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National Association of Software and Service Companies I n d i a
Strengthening thehuman resource foundation of the
Indian IT enabled services/ IT industry
Report by KPMG Advisory Services Private Limited in association with
NASSCOMunder the aegis of the
Department of IT, Ministry of Information Technology and Communications,
Government of India
National Association of Software and Service Companies
Preface
Developing 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
Global IT sector growth trends during 2002-12 1
Gap between demand and supply of manpower 12for IT / ITeS industry and share of the market for India
Strategy to enhance institutional capacity (formal and 32non-formal) to generate requisite manpower
Emerging areas in the knowledge domain for India to pursue 43and strategy to reinforce status as ITeS / R&D hub
Design of standards and common test for ITeS skills 58based on industry requirements
Measures for optimizing deployment of non-IT personnel 67in ITeS and R&D
Fiscal policy measures to maximize private sector participation 75in HRD for IT / ITeS
Comprehensive action plan for HRD in IT / IteS 81
Contents
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.
Global IT sector growth trends during 2002-2012
1
Companies world-wide are faced with increasing pressures to improve business performance . . .
. . . even as overall budgets get reduced
Pre
ssu
res
toim
pro
ve
bu
sin
ess
perf
orm
an
ce
Business performance
Skills shortage
Productivity drivers
n 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 laborparticipation
n Even countries like China, with a large population today, could face a shortage of up to 10 million workers by 2020
n Companies will be unable to make-up for labor shortage through automation (only 13.5 per cent of all service jobs are amenable toautomation)
n Business productivity in form output production efficiency (through automation, IT, supply-chain reconfigurations etc.) may be plateau-ing
n 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.)
n Index returns over the last three years for major US stock markeindices have been – 10 per cent to – 40 per cent
t
n Number of corporate bankruptcies (for companies with assets greathan USD 100 million) during 1998 – 2002 increased by 150 per cent compared to those in 1993 –1997
ter
n 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)
Source: Press reports. BCG. NASSCOM. KPMG. 2003 -2004.
This chapter provides an overview of the off-shore ITeS / IT business and the potential
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, 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 industry
National Association of Software and Service Companies
2
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 35–55 per cent savings in relevant costs through off-shoring.
Off-shoring offers an option to reduce expenditure while maintaining or even improving performance . . .
. . . and can lead to savings of 35–55 per cent on current cost structures depending on specific business process and scale being considered
Illustrative
100
5
45
10
5
35
Original cost
base
Budget
reduction
Support
functions
restructuring
Process re-
engineering
Off-shoring
benefits
Reduced
cost base
45
55
35
10
1020
Labor cost
differentials
Incr telecom
costs
Incr Control /Co-ordination
costs
Consolidationand scale
economies
Process re-
engineering
Off-shoring
benefits
Technical services (IT) cost improvement for a global financial services company
Per cent of cost base
Source: J P Morgan. NASSCOM. KPMG. 2003-2004.
Benefits from off-shoring to the extent of 35 – 55
per cent of original cost base depending on client
and process specific characteristics
Note: Numbers for off-shoring benefits are based on experience of companies off-shoring IT services and back-office processing functions to India
10
3
Off-shore IT and IT-enabled services include specific services leveraging the potential of Information and Communications
Technology . . .
The phenomenon of locatingIT-services and other business
processes. . .
. . . into optimal off-shorelocations . . .
- Excludes outsourced manufacturing, product assemblyetc.
- Excludes hardware technology products
. . . largely enabled through advances in IT and
telecommunications . . .
. . . to access relevant skills / resources for business
performance improvement.
- Excludes on-site / in-country support (i.e. primarily directed atexports)
- Excludes body-shopping services or those requiring physicalinteractions
- Expands role of ITeS / IT beyond mere cost reduction to overall business improvement
Source: 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 industry
National Association of Software and Service Companies
4
These could include a wide-range depending on the nature of expertise involved . . .
Back-office data entry /
processing
Customercontact
Corporate support functions
Knowledge services and
decision-support
Research/ Design and development
n Data entry(form filling)
n Data conversion(translation, transcription)
n Basic processing (checking / updating)
n Document management (storage, retrieval)
n Customer services(complaints, inquiries)
n Tele-marketing (pre-sales, order-taking, catalog sales)
n Collections support(reminders, payment support)
n Shared corporate function support (HR, Finance / Accounts, HR, procurement)
n IT support (development, integration, maintenance, help-desk)
n Analyst services (legal, financial)
n Customer analytics (segment profits)
n Application processing (claims)
n Risk management (underwriting, structuring)
n Advisory services (tele-medicine, consultancy)
Nature of work
n Engineering and design (CAD/ CAM)
n Content development (animation, web site, graphics)
n New product design (specifications, pilot testing)
Illustrative
Increasing complexity of task and skill requirements
Note: List of activities and examples above is illustrative only and not exhaustive Source: Press reports. 2003.
Off-shore ITeS / IT include a wide range of services with increasing complexity of work
from back-office data entry and processing to customer contact services to corporate
support functions to knowledge / decision support services to R&D / Development
services.
As a result, the qualifications and nature of skills required could vary accordingly.
5
The first wave of global expansion began with companies reaching out to new markets
with existing products and brands – the key driver being the increasing demand for
new products in growing markets.
In the second wave of global expansion, companies actually began shifting entire
production activities in order to take advantage of lower cost labour and capital.
Off-shoring represents the third-wave of establishing global presence, with the
segregation of business processes and functions and their outsourcing to different parts
of the world or remote locations.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
. . . and partially through remote facilities
Business processes conducted only partly within client country . . .
Business processes managed within client country
Before off-shoring
After off-shoring
Wave 1: Global export
- Spreading-out of sales efforts
- Attracted by latent / growing demand for products and services in new markets
- Offer existing goods under existing brand names in new markets
Wave 2: Global production
- Spreading-out of product manufacturing
- Leverage pockets of capital / labor efficiency due to lower costs, economies of scale etc.
- Produce in specialized pockets to then ship globally / re-assemble
Wave 3: Global business re-alignment
- Spreading-out of business processes and functions
- Leveraging global presence to access low-cost skills and spread establishment risks
- Run business processes across locations over telecom networks
1 2 3 4 5
2 3
1 4 5
Nature of global
expansion
Key drivers to expansion
Business implications
Different forms of global expansion by companies
Off-shoring
Source: KPMG. 2003.
Illustrative
4
6
Companies are considering off-shoring business processes from across the entire business value chain . . .
Operations / Logistics
n Order tracking
n Order / claims / application
processing
n Payments processing
Finance and Accounts
Technology Services
Product Development
Inb
ou
nd
Lo
gis
tics
Man
ufa
ctu
rin
g/
Op
era
tio
ns
Ou
tbo
un
dL
og
isti
cs
Mark
eti
ng
an
dS
ale
s
Cu
sto
mer
Serv
ice
Human Resource Management
Sales / Marketing and Customer
services
n Tele-sales
n Order processing
n Customer services and
complaints
n Help-desk
IT services and support
n Custom development
n Systems integration
n Hosting / maintenance
n Customer help-desk /
support
Human resources
n Payroll processing
n Recruitment and selection
support
n HRIS
Research / Design and
Development
n Clinical Research
n VLSI design
n DSP chip design
n Avionics research
n Clinical Research
n Engineering design
services
n Legal research
Finance and Accounting
n Back-office
n Accounts payable
n Accounts payable /
receivable, fin. reporting
n Finance accounting
n Revenue accounting
Illustrative
Source: Press reports. KPMG. 2003.
Off-shoring is no longer restricted to specific primary or secondary activities of a
business. All the key business processes across the entire business value chain, as
exhibited in the figure above, can potentially be off-shored.
A number of companies world-wide have already off-shored business support activities
to in-house or third-party service providers.
7
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
This trend towards off-shoring is being driven by some key developments on the demand and supply side . . .
Ke
yd
ev
elo
pm
en
tsd
riv
ing
off
-sh
ori
ng
Demand-side characteristics
Supply-side characteristics
Scope of economic benefits possible
- Companies stand to gain 30 – 50 per cent in cost savings with additional revenue enhancement / service improvement possibilities
Comfort with and trust in off-shoring
- Companies with established sourcing relationships grow trust in suppliers for BPO
- Other companies are getting attracted by others’ success
Access to global resources- Companies with global
presence can leverage local resource access to support off-shoring
Access to trained, cost-effective skills
- Companies have access to certified / experienced skills at 1/5 –1/10 of costs in other locations
Telecom connectivity options
- Global telecom connectivity options have increased and costs have fallen under competition and technology
Regulatory support and incentives
- No restrictions/ barriers on service trade (duties etc.) have been placed
- Host countries even support services export through incentives
Source: Press reports. Merrill Lynch. KPMG. 2003.
The trend towards off-shoring is being driven by specific dynamics on the supply and
demand side. Companies are becoming increasingly comfortable with the idea of off-
shore service provider relationships.
With the continuing support from regulatory agencies, availability of low cost
infrastructure and the right skills mix, off-shoring could continue to be a large business
opportunity over the longer term.
As per estimates by IDC and NASSCOM (2003), the global ITeS / IT market (off-shored
as well as domestic) was USD 1,184 billion in 2002 (USD 392 billion for IT services and
USD 792 billion for ITeS).
This market is expected to grow by a CAGR (2003 – 2012) of 11 per cent, driven by
strong growth across the Americas, Europe-Middle East-Africa (EMEA) and the Asia-
Pacific market.
The American and EMEA markets are expected to continue to be the major markets for
ITeS / IT, contributing 80 per cent of the market in 2012 as compared to 85 per cent in
2002.
The American and Europe-Mid East-Africa (EMEA) regions are expected to continue to be the major markets for ITeS / IT although
the growth could be faster in the Asia-Pacific regions . . .
Source: IDC. NASSCOM.KPMG. 2002-03.
441 625 8641,193
792 881
1,213
1,633
2,198
3920
1,000
2,000
3,000
4,000
2002 2003 2006 2009 2012
ITeS
IT
USD billionCAGR
(2003-2012)
1,184 1,322
3,391 11 per cent
11 per cent
12 per cent
Global ITeS / IT market
EMEA
Americas
Asia-Pacific
225 313 425 577496 546
726941
1,218
2010
1,000
2,000
2002 2003 2006 2009 2012
IT ITeS
USD billionCAGR
(2003-2012)
697
1,366
1,795 10 per cent
9.3 per cent
11.0 per cent
USD billionCAGR (2003-
2012)
11.8 per cent
USD billion CAGR (2003-2012)
Source: IDC. NASSCOM.KPMG. 2002-03
2,497
771
1,838
1,040
149 212 295408173 194
272372
509
1330
1,000
2002 2003 2006 2009 2012
IT ITeS
306343
917 12 per cent
11.3 per cent
667484
66 99 143 208123 141215
318471
580
1,000
2002 2003 2006 2009 2012
IT ITeS
181 208
67914 per cent
14.3 per cent
13.5 per cent
461314
Note: Industry estimates upto 2012 are based on available short-term estimates and would need to be revised periodically based on actual performance
Note: Industry estimates upto 2012 are based on available short-term estimates and would need to be revised periodically based on actual performance
8
This growth is expected to be driven by the characteristics and needs of specific industries . . .
