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human resource foundation of the Indian IT enabled services IT industry

Nov 13, 2014




Strengthening the human resource foundation of the Indian IT enabled services/ IT industryReport by KPMG Advisory Services Private Limited in association with NASSCOM under the aegis of the Department of IT, Ministry of Information Technology and Communications, Government of India

National Association of Software and Service Companies


PrefaceDeveloping India's human resource is key to our progress. The most visible and successful demonstration of this is our IT industry. In this sector, human resources comprise both the raw material and the 'technology', and is therefore of prime importance. Availability of a sufficient number of high quality manpower is a key requirement to ensure the on-going and sustainable growth of India's IT industry. It is in this context that NASSCOM was particularly delighted when the Department of IT initiated a Task Force on 'strengthening the human resource foundation of the Indian ITeS / IT industry. We at NASSCOM felt that this was not to be just one more of those reports, particularly as the Task Force comprised representatives of some of the leading ITeS and IT companies in India, in addition to representatives from various government bodies and educational institutions. NASSCOM, as the overall representative of the Indian ITeS / IT industry, decided that the best way to support the Task Force was by providing industry inputs and past research, while leveraging its relationship with KPMG to look at present and future needs. The study aims at covering a vast and seemingly unconnected range of areas including humanpower requirements for R&D, IT services and IT-enabled Service. NASSCOM, with able support from the team at KPMG as well as the co-operation shown by various industry players, managed this within a short time. The report has been prepared under grant-in-aid received from the department of IT, Ministry of Communications & IT and is aimed at supporting the Task Force's deliberations on recommendations. The level of detail adopted for this study is exemplary and indicates the focus on implementation as maintained by the Task Force and the project team throughout its deliberations. Implementing these will however be another challenge, considering the nature of change required and the multiplicity of stakeholders involved. NASSCOM, however, is committed to supporting the implementation of these recommendations. The first step in this context is to establish this report as a common source of reference and mobilization amongst policy-makers, industry players and potential employees. The next step is to concretize specific, actionoriented pans with definite responsibilities and timeframes. These need to be implemented and monitored with appropriate correctives based on feedback.

Kiran Karnik President, NASSCOM

National Association of Software and Service Companies

This document, prepared by KPMG Advisory Services Private Limited in association with NASSCOM, focuses on strengthening the human resource foundation of the Indian ITeS/ IT industry. A special thanks goes to the Department of IT, Ministry of Communications and Information Technology (Government of India), who have supported the production of the publication under a special grant.

ContentsGlobal IT sector growth trends during 2002-12 Gap between demand and supply of manpower for IT / ITeS industry and share of the market for India Strategy to enhance institutional capacity (formal and non-formal) to generate requisite manpower Emerging areas in the knowledge domain for India to pursue and strategy to reinforce status as ITeS / R&D hub Design of standards and common test for ITeS skills based on industry requirements Measures for optimizing deployment of non-IT personnel in ITeS and R&D Fiscal policy measures to maximize private sector participation in HRD for IT / ITeS Comprehensive action plan for HRD in IT / IteS 1 12







Global IT sector growth trends during 2002-2012This chapter provides an overview of the off-shore IT / IT business and the potential eS benefits and impact of these services on performance. It also provides estimates of market size and growth for the global ITeS / IT industry by geography, client-industry and solution form.

Companies world-wide are faced with increasing pressures to improve business performance . . .

Business performance


Index returns over the last three years for major US stock marke t indices have been 10 per cent to 40 per cent Number of corporate bankruptcies (for companies with assets greater than USD 100 million) during 1998 2002 increased by 150 per cent compared to those in 1993 1997 Even European countries like Germany are facing slowdown in growth to 0.4 1.4 per cent accompanied by stock market index fall of 60 per cent from approx.8,065 (March, 2000) to approx.3,170 (Sept, 2002)

Pressures to improve business performance



Skills shortage

Rapidly ageing population (e.g. increase in median age in OECD countries from 29.6 in 1970 to 36.5 in 2000) leading to lower labor participation n Even countries like China, with a large population today, could face a shortage of up to 10 million workers by 2020n n

Companies will be unable to make-up for labor shortage through automation (only 13.5 per cent of all service jobs are amenable to automation)

Productivity drivers


Business productivity in form output production efficiency (through automation, IT, supply-chain reconfigurations etc.) may be plateau-ing Business productivity growth in the future is expected to be driven more by cost efficiency of inputs (e.g. down-sizing, off-shoring, economies of scale / scope etc.)Source: Press reports. BCG. NASSCOM. KPMG. 2003 -2004.


. . . even as overall budgets get reduced

Companies world-wide are faced with increasing pressures to improve business performance, even as they face a looming skills shortage and an exhaustion of standard options to drive productivity. Skills shortage, as reflected by an ageing population in Western countries, would increase pressure on availability of labour force. Automation is also not expected to entirely compensate for the shortage of labour supply.

Strengthening the human resource foundation of the Indian IT enabled services/ IT industryNational Association of Software and Service Companies


Off-shoring offers an option to reduce expenditure while maintaining or even improving performance . . .Illustrative Technical services (IT) cost improvement for a global financial services companyPer cent of cost base

5 5 10

Labor cost differentials

Incr telecom costs

Incr Control / Consolidation Co-ordination and scale costs economies

Process reengineering

Off-shoring benefits



1005 5 10 10 20


Original cost base

Budget reduction

Support functions restructuring

Process reengineering

Off-shoring benefits

Reduced cost base

Benefits from off-shoring to the extent of 35 55 per cent of original cost base depending on client and process specific characteristicsSource: J P Morgan. NASSCOM. KPMG. 2003-2004.

Note: Numbers for off-shoring benefits are based on experience of companies off-shoring IT services and back-office processing functions to India

. . . and can lead to savings of 3555 per cent on current cost structures depending on specific business process and scale being considered

Off-shoring of business processes and functional activities is one of the options available to a global business to improve business performance. The benefit from off-shoring is through the ability to access relevant skills at appropriate costs such that the savings are much higher than the incremental cost of telecom connectivity and control / co-ordination activity involved. Additional benefits could arise from economies of scale and re-engineering benefits at the off-shore location. Some global companies have seen business benefits to the extent of 3555 per cent savings in relevant costs through off-shoring.


Off-shore IT and IT -enabled services include specific services leveraging the potential of Information and Communications Technology . . .The phenomenon of locating IT-services and other business processes. . .-


Excludes outsourced manufacturing, product assembly etc. Excludes hardware technology products

. . . into optimal off-shore locations . . .


Excludes on-site / in-country support (i.e. primarily directed at exports)

. . . largely enabled through advances in IT and telecommunications . . .


Excludes body-shopping services or those requiring physical interactions

. . . to access relevant skills / resources for business performance improvement.


Expands role of ITeS / IT beyond mere cost reduction to overall business improvementSource: KPMG. 2003-2004.

Off-shore IT and IT-enabled services include: IT services and other business processes located in optimal off-shore locations, largely enabled through advances in information and telecommunications technology, to access relevant skills and resources for business performance improvement.

Strengthening the human resource foundation of the Indian IT enabled services/ IT industryNational Association of Software and Service Companies


These could include a wide-range depending on the nature of expertise involved . . .Illustrative Back-office data entry / processing Customer contact Corporate support functions Knowledge services and decision-support Research/ Design and development

Increasing complexity of task