India must act now: Nasscom

It is time to act in a faster and more rational manner. This is what Nasscom's India Strategy Summit 2005 had to say to the captains of the industry and the nation at large.

The target for the Indian IT industry is to grow faster to reach the $60 billion mark in exports from the present $17 billion in just another five years.

India is already the leader in IT services and BPO offshoring with a 65 per cent share in global IT services and 46 per cent share in BPO. But the real challenge is how to sustain and improve upon these achievements. In the past six years India has been able to build a virtual platform on which the IT industry can grow.

"This virtual platform has been established, tested and made scalable," said Ramalinga Raju, founder and chairman, Satyam Computer Services. The need of the hour is to use it effectively to meet the target.

A changed model of increasing thrust on services has to be mounted on the virtual platform that Indian IT industry has built. "The trend is clearly moving towards services and employing innovative techniques but the question remains as to how to balance both," said Jayant Sinha, partner, McKinsey and company.

Raju said, the two enabling factors that will help the Indian IT industry to reach the target is its software and hardware infrastructure and its leadership position in IT services and BPO. Right now 28 per cent of the global pool of suitable professionals are employed in India as compared to China and Russia which have 11 per cent and 10 per cent respectively.

But there are seemingly insurmountable challenges in terms of infrastructure and talent requirement for the Indian IT sector. The Nasscom-McKinsey 2005 report highlights that the country may, by 2010, fall short of five lakh people in terms of required workforce for the IT sector.

Presently, the total strength of people employed in the IT sector in India is 700,000 and by 2010, according to the report, it needs to add another 1.6 million suitable professionals.

The main reason for the expected shortage is the lack of suitable talent required for the industry. India generates 2.5 million graduates every year, of which only 10 per cent are fit for jobs in BPOs.

Only 25 per cent of the 350,000 diploma holders or graduates who come out of the colleges are able to fit into the IT services area.

This highlights the increasing need for improving the suitability of these potential workforce. For this, the higher education system and its curriculum has to adapt to the need of the industry.

"In BPO area, the poor quality of spoken English is the main problem," says Sinha. There is also a "lack of quality linkage" between academia and industry.

"So the remedy is to train and certify the available talent and generate a competitive advantage," adds Sinha.

There is also an impinging need for structural reforms in the ways in which universities function. At present, almost 135 universities across the country control almost 17,000 colleges. "There is a need for de-regulaiton in this area," says Raju. The public money has to flow more to the students than to the universities.

Another challenge for the country is the need for integrated infrastructure development. The Nasscom McKinsey report has suggested that to reach the coveted $60 billion mark and remain an ideal destination for offshoring India needs to have 10-12 cyber cities -- five based on the Gurgaon model and the rest based on Pune model.

The report says that these cities must be closer to the tier II cities, not be more than one hour of commuting time. They must have airports and expressways and operate as integrated satellite townships fully funded through public-private partnership.

They should be governed by a centrally run national authority with oversight by eminent individuals and unaffected by political change.

The report also says that an IIT and IIM at each of these proposed cities with a population of 1-2 million should be able to employ 200,000 knowledge workers each. "This requires an investment of almost $20-30 billion and should follow the public private partnership model," says Raju.

The role for the government is enabling land acquisition for the proposed cities and de-regulating the rules for faster construction.

The country also needs to increase the domestic IT growth which has a low penetration rate and has to stress more on improving the e-governance. "More talent development programmes and innovation driven business processes and models have to be encouraged," said Sinha.