15
19
20
19
47
47
57
121
140
30
35
45
52
69
107
109
136
262
354
11
13
17
18
16
43
42
51
109
126
12Education
Healthcare
Transportation
Utilities
Telecom services
Retail / wholesale trade
Telecom equipment
Government
Manufacturing
Banking, Finance and Insurance Services
2012
2009
2006
2003
2002
10.9 per cent
10.2 per cent
9.0 per cent
9.8 per cent
9.6 per cent
15.5 per cent
11.2 per cent
10.2 per cent
10.2 per cent
10.2 per cent
USD billionCAGR
(2003 – 2012)
Offshore-ability
(preference and ability)
Source: IDC. Gartner Dataquest. NASSCOM - McKinsey. KPMG. 2002–2003.
Global IT services requirement projections by industry (does not include ITeS)
Note: -ability (preference and ability)
-ability (preference and ability)
indicates high degree of offshore
indicates low degree of offshore
High growth potential due to
under-penetration
9
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The demand for IT and IT-enabled services across industries would vary by the specific
characteristics and needs of those industries.
The Banking, Finance and Insurance services industry and the Manufacturing industry
have been the largest user of global IT services (2002). They are expected to continue
being the largest users even by 2012 due to high offshore-ability (i.e. ability to off-shore
and preference to off-shore).
However, going forward, other industries like telecom, utilities, healthcare and retail
trade are expected to drive growth with a CAGR (2003 – 2012) of 10–15 per cent due to
under-penetration despite high offshore-ability.
The global IT services market in 2002 was driven by Application Development and
support services (on-site and off-shore).
The preference of clients to use off-shore facilities for business continuity and cost
saving requirements is going to drive the global IT services market. The market is
expected to grow at a CAGR (2003 – 2012) of 12 per cent.
The global ITeS market in 2002 was driven equally by administration support services,
customer care, finance and payment processing services.
Increasing sophistication of the off-shore ITeS delivery model is leading to new
business processes being considered for off-shoring by new clients. The ITeS market is
expected to grow at a CAGR (2003 – 2012) of 11 per cent, driven by an increasing
demand for finance support, payment processing and HR services.
. . . within specific functional / solution areas inIT and IT-enabled services . . .
135 182 235303
245 278
405
580
830
1220
500
1,000
1,500
2002 2003 2006 2009 2012
IT education / training
Appln Dev and Support*
SI and IS consulting
USD billionCAGR
(2003-2012)
12 per cent
9.0 per cent
9.4 per cent
12.9 per cent392
441
1,193
31 55 97201
323491
747
162 178
235
306
400
199216
274
330
398
169182
226
276
337
7888
124
165
219
1710
500
1,000
1,500
2,000
2,500
2002 2003 2006 2009 2012
Content Development*
Administration
Customer care
Finance
Payment services
HR
USD billionCAGR
(2003-2012)
11 per cent
10.7 per cent
25.0 per cent
9.4 per cent
792
1,633
2,198
15.7 per cent
7.0 per cent
7.1 per cent
Source: IDC. NASSCOM. KPMG. 2002 - 03.
Source: IDC. NASSCOM. KPMG. 2002 - 03.
* Support IT services are those that require on-site presence of support staff and are not delivered from off-shore location like ITeS
* Content development services include remote design services for VLSI / embedded systems, security / control systems etc.
864
881626
1,213
Note: Industry estimates upto 2012 are based on available short-term estimates and would need to be revised periodically based on actual perfor mance
Note: Industry estimates upto 2012 are based on available short-term estimates and would need to be revised periodically based on actual perfor mance
Global IT services market Global IT-enabled Services (ITeS) market
10
This growth in ITeS and IT industry is expected to usher ina new way of working . . .
. . . creating pressures on the economic and social systems of various countries to adapt to these changes
Imp
act
of
ITeS
/IT
wo
rkin
g
Night-shifts
Flexi-time
Average age of employee
Means of service delivery
n Remote services delivery imply a greater emphasis on agent voice modulation /
accent and ability to understand client accents and lower emphasis on grooming
n Remote services also imply lesser need for agglomeration into urban offices and
the move towards SOHO / tele-working
n ‘Follow-the-sun’ service expectations imply need to support night shift
operations including support for banking, healthcare, food and entertainment,
transportation for agents
n In order to manage higher returns from resources, capacity utilization through
scheduling becomes critical, leading to flexible working hours
n Agent preferences for ITeS / BPO work suggest the need for flexi-time options
n The average age of the workforce would be around 27 – 30 as compared to 35 –
40 in other industries, requiring a different organizational structure and culture
as well as facility design
11
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
This increasing trend towards off-shore ITeS / IT is going to change not only the way
business is organized but also the social and economic aspects of employees and
potential employees
– Tele-working and remote support is going to be increasingly common.
– Night operations, tuned to end-customer service timings are going to increase
in demand.
– Employees on the other hand will be faced with a flexible work-time depending
on business cycles as well as peak demands for their respective services.
– Average age of employees could be much lower as the education – employment
cycle gets transformed into an education – employment – reskilling –
employment cycle.
12
This chapter provides an understanding of India’s key strengths related to the off-shore
ITeS / IT industry and target market share.
It also provides an estimate of the potential manpower requirement in India upto 2012
to meet the off-shore ITeS / IT market requirements and the potential gap based on
numbers expected to be available.
India’s revenues of USD 7.7 billion in 2002 correspond to 24 per cent of the off-shored
ITeS / IT market, establishing India as ‘the services-hub of the world’.
Some of the world's leading organizations have chosen to have their business
operations supported from India through third-party or in-house facilities. This includes
a wide range of services from back-office data entry and processing to customer contact
services, corporate support functions, knowledge support functions and research and
design activities.
1.98.3
1.7 0.4
0.8 0.2
8.41.1
2.47.7
1.1 3Ireland
Israel
E. Europe
Russia
China0.3N/A
Philippines
Australia
2.1 0.4
India
0.02 0.04
South Africa
24.43.7
0.5N/ACanada
Mexico
Global IT / IT-enabled services market (2002)
Domestic
Off-shored
Source: McKinsey Global Institute. 2003.Note: Numbers above indicate total market for off-shored and domestic ITeS / IT for year-ended December 2001 or March 2002.
Eastern Europe includes Poland, Hungary, Romania and the Czech R epublic
USD billion
. . . however India’s share of the global ITeS / IT spend was still low at 0.8 per cent (2002), suggesting significant growth potential
India is emerging as ‘the services-hub of the world’ with a 24 per cent share (2002) of the off-shored IT / IT-enabled services market . .
Gap between demand and supply of manpower for ITeS / IT industry and share of the market for India
However, India’s current share of the total global ITeS / IT spend (off-shore and
domestic) was still low at 0.6 per cent, suggesting significant future growth potential
related to off-shoring.
India’s proposition for off-shore ITeS / IT support is driven by:
– availability of appropriately skilled resources;
– lower costs of manpower (1/5th to 1/10th); and
– ability to generate better quality of work, more efficiently.
There are examples of companies with off-shored services being provided from India
which have improved service levels by 5–10 per cent across different parameters such
as customer satisfaction, response time, accuracy, speed etc.
India’s proposition in this area is based primarily on the availability of a significant pool of appropriately skilled and trained
resources at a competitive price . . .
Skills
availability
Cost of
manpower
Quality of
work
efficiency
§ Highest base of employees currently within ITeS
§ A graduate base of over 14 million people with over 1 million IT-trained users
§ Salary levels at 1/5th to 1/10th of that of equivalent jobs in the U.S.
§ Reduced trade response time for an European airline services company
§ Increase in transaction processing speed at a U.K.-based retail bank
§ Increased customer satisfaction at a U.S-based financial services company
§ Increased accuracy of transaction entry at a U.K.-based retail bank
Philippines
Ireland
India
15,000
18,000
106,000
Dbase Admin.
Fin/Acctg Exec
Teacher 1/10
1/4
1/5
Note: Indexed to U.S. salary level for equivalent post
India
facility
U.S.
facility85 per cent
92 per cent
18 hrs.
4 hrs.
100
120
95 per cent
98 per centIndia
facility
U.K.
facility
Work facility
India
Europe
facility
India
facility
U.K.
facility
Source: NASSCOM. KPMG. 2002-2003.
Illustrative
13
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
India’s revenues in the ITeS / IT market grew by more than 25 per cent in 2002–2003 to
USD 12 billion by 2003.
Going forward, India’s value proposition and an overall shift towards off-shore ITeS / IT
are likely to help India’s revenues to grow at a CAGR (2003–2012) of 35 per cent,
reaching USD 148 billion by 2012.
The key contributors to this would continue to be IT export services (with revenues
estimated to be USD 55 billion by 2012, at a CAGR (2003–2012) of 25 per cent) and IT-
enabled services (revenues estimated to be USD 64 billion by 2012, at a CAGR (2003–
2012) of 44 per cent).
Based on its initial successes, India is expected to achieve revenues of USD 148 billion in the ITeS / IT area by 2012 . . .
8 15
55
27
64
28
21
0
40
80
120
160
2002 2003 2006 2009 2012
Domestic IT services
ITeS exports
IT exports
Source: NASSCOM-McKinsey.BCG. 2003.
Note: Market share estimates assume the same concessions and efforts in place as currently.
Industry estimates upto 2012 are based on available short-term estimates and would need to be revised periodically based on actual performance.
CAGR
(2003 – 2012)
USD billion
10 12
62
148
35.0 per cent
31.0 per cent
44.2 per cent
24.8 per cent
Indian ITeS / IT market projections (2002 –2012)
Indian ITeS market projections (2002–2012)
0
20
40
60
2002 2003 2006 2009 2012
Content Development
Administration
Payment services
HR
Finance
Customer care
1 2
21
64
Source: NASSCOM-McKinsey.BCG. 2003.
Note: Market share estimates assume the same concessions and efforts in place as currently.
33.7 per cent
54.8 per cent
101 per cent
47.0 per cent
Indian IT export services market projections (2002–2012)
24
10
18
0
20
40
60
2002 2003 2006 2009 2012
Training and Education
Outsourced support
IT Development
Consulting, integration, installation
24.8 per cent
86.6 per cent
26.4 per cent
8.6 per cent
50.7 per cent
6 7
28
55
27
14
7
CAGR (2003 – 2012)
USD billion
USD billion
24.9 per cent
23.4 per cent
CAGR (2003 – 2012)
44.2 per cent
14
The increase in revenues would correspond to an increase in India’s share of the global
ITeS and IT market from 0.8 per cent in 2002 to 1.5 per cent by 2006 and 4.4 per cent by
2012.
This is largely driven by an increasing share of the ITeS market as well as the IT market,
a lot of which could be in the form of off-shore services based on current trends.
This suggests a significant increase in India’s share of the global IT-enabled services and IT spending to 4.4 per cent by 2012 . . .
India’s share of global IT services market
India’s share of global ITeS / IT market
Source: NASSCOM-McKinsey.KPMG. 2003 -2004.
7.0%4.7%3.2%
2.2% 2.3%
60%
80%
100%
2002 2003 2006 2009 2012
USD billion
441100 percent: 1,194
USD billion
1,184100 percent: 3,391
. . . India’s share of off-shored services (i.e. not located within the same country) is expected to be even higher
India’s share of global ITeS market
392
2.9%1.3%0.6%0.2% 0.3%
60%
80%
100%
2002 2003 2006 2009 2012
USD billion
881100 percent: 2,198792
4.4%2.5%
1.5%0.8% 0.9%
60%
80%
100%
2002 2003 2006 2009 2012
1,322
Increase in overall
market share (IT and
ITeS) to 4.4 per cent by
2012
Note: Industry estimates up to 2012 are based on available short-term estimates and would need to be revised periodically based on actual performance
15
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
This translates into a direct employed manpower requirement of 3.7 million personnel for off-shore ITeS / IT by 2012 . . .
