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Benefits of Outsourcing IT to India - Knowledge Professionals

India's abundant, high quality and cost effective services and its vast resource of skilled software human power have made it an attractive location for global software clients.

There has been a healthy growth in the number of India's IT professionals over the last decade.

From a base of 6,800 knowledge workers in 1985-86, the number increased to 522,000 software and services professionals by the end of 2001-02. It is estimated that out of these 522,000 knowledge workers, almost 170,000 are working in the IT software and services export industry; nearly 106,000 are working in the IT enabled services and over 220,000 in user organizations.

Indian IT Sector: Knowledge Professionals Employed

Category 1990-91 1996-97 1999-00 2000-01 2001-02 E
Software exports sector 110,000 162,000 170,000
Software domestic sector 17,000 20,000 22,000
Software-captive in user organisations 115,000 178,114 224,250
IT enabled services 42,000 70,000 106,000
Total 156,000 160,000 284,000 430,114 522,250
Source : Nasscom

Educational institutions and polytechnics, as well as the prestigious Indian Institutes of Technology (IITs) are the principal sources of newly qualified graduates/post-graduates.

India has more than 250 universities (over 900 colleges) and engineering colleges providing computer education at the degree/diploma level. The output of trained human power at the degree / diploma level has been consistently increasing since 1985 and touched a figure of 130,000 during the 2000. The formal education system is supplemented and complemented by thousands of private training institutes across the country, which are providing computer education. The private training institutes are also doing a great service in providing a backbone to the computer literacy program.

Degree Level: Engineering Admissions, Professionals

Year Admission Graduates IT Admissions IT Professionals
1992 73,018 44,144 50,832
1993 79,758 49,769 54,235
1994 87,119 53,015 58,370
1995 95,160 56,032 62,806
1996 103,933 60,749 67,556
1997 138,450 59,311 89,957 42,846
1998 157,556 68,824 103,067 46,112
1999 179,299 75,177 118,947 49,617
2000 233,351 82,107 125,522 53,370
2001 256,686 109,376 133,053 71,066
2002 282,355 124,469 141,037 81,423
2003 310,590 141,646 149,499 93,968
2004 341,649 184,347 158,469 99,162

  • Ministry of Human Resource Development, Technical Education in India - Survey of Facilities
  • NTMIS, AICTE, Government of India

India's New IT Labor

Category 2000-01 2001-02 2002-03 2003-04 2004-05
IT Professionals from degree & diploma colleges 74,364 90,867 99,959 110,495 115,533
Non-IT Professionals from degree & diploma colleges 32,025 35,612 38,423 43,261 55,877
IT labour from non-engineering fields 26,597 31,620 34,595 38,439 42,853
New IT labor 132,986 158,099 172,977 192,194 214,263
Total number of Engineering seats 290,088 333,094 361,076 401,791 464,743
IT Professionals from degree & diploma colleges as a proportion of Engineering seats 26 27 28 28 25
IT graduates as a proportion of Engg. Graduates 33 35 35 35 31

Indian Institute of Information Technology (IIIT)

One of the remarkable initiatives undertaken to increase the Information Technology workforce in India was during 1998. This was the setting up of the Indian Institute of Information Technology (IIIT).

IIIT-Hyderabad was the first IIIT involving Government-Industry partnership commencing its academic session in 1998. It may be recalled that it was in the 50s and 60s that the Government of India had set up five IITs in various parts of the country. Also, in the 60s, IIMs were set up in the country. All these institutes of formal education have already emerged as centers of excellence. The relevance of formal education in developing software/Information Technology professionals needs no elaboration. The emerging trend is to further increase the annual output of the IIITs.

Most of the IIITs have begun as a joint initiative between the government and industry, while some of them - as in Gwalior and Allahabad are solely government initiatives. The National IT Task Force has recommended that the IIIT should be given the status of a deemed university.

The aim of the IIIT is to give both computer software-engineering degrees as well as to conduct short-term courses. In other words, not only will the IIIT produce the B.Tech/M.Tech/PhD graduates, it will also train professionals as well as industry-sponsored candidates in courses ranging from six weeks to six months duration.

One of the unique concepts under implementation is to allow private sector companies to affiliate their own schools with the IIITs. IIIT Hyderabad for instance has affiliated schools of IBM, Microsoft, Oracle, Satyam and Metamor. More are expected to join the bandwagon. It is expected that over the next seven years, the annual output of engineering graduates from the IIITs may increase to 2000 engineering graduates and about 25,000 professionals trained in short-term courses.

While IIIT-Hyderabad has been doing well, IIIT-Bangalore has made international news, through its global quality infrastructure and faculty. The software industry of Bangalore is fully supportive of IIIT-Bangalore, both in terms of hiring professionals as well as getting their employees trained in IIIT-Bangalore.

In the coming years, the models of IIIT-Hyderabad and IIIT-Bangalore will emerge as role models of for setting-up of IIITs in other states.


Despite the availability of training manpower, a demand supply gap still exists in the IT manpower market. If India's IT software and services sector is to achieve an annual revenue of US$ 70-80 billion in 2008, it will have to educate at least 2 million additional knowledge workers over the next 8 years. Though the quantity of workers is important, it is the quality of this knowledge base that will ultimately play a crucial role in deciding the fate of the IT industry in India.

India is one of the 5 largest economies in the world, in terms of purchasing power parity. However, it ranks 128 in the world out of 174 countries on the Human Development Index (UNDP, 2000). India was placed at the 49th position in the global competitiveness survey (undertaken in about 60 countries) in 2000. (Its position in the survey has ranged between 39 and 53 in the last three years (1998-2000).)

The general perception is that efforts in R&D have not been sufficiently intensive in creating a globally competitive economy.

