industry is growing at an annual rate of 35%.
National e-Governance Plan (NeGP): The Government of India plans to give high priority to improve the quality to the citizens by providing basic services at their doorstep for which it has formulated a NeGP covering 27 mission mode projects.
Corporate Governance at Wipro 39
State Wide Area Networks (SWANs): The Government has initiated a scheme for establishing SWANs across 29 states of the country with a total estimated budget of US$ 682.27 million, which will be implemented in fi ve years.
State Data Centers (SDCs): The data centers have been identifi ed as important for the core infrastruc- ture of supporting e-Governance initiatives under NeGP.
Common Service Centers (CSCs): The CSCs will develop a platform that can enable both the Gov- ernment and private/social sector organizations to meet their commercial and social goals for the benefi t of the rural population in the country with a combination of IT-based as well as non-IT-based services.
Community Information Centers (CIC): The Government of India has established the CIC’s in the far-fl ung rural and hilly areas of the country with main motive to bring the benefi ts of ICT to the people so that it helps in the socio-economic development.