. . . this is in addition to manpower requirements for domestic and captive ITeS / IT support requirements within India
1.8
3.9
0.5
3
18
10
24
Training and Education
Outsourced support
IT Development
Consulting, integration, installation
0.5
0.2
0.1
0
0.3
0.4
4.3
2.6
9.7
18.8
6.2
22.4
Content
Development
Administration
Payment
services
HR
Finance
Customer care
India IT export services (USD billion)
India ITeS export services (USD billion)
274
111
529
58
972
2,717
197
147
447
690
206
1,030
IT export services employment (000s)
ITeS export services employment (000s)
2012
2002
2012
2002
Source: Press reports. NASSCOM-McKinsey.Manpower profile of India. BCG. KPMG. 2003.
Note: Billing rates and productivity assumptions have been based on nature of work and competition for services expected.
Total IT and ITeS employment (2012) of
3.7 million
Based on assumptions of utilization adjusted charge rate of USD 41.5 / Full Time
Equivalent / hour for export IT services and USD 17.3 / Full Time Equivalent / hour for IT-
enabled services, this market size translates to an estimated manpower requirement of
over 3.7 million for export IT and IT-enabled services, compared to 0.4 million in 2003.
Additionally, another 1–1.5 million could be employed in the domestic / captive IT
services area (based on current ratios of roughly 1:1), leading to a total manpower
requirement of approx. 4–6 million.
16
17
The IT export services industry could employ approximately 0.97 million
people by 2012 as compared to 0.2 million in 2003 . . . Illustrative
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
2002 2003 2006 2009 2012
0.5 0.6 2.3 8.9 24.3
30 30 50 70 65
12 15 34 93 274
Revenues (USD billion) 3.9 4.7 6.0 7.8 9.8
1.8 2.2 4.8 10.4 18.0
0 0.0 0.1 1.0 2.7
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
43 43 55 70 65
66 81 81 82 111
14.5 14.7 21 27 25
91 109 167 283 529
20 20 27 35 35
0 0.4 3 21 58
Consulting, Integration, Installation
IT development
Outsourced support
Training & Education
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
CAGR (2003–2012)
51 per cent
38 per cent
9 per cent
4 per cent
26 per cent
19 per cent
87 per cent
75 per cent
6.2 7.5 13.2 28.1 54.8
26.7 26.9 34.2 43.0 41.5
170 205 285 479 972
Total IT export
services
Revenues (USD billion)
Utilization adj. charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
25 per cent
19 per cent
Source: Press reports. NASSCOM-McKinsey.Manpower profile of India. BCG. KPMG. 2003.
Note: Billing rates and productivity assumptions have been based on nature of work and competition for services expected.
FTE = Full Time Equivalent
Assumptions related to manpower requirements for the IT export services industry are
provided here:
Number of working hours per FTE p.a. assumed as follows:
Total hours available 2080
Less holidays (35 days) 280
Less training time 200
Less admin. time 240
720
Utilized hours 1360 (76 per cent)
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
18
Assumptions related to manpower requirements for the IT-enabled services industry are
provided here:
Number of working hours per FTE p.a. assumed as follows:
Total hours available 2080
Less holidays (35 days) 280
Less training time 200
Less admin. time 240
720
Utilized hours 1360 (76 per cent)
The ITeS industry could employ approximately 2.7 million by 2012 as compared to 0.17 million in 2003 . . .
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
2002 2003 2006 2009 2012
0.4 0.7 2.4 8.0 22.4
10 10.5 12 14 16
29 49 145 420 1,031
Revenues (USD billion) 0.3 0.5 1.1 2.5 6.2
0.0 0.0 0.4 3.5 18.8
0.1 0.2 0.8 3.0 9.7
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
11 13 16 21 22
20 25 49 88 206
9 12 14 18 20
2 2 18 148 690
9.7 10 12 15 16
8 14 46 143 447
Customer care
Finance
HR
Payment services
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
CAGR (2003–2012)
47 per cent
40 per cent
34 per cent
26 per cent
101 per cent
90 per cent
55 per cent
47 per cent
1.5 2.4 6.5 21.0 64.0
10.2 10.9 12.7 15.4 17.3
106 160 379 1,004 2,717
Total ITeS
Revenues (USD billion)
Utilization adj. charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
44 per cent
37 per cent
Source: Press reports. NASSCOM-McKinsey.Manpower profile of India. BCG. KPMG. 2003.
Note: Billing rates and productivity assumptions have been based on nature of work and competition for services expected.
FTE = Full Time Equivalent
0.2 0.4 0.7 1.5 2.6
8 9.2 11 13 13
17 28 48 147 147
Admin.
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
25 per cent
20 per cent
0.5 0.7 1.3 2.5 4.3
11.5 11.5 13 15.2 16.1
29 42 72 85 197
Content Dev.
Revenues (USD billion)
Utilization adjusted charge rates (USD / FTE / hour)
Manpower requirement (FTE 000s)
23 per cent
19 per cent
Illustrative
19
Current graduate output and employment preference trends suggest that in the
absence of any corrective interventions, there could be a significant shortfall of
manpower required for ITeS / IT, even in the medium term.
High-level estimates suggest that this shortfall could be to the tune of 0.5 million people
by 2009 , roughly 23 per cent of the industry’s requirements of 2.1 million people for IT
services and IT-enabled services.
The key assumptions used for calculations include:
– Manpower requirements get reduced due to productivity adjustments brought
about by internal changes as well as nature of services provided. This is
reflected in the increase in charge rate per FTE per hour.
– Current pool numbers are based on NASSCOM’s estimates of approx. 160,000
employed in ITeS as at end of March 2003.
– Supply estimates are based on 13 per cent increase in annual graduate supply
(as per current trends), 65 per cent workforce participation and 1-2 per cent of
these preferring and capable of employment in the IT-enabled services sector,
with adjustment for attrition as currently observed (approx. 30–40 per cent).
Current manpower resources will not be sufficient to meet the aggressive growth targets even in the medium term (2009) . . .
1,120
140
520
460
885
525
360
Total supply (2009)
Supply expected based on
current trends
Current pool
Total demand (2009)
Products and Technology
services
Domestic IT services
IT services exports
Shortfall:235
IT manpower gap (2009)
Number (000s)
ITeS manpower gap (2009)
Number (000s)
Source: Institute of Applied ManpowerResearch. NSSO. NASSCOM. KPMG. 2003.
1,003
413
1,416
741
581
160
Total supply (2009)
Supply expected (net of attrition
at current levels)
Current pool
Total demand (2009)
Industry productivity
enhancement (product mix,
structural changes)
ITeS market demand (current
productivity)
Shortfall:262
Total graduate / engineer pool addition of 51 million,
discounted for labor force participation (65 per cent) and ITeS employment preference /
suitability (1 - 3 per cent)
. . . with a shortfall of over 0.5 million by 2009 for IT and ITeS, based on current human resource supply trends
Note: Manpower supply numbers are based on extrapolation of current trends related to growth in educational institutions, attendance rates, out-turns and labor participation as well employment preferences.
Reduction in manpower requirements depending
on mix of services offered
and delivery efficiencies
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
20
Not addressing this gap means that India’s target share of the export IT and ITeS market
would fall short accordingly.
High-level estimates, based on population and economic growth, suggest that India will
be one among many surplus countries across the world that will have a labor surplus
and would be able to meet off-shoring requirements of the world.
The issue, however, will be of being able to skill this surplus to be able to meet the ITeS
/ IT requirements.
A number of other countries with marginal surplus (like China, Philippines, Ireland and
Mexico) are already making strong efforts to establish the necessary policies,
institutions and infrastructure to meet these skilling objectives.
Potential labor surplus / shortage in working age group across the world (2020)
Shortfall
Surplus
India will be one amongst other countries with surplus manpower that could possibly be trained and deployed for ITeS
/ IT requirements . . .
. . . China, Philippines, Ireland and Mexico are some countries that could pose a competitive threat to India’s market share aspirations
Philippines
Japan
Australia
India
Egypt
UK
IrelandGermany
Spain
France
47
-9
-0.5
5
Indonesia
5Malaysia
1
Pakistan
19 China
-10Russia
-6
Turkey
2
4
-3
-3
-2
2-3
Brazil
3
Mexico
5
-17
US
-X
X
Source: US Census Bureau. BCG. 2002-2003.Note: Working population is defined at the 15–59 years age group. Ratio of working population to total population is assumed to be constant.
Labor numbers are based on assumptions of no interventions by respective governments.
Million
21
Comparing India to some of the emerging ITeS /IT destinations, one observes the
availability of a significantly large human resource pool that can be utilized.
India currently has some advantages as compared to these countries in terms of the
availability of skilled manpower at competitive costs.
However, the efforts by these countries to develop human resources pose a significant
competitive threat to India in the long-run.
Although these countries are currently not as favorably positioned as India in terms of availability of low-cost skills . . .
19,500
1,400
2,900
2,000
2,400
Ireland
Mexico
Philippines
China
India
43,200
137,600
380,000
950,000
2,100,000
Ireland
Mexico
Philippines
China
India
Manpower comparison across countries
Average salary for graduates
(USD per annum, 2001)
Total number of graduates per annum
(2001)
Source: NASSCOM-McKinsey. 2002 -2003.
. . . they are making significant efforts in improving the quality and quantity of manpower to meet global ITeS / IT requirements in the future
Note: Numbers are for year-ended December 2001 or March 2002.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
22
Ireland’s vision to become a knowledge-based economy has evolved based on industry
and competitive developments.
Once Ireland had established itself as the preferred manufacturing / services destination
for a number of European and some American businesses, it decided to focus on high-
end services to avoid competing head-on with other countries that could boast of better
cost structures due to labor cost differences.
Ireland began with an overarching vision to become a knowledge-based economy driven by off-shoring . . .
n Ireland is one country that has strategically pursued the development of an outsourcing services market. It has developed a business environment that promises upto 44 per cent of savings for companies worldwide and over 1,200 companies have already chosen Ireland as a base. Ireland’s focus has been on becoming the foremost out-location service centre.
Ireland began with a vision of becoming a ‘knowledge-based economy with a world class infrastructure’ to promote foreign investment, export earnings and growth in employment. It invested heavily in telecom infrastructure (USD 5 billion over 10 years; IRP 250 million in a Technology Investment Fund for infrastructure modernisation) and education and training (IRP 75 million to develop technology skills; introduction of tele-service courses; focus on multi-lingual skills) to be able to compete as an outsourcing service provider country. It formulated tax incentives to attract foreign investment and instituted the Investment and Development Agency (‘IDA’), Ireland, to promote Ireland as a global location for back- end processing services.
The success of initial ventures attracted new players leading to intense competition for skilled labour. As a result, wages rose and Ireland lost its low-cost advantage. To boost supply of skills, it invested in its educational system that produces 60,000 English-speaking graduates each year. In order to arrest attrition, the government made efforts to spread development of outsourcing service centres beyond big centers like Dublin. It then leveraged the sophistication in its workforce and technology infrastructure to offer value added services. Outsourcing service providers were encouraged to upgrade their services portfolio. According to the IDA, “We don’t position Ireland as a low-cost environment. . .[but a place where companies] get quality people with high skills and high productivity.”