Nasscom's Manpower Resources Survey

Focus of the Survey

The Nasscom study in the year 2001-02 on the IT workforce status focused on the following issues:

  • Ascertaining the present quantum of the IT-workforce in the country
  • Making projections about IT-manpower requirements of the IT-software and services industry.
  • Devising a strategy for matching the demand and supply of human resources in this industry.

Highlights of the Survey

  • The number of employed IT software and services professionals increased to 522,000 by the end of 2001-02 compared to 280,000 employed in the year 1998-99. This figure includes professionals, who are engaged in software, IT services and IT-enabled services including professionals engaged in software development units in user organizations.
  • The hiring of new IT professionals was highest in South India at 41 percent and lowest in the Eastern region at 6 percent.
  • The overall median age of software professionals was about 25.6 years.
  • 79 percent of software professionals in software companies were men, whereas 21 percent were women. However, this ratio is likely to be 65:35 (male: female) by the year 2005.
  • 44 percent of the software professionals or knowledge workers possessed over 3 years of working experience.
  • There was an average of 6 percent rise in basic salary during 2001. (This was the lowest rise ever recorded since 1990). Most companies are increasingly adopting the variable pay concept in order to link pay to revenues, and control costs.
  • The skills in demand were in the areas of
    • Software engineering/programmers/analysts
    • Internet and e-commerce applications
    • Database administrators
    • Network specialists and communication engineers
    • Digital media
    • Business applications of software development
    • Web based applications
    • Networking applications
    • Java
    • Data warehousing
    • Client-networking
    • Project management
    • Quality assurance & technical writing
    • Legacy systems, etc.

Key Recommendations

In order to maintain India's competitive advantage of technically skilled knowledge-workers with the right mix of technical, business and functional skills, the workforce needs to increase by at least 10-fold by 2008. As per the Nasscom-McKinsey report 1999, India needs to have at least 2.2 million knowledge workers in IT software and services related areas by 2008.

Some key initiatives which needs to be pursued by the Government are:

1. IIT/IIIT in every state
It was only in 50s and 60s, that the five IITs were established in India. They have produced world-class professionals. The sixth IIT was set up at Guwahati in the 90s. Undoubtedly, more IITs are required whereas the concept of IIIT is just about three years old. If we want every state of India to progress in IT, then during the 10th five-year plan that is 2002-2007, India�s aim should be to establish one IIT in every state of India. Nasscom recommends allocation of at least Rs.15,000 crore in the 10th five-year Plan, towards this activity.

2.Courses Offered by IIT/IIITs
The courses offered in these IT institutes should be in areas of Project Management, e-commerce,Java, Software Engineering and anything else which is the need of the day. In most IIITs, the industry would help to formulate the syllabus. This will allow dynamic changes in the courseware.

3. Deemed University status for IIITs
The setting up of the Indian Institutes of Information Technology (IIIT) in every state needs to be implemented with urgency. These IIITs should be given the Deemed University status without insisting on the mandatory three-year stipulation.

4. More Ph.Ds required
If India needs to create original technology then more Ph.Ds are required. Moreover, we also need substantial number of research scholars/professors to meet the requirement of teaching faculty as well as meet the R&D demands of the Industry. If we do not produce an adequate number of Ph.Ds, then India may not be able to continue to produce an IT workforce with a high quality level in the coming years.

5. Train the teachers program
There is an immediate need to launch a nation wide "Train the Teachers" Program (3T Program). This should be done at all levels including Faculty of Engineering in colleges, Post and Under-Graduates courses, Higher Secondary Schools, Secondary Schools as well as Primary Schools. A combination of physical and virtual training should be imparted.

6. Bridge Courses: Reengineering the courses of engineering colleges
To increase manpower supply on an immediate short-term basis, computer courses need to be introduced in every engineering discipline in the country. In other words, regardless of the discipline, every course in engineering should include computer science programs for at least one semester. These students would be very useful for the software industry, as the industry requires not only computer science graduates, but also engineering graduates with skills in various domains such as mechanical, chemical or textile engineering.

7. Providing IT Modules to every graduation course
It is proposed that training in Information technology, i.e. computer related courses should be made mandatory in every graduate course in the country. In other words, diverse courses like B.Sc, BCom also should be taught computers. Special IT Modules can be made available at the state level. The aim of these courses would be to impart the ability to use computers / IT as productivity-enhancing tool in a wide range of work situations.

8. Increasing the output of the engineering stream
It is proposed that the existing institutions like IIT, IISc, RECs and MCA courses should double or triple the output by suitable restructuring (in the shortest possible time). This can be achieved at a marginal cost, since the main cost involved will be hiring of new faculty, while using the existing laboratory and other infrastructure available within these institutions. This process has already begun at many institutions.

9. Networking of Educational Institutes
The universities, engineering colleges, medical colleges, and other educational institutions in the states as well as Research and Development Organizations should be networked for a supplementary program of distance education for improving the quality of education. This will facilitate the sharing of high quality a faculty an also provide access to the library resources in all the institutions.

10. Re-training industry experts
The software and related services industry will increasingly need experts to lead and support IT projects in areas such as CRM / e-CRM implementation (including front office automation, supply chain management, customer relationship management, etc.), and to provide ITES such as finance and accounting, HR, engineering design, etc.

To meet this need for domain and functional experts, industry professionals with a basic understanding of IT should be provided with the training to build the necessary expertise. This training would range from areas as CRM / EAS / packaged software, Internet applications, and legacy/client server maintenance to better support development, implementation and consultative selling. Some companies have already implemented programs to fill this capability gap.

To meet the overall requirement, however, private and government educational institutions will need to develop more re-training programs.

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