Ireland’s strategy today is to continue to promote inward investment but focus more on development of strategic business areas, clusters of excellence through the converged efforts of academia, business and venture capitalists. Amidst increasing price-based competition from other countries, it has identified its niche of value-added services where ‘ideas are created and used’.
Today, at least 60 companies have established call centres and at least 30 companies (2001) have established shared service centers in Ireland.
n
n
n
n
Case study
Source: Press reports. CII–KPMG study on ITeS. 2002.
23
Ireland focused efforts on creating a world-class education system that attracted and
generated skills ‘employable’ for high-end knowledge support services and then
conducted reforms in the enabling infrastructure (e.g. telecom, VC-funding etc.).
At the same time, various national agencies coordinated efforts at marketing and
positioning through industry interactions and specifically directed policies.
. . . and is striving to migrate to high-end off-shore support and management through a mix of investments and incentives . . .
Source: Press reports. CII–KPMG study on ITeS. 2002.
Create right environment
Co-operation between stakeholders Commercialize new concepts
Growth through sharingEncourage support industries
n Ranked second most-global economyn Initiated Partnership 2000 program to
manage wage inflation in off-shoringn Corporate tax rates down from 24
per cent (2000) to 12.5 per cent (2003)
n Revamping of copyright and related intellectual property rights law for the comfort of potential investors
n Push towards higher quality education (already ranked #1by IMD, 2001) with multi-lingual skills, tele-service courses
n Supporting upgrade plans for current outsourcing centers into high-end off-shore support facilities
n Investment in off-shored centers started with Whirlpool Europe’s SSC in Ireland in 1995
n With unemployment rates at 17 per cent, company’s were able to attract suitable graduates at lower wages to achieve savings of 10 – 15 per cent as compared to operating in the UK
n IRP 250 million invested in telecom infrastructure modernization
n IRP 75 million to be invested in upgrading technology skills over four years
n Upto 400 per cent deduction on taxable profits for R&D expenditure
n Use of the Investment and Development Agency (IDA) as a common platform for FDI and off-shore attractiveness promotion
n Change of focus in 2001, towards setting-up of ‘Clusters of Excellence’ for specialized off-shoring
Case study
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
24
Ireland’s stakeholders have worked together across defined boundaries to formulate a
national strategy towards establishing Ireland as the preferred choice for knowledge
services.
This includes efforts at the policy level, efforts at working with the industry to identify
opportunities as well as efforts related to guiding the development of human resources
for future requirements.
Init
iati
ves
top
rom
ote
Irela
nd
as
acen
ter
for
bu
sin
ess
All the key stakeholders have been involved in efforts to promote Ireland as a ‘cluster for business excellence’ . . .
Involving government
agencies
Involving the industry
Involving the educational institutions
n Clarification on specific enabling regulations related to Copyrights, telecommunications and e-Commerce n Identified Foras as a national-level policy body to support and co-ordinate efforts across multiple agencies and
geographic regionsn Launch of National Spatial Strategy (involving hub-spoke approach) to co-ordinate efforts by various regions to
attract investments as per vision and to avoid unnecessary competitionn Identification of expert group on future skills needsn IRP 2.5 billion under the National Development Plan (2000 -2006) for R&D including a seven year fund of IRP
635 million under the Science Foundation Ireland for ICT / biotech R&D funding
n Special body under ICT Ireland to promote the development of indigenous ICT companies targeting domestic as well as exports businesses
n Strategic Competitiveness program as a forum for local set-ups of 1,100 global businesses already in Ireland to assist with competitiveness and sustainability
n Targeting of ambitious clients like Intel Fab 24, Google who were willing to experiment with new forms of organizing business
n Prominent business leaders invited to join policy makers in a series of studies addressed to meet quantity and quality of future skill requirements in the IT and other industries
n Using feedback from international review committees (e.g. IMD World Competitiveness Report) to ensure ‘fit’ between educational system and desired output characteristics
n Working with local educational institutions to retrain staff in order to meet market requirements (e.g. Prudential Inc. in Letterkenny)
n Locating universities based on market demands (e.g. three universities offering courses specific to the requirements of International Financial Service Center in Dublin, within a four-mile radius)
Source: Press reports. KPMG. 2003.
25
China is leveraging its excellent reputation in the manufacturing sector to attract global
ITeS and IT companies.
It has developed partnerships with large global giants in the area of manufacturing and
is now developing the requisite infrastructure for the ITeS and IT industries.
There has been increased focus on imparting English language education to enhance
the skills of the potential working population.
Case study
China is investing in improvement of existing infrastructure andresources . . .
n
n
n
n
Source: Press reports. CII–KPMG study on ITeS. 2002.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
China has already had experience of outsourcing services for the domestic market and has built relations with global clients through outsourced manufacturing. The focus now is to develop the capabilities, institutions and incentives that would propel China into grabbing a large share of the global services market. Comprehensive efforts are already visible across areas of telecom infrastructure, education and global marketing.
In order to bridge its capability gaps in the area of English language and technical skills, China has initiated a massive investment programme. USD 5.4 billion were invested in nine universities to revive the domestic IT resource pool. In order to spur English skills, the government plans to start English classes from the third grade and about 60,000 English teachers were invited from other countries to teach English. Success at the Olympic Games 2008 bid and the recent accession to the WTO are other drivers behind the enthusiasm for developing skills in English.
Reforms in the telecom industry were seen as critical to the success of this industry and were initiated in phases in 1999. The first phase involved separation of government ownership and operations. The second phase involved attracting new domestic players through active privatization and the third phase is about attracting global players and at the same time enabling domestic players to compete with them.
Promoting China’s advantage in providing outsourcing services has been handled at multiple levels, from repositioning China as an investment location, to projecting China’s low-cost advantage and the bundling of permissions to access the domestic market with a commitment to invest in China-based outsourcing services.
26
The focused approach, as illustrated above, involves a right balance of creating the
right business environment and increasing stakeholder co-operation.
At the policy level, the government is playing a key role by introducing reforms in
telecom policy as well introducing initiatives to encourage new investments.
Increasing promotional activities such as international fairs and business promotion
events are helping to promote China as an investment location of choice.
. . . with a structured approach to capture a larger share of theglobal off-shoring market . . .
Source: Press reports. CII–KPMG study on ITeS. 2002.
Create right environment
Commercialize new concepts
Growth through sharingEncourage support industries
n Policy geared towards globalization and accession to the WTO
n FDI approval for almost all projects at provincial level
n Preferential tax rates of 15 per cent (normal 33 per cent) under EPZs and other zones. Tax refund on capex over five years
n Attract investments from high-tech majors in the form of technology parks
n Labor law reform through a single comprehensive framework
n Promoting economic co-operation for industrial development in mainland China
n Leveraging experience of off-shored manufacturing and outsourced services to offer off-shore services to the global market
n Exploiting low cost structure supported by government subsidies, low software / labor costs etc.
n Phase approach to telecom reforms including divestment, privatization and competition
n Import of over 60,000 English teachers to build language capability
n New legal framework for lending by Chinese banks to JVs
n Use of international fairs and special business promotion events to promote China as an overall destination for investments
n Permissions for MNCs to leverage Chinese markets bundled with responsibility for off-shoring
Case study
Co-operation between stakeholders
27
Philippines is leveraging its economic and geographic proximity to the US to grow its share of the ITeS / IT industry . . .
Case study
Source: Press reports KPMG. 2002 -2003.
n
n
n
n
n
n
n
The Philippines government has recognized ITeS as a key driver to the country’s economy and has identified focus areas related to call center services, medical transcription, animation, shared back-office functions, software development and engineering and design.
The government aims to achieve revenues of USD 1.65 billion by 2004, largely from call centers services, with medical transcription being the second highest segment.
The government has established the Information Technology and e-Commerce Council (ITECC) through private – government partnerships to oversee and review the national promotion strategy for e-commerce
The ITECC works with the Department of Trade and Industry (DTI) to promote technology-related investment opportunities in Philippines
The country has launched the ‘IT 21’ plan to transform Philippines into a ‘Knowledge Center for Asia’ over the next 10–25 years
Private sector involvement has been sought to devise skill upgradation programs to meet the needs of the contact center industry and the ITECC is working with the Technical Education and Skill Development Authority to promote employment in call centers
Attractive infrastructure development incentives have been planned and the two ex-US air bases at Clark Bay and Subic Bay have been transformed into world-class, ready-to-use facilities for ITeS / IT industry
Philippines has had the advantage of significant cultural influence of America on its
society, and is using this proposition to a large extent to promote its ITeS / IT industries.
The ITECC, a government arm, is carrying out pioneering work to promote the industry
by developing public-private partnerships to upgrade the skills of the workforce and
cater to the specific needs of the ITeS / IT industries.
There is also greater emphasis on developing the infrastructure and help set up world
class facilities with all necessary telecom and IT support.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
28
. . . and is targeting to become the Asia-Pacific region’s ‘e-service’s hub’ with revenues of USD 1.65 billion by 2004 . . .
Source: Press reports. CII–KPMG study on ITeS. 2002.
Create right environment
Co-operation between stakeholders Commercialize new concepts
Growth through sharingEncourage support industries
n ITeS identified as the key economic driver for the country by leading authorities within the country
n Income tax holiday for 4 – 6 years with permanent resident status for medium / large investors
n Collaborating with private sector companies (e.g. TIM, CRC etc.) for skills upgradation through formal and non-formal sectors
n Conversion of ex-US air bases into ready-to-move ITeS / IT facilities
n Leveraging proximity to the US and low connectivity costs for ITeS, Philippines aims to grow into the E-Services Hub for Asia with a focus on call center, animation / design, transcription and back-office operations
n Launch of ‘IT 21’ plan to transform Philippines into knowledge center for Asia with HR development
n Plans to address telecom sector investments through competition
n Incentives for IT infrastructure developers with up to 15 projects being supported
n Use of DTI and ITECC to promote IT-related investments as well as to support skill enhancement
Case study
The Philippines government has identified ITeS as a priority sector to drive economic
growth. Towards this end, it has formulated a number of incentives and encouraging
investment policies.
The ‘IT 21’ plan has been launched to help Philippines develop into a hub for ITeS / IT in
Asia by bringing about rapid human resource development.
The focus areas decided by the ITECC include call center operations, animation/design,
transcription and back-office operations. Philippines aims to leverage its strengths in
these areas and develop long-term competitive advantage.
The imminent manpower shortage in the IT and ITeS industry in India is already
affecting various operational and financial parameters. This makes the industry less
competitive in the global market and less attractive to potential entrants.
Considering that the next few years will be critical to the overall ramp-up of India’s ITeS
/ IT revenues, some actions are required to address this issue at the earliest.
The manpower shortage is already impacting the performance of the Indian ITeS / IT industry today . . .
ITeS
/IT
healt
h-c
heck
ind
icato
rs
Employee attrition levels
Salary costs
Company profit margins
Service billing rates
2000 – 01
n IT: USD 30 – 40 per hour
n ITeS: USD 10 – 12 per hour
2000 – 01
n ITeS: 10 – 15 per cent per annum
2000 – 01
n ITeS: USD 200 per month (cost to company)
2000 – 01
n ITeS: 30 – 40 per cent operating profit margins
2002 – 03
n IT: USD 15 – 25 per hour
n ITeS: USD 4 – 11 per hour
2002 – 03
n ITeS: 30 – 40 per cent per annum
2002 - 03
n ITeS: USD 330 per month (cost to company)
2002 – 03
n ITeS: 17 – 25 per cent operating profit margins
Source: Press reports. KPMG. 2003-2004.
. . . making the industry as a whole in India less competitive on a global scale and less attractive for potential entrants
n Competition from captives turning third-party
n Ease of entry into ITeS / IT
n Competition for talent with MNCs able to afford poaching with salary hikes of 15 – 20 per cent
n Over-qualification of labor pool attracted has led to higher wage rate
n Wage rates increasing with competition
n Overall margins under pressure with domestic and international competition, regulatory restrictions and large capital requirements
29
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
A number of interactions were held with key stakeholders such as the Department of
Information Technology and BPO industry service providers to get a clear
understanding of the current issues faced and ways to resolve them.
Some of the key concerns raised were related to high attrition, increasing salary costs
and low productivity of employees. These concerns are deep-rooted and it is imperative
to address them with immediate / concerted action.
The ITeS / IT industry has indicated concern and the need for animmediate action plan . . .
“Career paths are often not made clear to staff .
. . leading to attrition issues.”
“Efforts at improving resources required being done in pockets . . . in Kerala, AP, Karnataka.”
“Emotional maturity and physical stamina
requires at least graduate level of
education”
“ITeS / BPO is not seen as a career . . . there is a need to bring respectability to
the work”
“Low hit rates of 1-5 per cent lead to significant
costs related to recruitment and selection
of resources”
“There is a need for a common agency to certify and counsel
resources.”
“It is expensive to attract skills above the age of 35 into ITeS.”
“Functional education to be strengthened to
support high-end services.”
“University education needs to be re-oriented to support vocational
training for ITeS .”
“Shifting the BPO employment opportunity
to second-tier cities would reduce resource
pressures.”
“Even high literacy states like Kerala may
have lower awarenessof ITeS career options.“
nRising attrition, both inindustry and out of the industrynRising wage costs due to
scarcity of resourcesn Impediments to growth
plans for various service providersn Lower staff productivity
Source: Department of IT interactions with IT / BPO industry service providers. Industry interactions. Press reports, KPMG. 2003–2004.
30
IT-enabled services and IT services are expected to become significant contributors to the growth of the Indian economy . . .
2002 2003 2006 2009 2012
Domestic / Captive IT services
ITeS
IT export services
0.5
2.2
5.0
Direct ITeS/IT
employment
(million)
Percentage of
total
employment
0.1 per cent
0.1 per cent
0.9 per cent
2002 2003 2006 2009 2012
1.9 per cent
6.6 per cent
12.3 per centOff-shoring
as per cent of GDP
Contribution to GDP growth 2003 - 2006 2009 - 2012
. . . actions must be initiated now in order to address manpower requirements for the ITeS / IT industry in the longer term
Source: NASSCOM. Institute of Applied Manpower Research. Statistical Outline of India. KPMG. 2003.
Note: GDP growth assumed as 9 per cent per annum upto 2012
Contribution to direct
employment
Contribution to GDP growth
1.1
0.2 per cent
0.4 per cent
0.7
2.2 per cent
3.4 per cent
2006 - 2009
17 per cent
31 per cent
8 per cent
The ITeS / IT industry could be a significant contributor to the economic growth of the
country, considering its long-term growth potential of 25 per cent per annum
(compared to overall GDP growth expectations of 8 – 10 per cent).
Benefits from ITeS / IT include a direct employment opportunity of approx. 5.1 billion by
2012, of which approx. 3.7 billion would be for export IT services and IT-enabled
services. Comparative numbers for 2002, according to NASSCOM, were 0.5 million.
Estimates by NASSCOM-McKinsey and BCG have suggested that the ITeS / IT industry
could generate another equal number of employment opportunities in support
industries (e.g. transportation, catering, office administration and services etc.).
The share of off-shore revenues to total GDP is also expected to grow significantly, with
a potential contribution of 12 per cent of GDP by 2012, as compared to 1.9 per cent in
2002. High growth of ITeS / IT revenues implies that it could grow to become a
significant contributor to overall GDP growth as well.
31
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
This chapter provides an understanding of the need to enhance institutional capacity in
the formal and non-formal sector.
It also suggests other approaches to generate requisite manpower for the ITeS / IT
industry.
The demand for IT and ITeS manpower is going to be driven by their requirements in
specific solution areas for IT and ITeS.
Out of the total requirements for IT export services, as much as 83 per cent could be for
systems integration and outsourced support (facilities management) services.
Similarly, for ITeS, 80 per cent of the manpower requirements could be in the areas of
Human Resources, Payment processing and Customer Care services.
Manpower demand for IT* services (2012)
275
111529
58
972
0
250
500
750
1000
Consulting,
integration,
installation
IT
Development
Outsourced
support
Training and
Education
Total
(000s)
There is going to be a significant demand for manpower related to the Indian IT export and ITeS industry by 2012 . . .
Manpower demand for ITeS (2012)
Source: IDC. NASSCOM. KPMG. 2003–2004.
1,031
206690
447
147197
2,717
0
700
1400
2100
2800
Customer
Care
Finance HR Payment
Services
Administration Content
Development
Total
(000s)
. . . requiring upto approx. 3.7 million people for export IT services and ITeS by 2012, up from 0.4 million people in 2003
83 per cent of requirements in
systems integration and
support
80 per cent of requirements in
HR, payment services and
customer care
* Manpower requirements for IT services under domestic / captive operations are in addition to requirements for IT export services shown above.
32
Strategy to enhance institutional capacity (formal and non-formal) to generate requisite manpower
Manpower estimates based on current staffing patterns for the export IT services and
ITeS requirements suggest that there could be a significant requirement in terms of
experienced personnel at the manager / team leader level.
This requires the ability to generate people with relevant skills at least 2–4 years prior to
the actual demand, reinforcing the criticality of requirement for action.
For example, by 2012, compared to a workforce of 3.7 million for export IT services and
ITeS, there could be a requirement for approx. 0.85 million managerial staff with over
5–6 years of relevant experience i.e. participating in the workforce since 2006 / 2007.
Although the educational capacity in existing / planned institutions to meet these
requirements may not be an issue, the specific skills provided as part of the education
system may need to be reconsidered.
Manpower will be required across all levels of the organization in the IT export services and ITeS business . . .
IT requirements*
Senior Manager:
Project Manager / Leader:
Programmers / Executives:
Total:
Source: IDC. NASSCOM. KPMG. 2003 –2004.
ITeS requirements
Manager / supervisor:
Team leaders:
Agents / Executives:
Total:
2003 2012
7
26
179
212
36
141
831
1,008
3
20
140
163
51
277
2,439
2,767
Qualifications Work experience Skill-sets
n Graduation / Post-graduation
n 6+ years- Managerial skills / Crises management- Analytical reasoning- Client interface and selling skills- Domain expertise
n Graduation (+Diploma) n 3 – 6 years - Supervisory skills / Domain expertise- Resource management and utilization- Planning and reporting skills
n Graduation / Diploma n 0 – 3 years - Computer proficiency and IT programming- Problem solving and analytical skills- Team-working
n Graduation / Post-graduation
n 5+ years- Managerial skills / Crises management- Analytical reasoning- Client interface and selling skills- Domain expertise
n Graduation (+Diploma) n 3 – 4 years - Supervisory skills / Domain expertise- Planning and reporting skills- Meeting process targets
n Graduation n 0 – 3 years - Language / communication skills- Analytical skills- Computer proficiency- Team-working- Customer service orientation
* Manpower requirements for IT services under domestic / captive operations are in addition to and roughly equal to requirements for IT export services shown above.
Manpower (000s)
33
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The more complex tasks under ITeS / IT are expected to require post-graduate
qualifications or other certification in addition to standard graduate degrees.
For example, while a typical back-office data entry/processing employee would need to
be a graduate in any stream, an employee in the area of research/design and
development would need to be at least a graduate / post-graduate in a specialized area.
Illustrative
Different categories of work at the agent level itself will requirespecific qualifications . . .
Note : List of activities and examples above is illustrative only and not exhaustive. Activities within a category are not necessarily in order of skill levels required
Source: Press reports. KPMG. 2003-2004.
Back-office data entry /
processingCustomer contact
Corporate support functions
Knowledge services and
decision- support
Research/ Design and development
Nature of work
Increasing complexity of task and skill requirements
Typical qualification
for work
n Graduates n Graduates with excellent communication skills
n Graduates with specialization, diploma/certificate holders
n Graduates / Post-Graduates in related areas (e.g. Law, Economics, Accounting)
n ICWA / CA
n Graduates / Post-graduates in related areas
n Design engineers with some work experience
n For website / DTP design, diplomas in related areas
n Data entry(form filling)
n Data conversion(translation, transcription)
n Basic processing (checking / updating)
n Document management (storage, retrieval)
n Customer services(complaints, inquiries)
n Tele-marketing (pre-sales, order-taking, catalog sales)
n Collections support(reminders, payment support)
n Shared corporate function support (HR, Finance / Accounts, HR, procurement)
n IT support (development, integration, maintenance, help-desk)
n Analyst services (legal, financial)
n Customer analytics (segment profits)
n Application processing (claims)
n Risk management (underwriting, structuring)
n Advisory services (tele-medicine, consultancy)
n Engineering and design (CAD/ CAM)
n Content development (animation, web site, graphics)
n New product design (specifications, pilot testing)
34
However, people with specific graduate degree qualifications may be better suited for
specific functions.
For example, a Chartered Accountant / Chartered Financial Analyst maybe better
qualified to support remote accounting services or equity research support for a client.
The person may also be required to undergo additional certification if required by the
regulations of the client country (e.g. FSA in the UK). However, for the data entry
support work of maintaining shareholder database or attending queries, a normal B.A. /
B.Com. / B.Sc. may be sufficient.
Even within a function, different levels of work may require specific qualifications . . .
Back-office processing
Customer contact Knowledge support Research and DesignHR Finance IT / Tech Support
Corporate functions
- Loan Admin.- Card / clainms
processing- Account
reconciliation- Data entry,
transcription, mining
- Records management
B.A.
B.Pharm.
B.Com.
B. Sc.- Maths- Statistics- Econ.
- 401 K
B.A.
+
Pensions Admin. Training
- Tax services (planning, preparation, payroll, book-keeping)
B.Com.
B. Sc.
+
Diploma in Acctg, Tax laws
- Acctg services- Shareholder
services- Equity research
(industry / sector / markets)
- Portfolio mgmt- Credit rating
CA / CFA / ICWA
Diploma in Fund Mgmt
Stock exchange certificate
- Payroll / Benefits processing
- Employee benefits
B.A.
B.Sc.
B.Com.
- Training & Development
- Performance Management
Post Grad. In HR / Behav. Science
Diploma in Labor Law, HR / IR, Staff welfare
- Outbound collections
- Outbound sales / marketing
- Inbound customer service
- Loans / processing service
B.A.B.Sc.B.Com.+ Vocational
Diploma (e.g. Hotel, Tourism)
- Inbound customer services
B.A.
B.Sc.
B.Com.
- Query resolution
- Problem solving
B.A.B.Sc.B.Com.+ Vocational
Diploma (e.g. Hotel, Tourism)
- Hardware help-desk and trouble-shooting
- Software and technical query support
BCA
B.Sc.- IT
ITI (Dip.)
IT course (e.g. DoEACC)
- Network configuration / hardware support and maintenance
- Software design / programming
BCAB.Sc.- ITMCA
B.E.
Certificate (CCNE, MCSE)
- Equity research(industry / sector / markets)
- IPR filings
CA / CFA / ICWA
MBA
- Tele-medicine and advisory services
MBBS
- Content development (web-site design, DTP, animation)
Courses in Animation/ Fine Art
Dip. in Multi-media
- Distance learning
- Engineering design / testing
- Product design/ testing
- Biotech research
B.E.
Dip. in CAD / CAM
Ph.D.
Basic
Med
ium
Hig
h-e
nd
Illustrative
Source: Industry interactions. KPMG. 2003 - 2004.
35
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
In addition to standard qualifications, different functions under ITeS / IT often require
certain specific skills related to language (comprehension, fluency), analytical (problem
solving, reasoning), computer proficiency (keyboard), customer service orientation
(team-working, listening) and behavior (confidence, integrity, drive).
However, the importance of these could vary depending on the specific function. For
example, ‘Listening skills’ are inherently more important to a customer contact function
as compared to knowledge services support, where ‘Reasoning skills’ may be much
more important.
These must be supported by some necessary delivery-related skills . . .
Spoken English
Written English
Foreign Languages
Accent Understanding
Logical reasoning
Problem Solving / Num. ability
Comprehension / Creativity
Listening / empathy
Initiative/Enthusiasm
Multitasking / Time management
Language Skills
Analytical Skills
Customer Service Orientation
Team working
Assertiveness and Confidence
Integrity / values and discipline
Motivation / Drive
Behavioral traits
Keyboard skills / Browsing etc.
Computer proficiency
ü
ü ü
ü ü
ü ü
ü
ü
ü
Data entry / processing
ü
ü ü
ü
ü ü
Customer contact
Human Resources
Finance & Admin.
Tech. Support / IT
Knowledge service / DSS
R&D and Content Dev.
ü
ü ü
ü ü
ü ü
ü ü
ü
ü
ü
ü
ü ü
ü
ü ü
ü ü
ü ü
ü
ü ü
ü
ü
ü ü
ü ü
ü ü
ü ü
ü ü
ü
ü ü
ü
ü ü
ü
ü ü
ü ü
ü
ü
ü
ü
ü
ü ü
ü
ü ü
ü
ü ü
ü ü
ü ü
ü
ü
ü
ü
ü
ü ü
ü
ü ü
ü
ü ü
ü
ü
ü ü
ü ü
ü
ü ü
ü
ü
ü
ü ü
ü ü
ü
ü ü
ü
ü ü
ü
ü ü
ü
ü
ü
ü
ü ü
ü
ü ü
Source: Industry interactions. KPMG. 2003-2004.
Illustrative
Note: ü ü: Necessary skillsü: Desired skills
Technical / Programming skills ü üü ü ü
Sociability / Dependability / Reliability
ü ü ü üü ü ü ü ü ü ü ü ü ü
36
In order to meet the ITeS / IT skill requirements, the entire education lifecycle must be considered . . .
Attract Educate Certify Deploy
Source : KPMG. 2003–2004.
Re-train
n Creating awareness about and preference for ITeS / IT as a lifelong opportunity, thereby creating a pull in the market
n Development of formal and non-formal mechanisms to equip students with requisite skills for ITeS / IT
n Pre-certification of potential employees through a standard / industry accepted testing body
n Counseling and deploying manpower into ITeS/ IT industry
n Using industry feedback to drive curricular changes and highlight employment opportunities
n Re-training ITeS / IT professionals to upgrade skills to meet changing industry requirements
One of the key success factors for meeting the manpower requirements of the ITeS / IT
industry is to lay emphasis on each aspect of the education lifecycle.
While it is important for institutions to provide students with relevant knowledge and
skills, it is equally important for students to gain recognition in the industry.
Skill recognition can only come about by developing a standard system of testing and
certification that is accepted by a formal authority.
Students will only be attracted to the ITeS / IT industry by getting good employment
opportunities and remuneration. Thus, a virtuous cycle is established between attraction
and deployment.
It is also necessary to keep track of changes in the industry and specific requirements or
opportunities. These should be incorporated into the curriculum as well as used as
inputs for re-training employees to face new challenges.
37
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
A World Bank study highlighted generic shortcomings in the Indian education system,
especially in its ability to generate highly-skilled manpower with the inclination and
capability of creative thinking in-line with global industry developments.
Some of the observations pointed out the inability to maintain and share common
infrastructure facilities across institutions, shortage of skilled faculty with industry
exposure and rigidities in the curriculum and evaluation system.
A study by the Ministry of HRD, Govt of India titled ‘Technical Education Quality
Improvement Project’, in Oct 2001, also highlighted potential action points (e.g.
networking, curriculum changes, faculty development etc.) required to improve the
quality of technical education in the country.
A World Bank study (2001) highlighted generic shortcomings in India’s education system to generate quality manpower. . .
Weakn
ess
es
inin
frast
ruct
ure
/in
sti
tuti
on
al
set-
up
Weakn
ess
es
inco
urs
ecu
rric
ulu
man
dd
eli
very Faculty
Infrastructure
Administration
Policy
- Expense allocation is often based on political pressures as against market conditions
- Lack of adequate quality controlin implementation of policy
- Inefficiencies due to limited mechanization / automation within R&D set-ups
- Lack of appropriate incentive / reward systems
- Facilities are poorly maintained, leading to shorter utilized life cycle
- Little sharing of expensive infrastructure and equipment
Finance
- No incentives for financial prudence and efficiency in R&D
- Excessive controls over finance allocation leads to costly delays
Source: World Bank Study on Science & Technology Manpower in India (2001). Industry / Academia interactions. KPMG. 2003.
Evaluation system
Curriculum
- Low compensation and lack of clarity on career progression attracts fewer teachers
- Teachers lack industry rigor, R&D background and exposure to tools
- Inflexible and rigid curriculum, not exposed to innovation / industry
- Teaching is exam-oriented without focus on communication skills, problem solving
- Continuous evaluation is often not systemized
- Exams are often memory-basedand encourage partial studying through ample choice
Students
- Lack opportunity / encouragement for creative thinking
- Lack of counseling for higher education choices and career decisions
38
The current education system lacks specific policy initiatives to help it align to the
specific requirements of the ITeS / IT industry.
There are also issues related to funding as well as development of institutional and
infrastructure facilities.
Moreover, there is a strong need for monitoring agencies to assess and correct gaps
related to developing and directing skills towards ITeS / IT employment opportunities.
In addition, the current system has gaps across the entire education life cycle related to skilling for ITeS. . .
Attract Educate Certify Deploy
n People are not aware
about employment
options, including
flexibility offered
n ITeS perceived as largely
requiring IT skills
n Jobs in the ITeS industry
lack esteem
n Employment not seen as
a long-term career option
n Key skills required by the
industry are not
developed through
current educational
system
n Lack of a standardized,
modular curriculum for
ITeS
n Lack of national-level
mechanism for pre-
certified pool of
resources
n Lack of understanding of
specific parameters to
test and certify upon
n Lack of feedback loop on
resource deployment
and skills provided
n Lack of direct placement
links between
institutions and ITeS
industry, especially in
Tier-II and smaller cities
Source: Industry / Academia interactions. Department of IT. KPMG. 2003-2004.
39
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The current system of education does not provide some of the necessary skills for ITeS /
IT, even at the graduate / post-graduate level.
Resources produced may have a strong conceptual / theoretical background but often
lack communication and vocation-specific skills and the creative drive or specific
regulatory certifications required by clients in foreign countries.
This could be addressed through specific modules integrated into the current system of
education, right from the primary / secondary education level. For example, a strong
focus on Computer literacy could be established at the primary / secondary level,
followed by a focus on customer service related skills (team-work, time management)
at the higher secondary levels.
Specific changes across the current system of education in Indiarelated to skills required for ITeS could be initiated . . .
n Mathematics and English skills are refined. Student’s get introduced to science and social science subjects
n Students acquire basic mathematics, language and general awareness skills
n Theoretical specialization in subject of choice; gradual shift to applied studies
Source: Department of IT. Industry interactions. KPMG. 2003-2004.
Higher secondary
Primary / Secondary
Graduation
Post-Graduation
n Students acquire basic mathematics, language and general awareness skills
n Student’s select subjects of their choice and specialize in a particular stream; cross-stream courses rarely available
Existing manpower for ITeS / IT are graduates/post-graduates with strong conceptual / theoretical knowledge but lacking in communication and
vocational skillsAdditional inputs required to make
‘employable’ for ITeS / IT
n Domain specific training linked to international developments
- Insurance certification- Healthcare regulatory standard (HIPAA)- Accounting standards (US GAAP)- Banking standards (Basel II)- Labor / Taxation laws (France, Germany)- HR practices (e.g. 401 K)- Alternative languages (e.g. Japanese)
n Customer service orientation- Listening skills- Time / stress management- Leadership- Team working
n Language skills- Written English (Grammar,
Comprehension)- Spoken English (Fluency)
n Computer literacy- Key board- Internet searching
Illustrative
40
China has taken significant steps across the education lifecycle in order to ensure that
its human resources are geared up to tap the opportunities presented by the ITeS / IT
industry.
A key step has been the promotion of English language in schools, colleges and
universities. The government has been quick to realize that learning the language can
lead to significantly large business opportunities in the future.
Long-term plans are also in place to develop knowledge in core areas of R&D. The ‘863’
program is focused on developing a highly qualified and competent scientific and
technical staff.
At the same time, a number of infrastructure building activities, such as setting up of IT
parks, is underway to ensure effective deployment of trained students in the ITeS / IT
industry.
China has made some significant efforts to develop language and culture skills relevant to global ITeS support . . .
Case study: China
Attract Educate Certify Deploy
n The government is
encouraging overseas
and domestic experts
to play a major role in
strategy formulation for
ITeS/IT
n The government is
focusing on increasing
urbanization of its
premier cities like
Shanghai and Beijing
(by 2005, over 50 per
cent of the Shanghai
population would have
internet access)
n The government is
encouraging English
language learning in
schools and colleges
(over 60,000 English
teachers brought in)
n Alliances with
prestigious foreign
institutions like Yale to
set up technology
centers and enable
student exchange
programs
n English teaching
combined with IT
training under
computer classes
n ‘China education and
research grid’ to share
IT research efforts
across 100 universities
n ‘Radio and TV’ universities
have been created to
facilitate learning
n The Chinese ministry of
science and technology
had established the
‘863’ program to
develop a highly
qualified scientific and
technical staff
n Upto 53 high quality
technology parks have
been set up by the
government to
encourage MNCs to
establish offshore R&D
and IT centers
Source: Press reports, UN / World Bank report. KPMG. 2003–2004.
41
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Philippines too has undertaken a number of initiatives to enhance the present
educational system and develop manpower for the new ITeS / IT economy.
At the school-level, there is an increased emphasis on basic subjects like Maths and
English that are imperative for language and communication as well as analytical skills.
The government has also begun taking steps towards increasing accreditation of
technical and vocational education. This accreditation would lend recognition to
students when they seek jobs in the ITeS / IT industry.
Universities and colleges are also developing partnerships with companies in order to
help students gain exposure to the working environment in the ITeS / IT industry. This
would help them appreciate the challenges posed by the industry and obtain necessary
skills.
Philippines too has made efforts to revamp its core curriculum approach to develop resources more suitable for ITeS / IT . . .
Case study: Philippines
Attract Educate Certify Deploy
n Balik IT professionals’
program to attract
overseas Filipino IT
professionals and inject
actual experience and
fresh insights into
knowledge workers
n Established ‘TESDA’ as the driving force for changes in curriculum and implementation of better training programs
n Greater focus on
Maths, Science and
English at the primary
and higher secondary
education level
n Training courses for
graduates and post-
graduates focused on
key ITeS areas for
Philippines
n Use of best of breed
methodologies, tools
and practices to train
students
n Training and re-training
teachers in formal
institutions to develop
IT skills
n Established a unified
‘TVET’ program
registration and
accreditation system in
consonance with a
quality technical and
vocational education
n Identification of specific
certification
requirements and
dedicated government
programs to carry them
out in areas like
Windows, Unix, Java,
SQL, XML, Linux and
C++
n Development of
alliances between
educational institutions
for students to get on-
the-job training and
companies to identify
untapped manpower
pools
Source: Press reports, UN / World Bank report. KPMG. 2003– 2004.Note:
TESDA – Technical Education & Skills Development Authority
TVET – Technical & Vocational Education Training
42
This chapter discusses the potential opportunities in off-shored R&D support services
that India could aim for based on current strengths in terms of people, infrastructure
and industry.
It also looks at some of the best practices followed in other countries and highlights the
issues that India currently faces in the R&D services sector.
43
We define research and development in the broad sense as a quest for knowledge . . .
“Creative work, undertaken on a systematic basis, in
order to increase the stock of knowledge (including
knowledge of man, culture, society) and the use of this
stock of knowledge to devise new applications
I. Basic research
“experimental / theoretical work to
acquire new knowledge of the
underlying bases of phenomena,
without any particular application”
II. Applied research
“original investigation to acquire
new knowledge, directed primarily
towards a specific practical aim or
objective”
III. Experimental Development
“systematic work, drawing on
existing knowledge stock to
produce / install / improve
materials, products and services”
Source: Frascati Manual (OECD). 1993.
. . . the focus is on the provision of R&D work in the form of support services for development rather than actual product development
The entire R&D value chain can be split across the areas of Basic Research, Applied
Research and Experimental Development.
Each of the areas has its own characteristics in terms of nature of activities, capital
intensity, labor intensity, commercial viability etc.
There are different players that occupy significant positions in the different parts of the
value chain based on their strengths, priorities and constraints.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Emerging areas in the knowledge domain for India to pursueand strategy to reinforce status as ITeS / R&D hub
44
Investments in technology related to R&D has been shown to have direct / indirect contribution to GDP growth . . .
Direct and indirect correlation between R&D investments and economic / social benefits
Investment in R&D
Innovation
Appropriated research
Spillover research
Productivity enhancement
Trade benefits
Enhanced competitive-
ness
License revenues
Social / Environ benefit
Productivity enhancement
Knowledge stock addition
Inward FDI
Employment generation
Source: OECD Working Papers (Endogenous growth theory). KPMG. 2003–2004.
Multiple direct and indirect benefits
from R&D
Research suggests that R&D investments have a positive impact on the development of
a country due to the benefits encompassing most developmental aspects of any nation.
In addition, from the perspective of a developing country such as India, foreign direct
investment in R&D facilities by MNCs is even more attractive.
This is because MNCs’ subsidiaries with strong R&D mandates as well as strategic
geographical or product range responsibilities tend to be stickier to the host economy
and hence are considered to be highly desirable in terms of their effects on local wealth
generation.
R&D activities conducted by government and institutions concentrates on research
areas which may not be remunerative or lead to commercially feasible/attractive value
propositions.
The R&D activities undertaken by the government/institutions have a different objective
function. While economic benefits are important, the benefits of such R&D activities are
not limited to economic areas but also encompass areas such as benefits to the society
and environment that are not directly quantifiable.
Governments and educational institutions try to balance R&D efforts across different areas of potential benefits . . .
Bala
nci
ng
ben
efi
tsfr
om
R&
D
Engineering and Design
services
Pharma. and Biotech
IT and electronics
Economic benefits Social benefits Environmental benefits
Illustrative
Source: Press reports. Ministry of Research, Science and Technology (New Zealand). KPMG. 2003-2004.
n Access to low-cost skills as well as proximity to a cluster from where IT support work is being carried out
n Application of IT for agricultural monitoring, educational delivery and medical automation
n Use of IT / electronics for control systems related to effluent / waste disposal systems
n Reducing the cost of new drug development and clinical testing
n Round-the-clock research on genetic sequencing to reduce time
n Crop productivity through genetic engineering and research
n Increased immunity / better medication through bio-informatics
n Use of biotechnology in hazardous waste treatment and pollution control (e.g. bio-remediation for oil spills)
n Access to low-cost skilled resources for materials and component design / testing
n Safer and better designed housing facilities with cheaper, stronger materials
n Increased productivity and efficiency in industry processes
n Fuel research to reduce pollution related to automobile exhausts
45
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The overriding objectives of R&D activities in the private sector remains economic
benefits such as revenues from new products, reduced time/cost of manufacture etc.
In this sector, R&D function has evolved from being a isolated activity that is loosely
connected to the overall business to being a core part and driver of the overall business
strategy.
As a result, R&D activities in the private sector are now guided by consumer groups
and end customers so that the research yields products/services that are readily
acceptable to the end customers.
The focus of R&D efforts by the private industry, on the other hand, has evolved from resource driven to customer / business
driven . . .
Evo
luti
on
of
ap
pro
ach
toR
&D
n Resource-driven
First-generation R&D
n Project-driven
Second-generation R&D
n Business-driven
Third-generation R&D
R&D philosophy
n R&D as an overhead costs under annual budget exercises
n Funds based on needs and risk-sharing
n Based on technology maturity and competitive impact
Funding approach
n Management of tacit knowledge in compartments
n Integrated use of tacit and explicit knowledge
n Synergy through conversion of knowledge to explicit form
Knowledge management
n R&D seen as a separate unit from business operations
n R&D as a supplier to overall business operations
n R&D efforts as partners adding to effective business delivery
Link between R&D and business
n No link between R&D and end-customer
n Remote linkn Use of consumer groups / end-
customers to guide R&D effortsLink between R&D and end-customer
Source: Nolan Norton & Co. KPMG. 2003.
. . . and are driven by economic considerations
46
As a result, the R&D focus areas for government, institutions and industry, across the world have become divergent . . .
. . . requiring a different R&D focus in terms of approach, time lines and funding
Primary focus on basic research
Balanced approach, more on applied
R&D
Primary focus on experimental development
Institutional expenditure on R&D Government expenditure on R&D Industry expenditure on R&D
0% 25% 50% 75% 100%
US
Spain
Japan
Iceland
France
Denmark
Australia
0% 25% 50% 75% 100%
US
Spain
Japan
Iceland
France
Denmark
Australia
0% 25% 50% 75% 100%
US
Spain
Japan
Iceland
France
Denmark
Australia
R&D expenditure distribution
(2000)
R&D expenditure distribution
(2000)
R&D expenditure distribution
(2000)
Basic research
Applied research
Experimental Development
Source: OECD R&D database (May 2002-2003). KPMG. 2003-2004.
47
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
A review of R&D spend across countries suggests that while educational and
specialized research institutions focus more on basic research, government agencies
tend to focus more on basic and applied research. As a result, the approach to R&D is
often that of a process of discovery without strict time-bound funding plans.
R&D spend by the industry is focused on developing solutions to specific business
problems. The approach to R&D is hence more often project-based with specific
investment budgets and return expectations. This is because private sector companies
have to address the requirements of its shareholders who have invested in their
company.
The divergent nature of activities undertaken by the various players in the R&D area
requires them to coordinate their efforts so that they can leverage each other’s
capabilities and knowledge capital.
World-wide the funding for R&D is increasingly being driven by the industry and this is most likely to be off-shored due to its
specific nature . . .
Ratio of R&D spend by industry to government
0.0
1.0
2.0
US UK Turkey Singapore Israel India Germany China Canada Brazil
. . . off-shoring service provider countries like India should focus on aspects of R&D which support experimental development
Source: UNDP –Development Indicators (2002). KPMG 2003 - 2004.
48
Across the globe,
– There is an increasing trend of reduction in the government’s contribution to
R&D activities.
– Greater reliance is being placed on the educational institutions, and all sectors
have expanded their participation in a variety of domestic and –
international partnerships both within and across sectors in order to pool
resources and leverage capabilities.
– The share of R&D activities by the private sector is witnessing a significant
rise.
Globally, the R&D spend is increasingly being driven by industry / business houses
(upto the extent of 50–60 per cent).
This suggests that the nature of R&D spend would be more directed towards specific
product / service related attributes in the form of experimental development work,
could be affected by industry life-cycles and may be subject to specific performance /
productivity targets.
A review of historical patent filings suggests that India’s R&D efforts have been prolific in some key areas . . .
Technology Class
Technology descriptionCumulative patents
(1995 –1999)
Class 514n Drug, Bio-affecting and Body-
treating compositions31
Class 435n Chemistry: Molecular Biology
and Microbiology26
Class 424n Drug, Bio-affecting and Body-
treating compositions25
Class 549n Organic compounds: part of the
Class 532 – 570 series20
Class 540n Organic compounds: part of the
Class 532 – 570 series14
Class 502n Catalyst, Solid Sorbent, or
Support: Product / Process10
Class 568n Organic Compounds – Part of
the Class 532-570 series8
Class 326 n Electronic digital logic circuitry 7
Class 528n Synthetic Resins or Natural
Rubbers –Class 520 series7
Class 585n Chemistry of Hydrocarbon
compounds7
Class 264n Plastic and Non-metallic Article
Shaping and Treating: Process6
Class 510n Cleaning compositions for solid
surfaces and process to make6
Class 536n Organic Compounds – Part of
the Class 532-570 series5
Class 246n Organic Compounds – Part of
the Class 532-570 series5
Class 623n Prosthesis, parts or Aids and
Accessories5
Others 134
Total patents across technology classes 316
Total patents across above 15 classes 182
IT and ElectronicsFor example:- VLSI design- Photonics- Robotics and AI
Pharma & BiotechFor example:- Clinical research- Bio informatics- Gene sequencing
Engineering and DesignFor example,- Materials research- Stress testing methodologies- Transportation systems
Source: US PTO (2000) KPMG. 2003.
The past few years has witnessed an increase in R&D sourcing from India in the areas
of IT, Pharmaceuticals/Biotechnology and Engineering and Design Services.
In all, a total of 316 patents were filed from India in the period 1995-99 with a 132 of
them being in the 15 classes mentioned in the table above.
Over 50 patents were filed in the areas of molecular biology, micro-biology and drug,
bio-affecting and body-treating compositions.
49
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
India’s strengths in the areas of IT, Pharmaceuticals/Biotechnology and Engineering and
Design Services can be leveraged to a large extent.
There are significant market opportunities in specific knowledge domains like
embedded systems and VLSI/chip design. For example, if India taps into the growing
demand for embedded software, R&D activity in India can go upto USD 1.5 bn by 2004-
05.
Similarly, Information Security is another area where companies require significant
R&D services in network security, cryptography etc. The Indian market is growing at a
rate of almost 30 per cent and is expected to develop even further.
. . . and India could leverage these strengths into specific opportunities that promise growth . . .
Bio-technology
/Bio-informatics
n Indian bio-informatics market expected to exceed USD 2 bn by 2008
n Market for Indian biotech R&D products and services expected to be USD 3 bn by 2010
n Molecular biology, DNA sequencing and RNA transcriptionn Molecular biology software packages and molecular modelingn Java, Unix, C, C++ and RDBMS like Oracle or Sybase
Embedded systems
VLSI/chip design
n R&D activity in India expected to go upto USD 1.5 bn by 2004-05
n Embedded system tools such as Micro-controllers, DSPs, FPGAsn Design of embedded hardware and software n Real-time programming skills
n Expected to be a USD 808 mn industry in India by 2005
n Basic electronics,digital electronics, micro-processor and micro-computer knowledgen VLSI design, circuit layout/design, verification and logic design n Supporting tools such as Verilog,HDL,VHDL and FPGA
Market potential Key skills required
Information security
n Worldwide demand for information security services expected to reach USD 23.6 bn by 2006.
n India market growing at CAGR of 27-30 per cent
n Cryptography, AAA framework, software security and reliability, network security, secure operating systems, application security, design if security policies, disaster recovery, biometrics and security auditing
n Certified Information Systems Auditor (CISA) and Certified Information Systems Security Professional (CISSP)
Illustrative
Source: Press reports. IDC. NASSCOM. KPMG. 2003- 2004.
50
India has also made significant progress in the areas of high-performance computing
and wireless applications. These are expected to propel further growth in the IT
economy.
Nano-technology is an area that is increasingly receiving emphasis in the scientific
efforts of many countries. The reason being that it finds use in a number of products
and applications (consumer durables, medicine, semiconductors etc).
However, the key to converting the advantage to significant revenue potential in these
areas is to develop the requisite skilled manpower. Some of these specific skills
required in each area have been mentioned.
Wireless applications
Market potential Key skills required
n Worldwide demand for wireless and mobile applications expected to be USD 37.4 bn by 2006
n J2ME, wireless messaging API, Micro Java and MIMEn C++ on pocket PC, Brew, Symbiann TCP/IP, HTTP, POP3, XML protocolsn Knowledge of various industry standards
Nano-technology
n Global market expected to touch USD 1 trillion over next 10 years
n Chemistry, electrical engineering, materials, biophysics, physics and mathsn Molecular electronics, nano-particle manufacture, quantum computers and scanning
probe microscopyn Knowledge of semiconductor technologies, magnetic materials, nano-structured
materials, electronic and photonic devices
Digital signal
processing
n Global market expected to touch USD 19 bn by 2004
n Fundamentals like convolution, DFT, FFT, Spectrum analysis etc. n ‘C’ , C++ programming n MATLAB and other tools for design and analysis of DSP algorithms
n Expected to be a USD 1.6 bn market in India by 2005
High-performance computing
n PC hardware and software knowledge and troubleshootingn Linux operating systems and administration, routing and network analysisn C++, development tools and parallel programmingn Security administration and computer security forensics
Illustrative
Source: Press reports. IDC. NASSCOM. KPMG. 2003.
(continued) . . . and India could leverage these strengths into specific opportunities that promise growth . . .
51
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Given India’s strengths in the form of availability of human resources, training
infrastructure and past experience / background as well as the potential for direct
benefit (economic as well as other) to India, we have identified an illustrative list of
opportunities towards which Indian R&D efforts could be directed.
Certain areas like bio-informatics, embedded systems and VLSI/chip design should be
immediately focused upon since they pose long-term benefits (to the economy,society
and environment). Moreover, India also has inherent strengths in terms of human
resources, infrastructure and industry exposure to realize these benefits.
Policy makers should also review these focus areas every 2-3 years in order to take
stock of the benefits accrued and progress made. New areas of development should be
studied and made part of the long-term agenda.
Going forward, R&D focus should be on those opportunities that leverage India’s strengths to meet market requirements . . .
. . . these could be reviewed over specific intervals ( 2-3 years) in order to revise and refine
n Water resource management
n Energy efficiency and management
n GIS applicationsn Dairy products research
Low
Low
High
High
Benefits expected from R&D
- Economic benefit
- Social benefit
- Environmental benefit
India’s key strengths
- Human resources
- Infrastructure
- Industry interface / exposure
Illustrative
n Industrial applications such as robotics,AI and mechatronics
n Disaster forecasting and management
n Nano-technology n Micro-electronics and
photonicsn Bio-technology and crop /
seed development
n Strategic and professional electronics
n Transportation technologyn Materials and components
n High performance and advanced computing
n Multilingual technologiesn Digital signal processing
n Bio-informaticsn Embedded systems and
softwaren VLSI and chip design
n Clinical drug trialsn Auto component design
n Network communication-wireline and wireless
n Information securityn Consumer electronics and
capital equipment
Potential areas for Indian R&D focus
Source: Industry interactions. Department of IT. KPMG. 2003-2004.
52
A review indicates that R&D activities in India did not attract the highly skilled
personnel. In comparison to the figure of 8.2 per 10,000 skilled personnel involved in
R&D activities in India, Singapore has a ratio of 56 per 10,000 skilled personnel in 1996.
A large proportion of R&D staff are not involved in R&D activities and instead end-up
supporting administrative functions.
While R&D activities in India in the past were primarily driven by government and
educational institutions, there is increasing participation of the private sector (Indian
companies and MNCs) in R&D activities. For example, out of the 50 research scientists
deployed by one of the leading multinational pharmaceutical companies at its R&D
center in Bangalore, 45 are Indian scientists who have returned back to the country
leaving similar overseas employment.
Many MNCs have started leveraging capabilities and competencies offered by Indian
educational institutions. The effect of such sourcing on the educational institutions has
been manifold - increased enthusiasm in conducting research in cutting edge areas,
renewed interest in R&D activities due to the economic benefits etc.
Going forward, the government could play the role of a facilitator as against the
principal initiator of R&D activities, to foster strength and interest of highly skilled
personnel in the R&D sector in India.
The current approach to attracting and deploying manpower for high-end R&D has had some shortcomings . . .
Current low attraction of highly-qualified personnel
towards R&D . . .
n Low base of PhDs in R&D
- Total Ph.D.s (1996): 16,839
n Low enthusiasm of higher educated staff into R&D activities
- Sci. / Tech. graduate base (1996) in PhD: 8.2 per 10000
- Approximate Ph.D. candidates p.a. (2003): 5,000
- Share going into teaching / research: approx. 37 - 40 per cent
n Low growth in R&D staff
- CAGR (1988 – 98) for total R&D staff: 0.7 per cent
- CAGR (1988 – 98) for core R&D staff: - 0.1 per cent
. . . with little improvement in staffing mix for
productivity in the last decade
Total R&D personnel
1992: 0.29 million 1998: 0.31 million
Core R&D staff Aux. support Admin. support
Source: Press reports. Institute of Applied Manpower Research. KPMG. 2003.
32 per cent
. . . increased presence of the private sector in R&D could drive more effective manpower development and deployment
31 per cent
53
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The government as identified policy initiatives related to improving interest in the R&D
area but these need to be supported by specific actions related to funding,
infrastructure / institutional support and monitoring mechanisms.
For example, the current process of plan / non-plan funding may not be relevant in the
context of R&D investments and could be changed based on practices in other
countries.
Finland uses the concept of Centers of Excellence, where funding for research as well
as research related training is provided as a unit for a period of six years.
In Germany, the 16 public, non-university labs were re-organized under the common
Helmholtz Association and funding was provided based on ex-ante review on a
program / project basis.
Recommendations on specific actions required are provided separately in detail (ToR
VIII).
The new Science & Technology Policy (2003) has indicated
some potential steps towards meeting manpower requirements
for R&D . . .
. . . but these need to be elaborated upon and implemented through a comprehensive action plan
n Providing curriculum changes, career progression options, fiscal incentives to enhance
R&D aptitude and raise conversion factor from current 8 per cent (60 per cent in
Singapore,16 per cent in South Africa)
Su
gg
este
dacti
on
sfo
rH
RD
for
R&
D
Raising R&D interest
Attracting R&D staff of Indian
origin
Attracting resources from
industry / academia
Attracting women into
R&D
n Providing lifestyle incentives to attract Science and Engineering graduates from other
countries (approx. 12.5 per cent of those in the US in 2000 were people of Indian
origin)
n Staff from industry and academia need to be rotated to support resource requirements
as well as benefit R&D productivity through increased exposure and part-time
involvement
n Need for special incentives / work culture to attract more women into R&D (only 11 per
cent of R&D staff are women although 20 – 25 per cent of Science & Engineering
graduates are women)
Source: Ministry of HRD. Science & Technology Policy (2003). KPMG. 2003.
54
The US has been extremely successful in its approach to R&D, driven by a mix of
policy, infrastructure and development initiatives. It is a benchmark model that India
should follow in order to develop a successful R&D programme.
The entire system is well organized to promote regular interaction between the
government bodies, industry as well as universities. As a matter of fact, some of the
best research endeavours in the US take place in the universities through privately
funded programmes.
Scientists and faculty get tremendous exposure to the latest technologies and initiatives
by interacting with peers from other universities as well as countries. Students get
good scholarships to pursue research activities. At the same time, private firms take
them in on projects and provide the necessary exposure and training.
The US provides a good case study of successfully promoting R&D through a mix of policy, investments and infrastructure
initiatives . . .
Case study: R&D in US
The US’ success in R&D . . .
n 298 patents per million residents (1999)
n 2.7 per cent of GDP spent on R&D (1996 –
2000)
n 4,099 scientists and engineers in R&D per
million people (1996 – 2000)
. . . is based on an overall strategy encompassing HRD and otherinitiatives . . .
Note: Corresponding figures for India were:1 patent per million residents1.2 per cent of GDP on R&D157 scientists / engineers in R&D per million people
Source: UNDP-HRD. OECD Case Studies. KPMG. 2003.
HRD initiatives
Infrastructure initiatives
Policy initiatives
Industry / Academia
involvement
- Attracting greater proportion of graduates to R&D by marking grant / scholarship levels against alternative employment prospects
- Use of professional networks to increase awareness and guide enrolment across the K-12 level based on future R&D requirements
- No mandatory age for retirement of academics (and hence R&D staff)
- Industry role in R&D much greater than government involvement- Most of government investment in R&D channeled through University-
based R&D- Rotation of staff to ensure strong relevance of R&D on industry and
global economic requirements and constraints
- Use of federal body to co-ordinate and balance R&D efforts, funding- Balancing market forces against social considerations (i.e. reliance on
research institution rankings) for R&D resource allocation- Streamlining of funding administration through co-operation and
simplification (Federal Demonstration Partnership)
- Investments in ‘education centers’, ‘centers of excellence’ and ‘quality of life’ related facilities to attract R&D resources from across the world
- Support and encouragement to corporate philanthropy to fund research (e.g. Carnegie, Hewlett and Gates Foundations)
- Invested in intermediate research funding level (funding to fund R&D)
55
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The PITAC is the advisory committee that guides state funding for new R&D
opportunities in the US. Its role is to guide the R&D activities of the various support
agencies in the area of IT R&D and provide the White House with strategic inputs on
focus areas for the future.
The committee on the PITAC is represented by a right balance of industry experts,
scientists and government officials.
The role of the committee is to identify the needs and challenges faced by the American
society, define the government’s role in solving these issues (while also identifying the
role of the private sector) and make recommendations on funding requirements for the
R&D areas that will resolve these challenges.
The PITAC* chartered by the U.S Congress is one of the many
initiatives in place to drive future R&D activities in the US . . .
Objectives of PITAC
n To provide the President and the Federal
agencies involved in information technology
research and development (IT R&D) with
expert, independent advice on maintaining
America's preeminence in advanced
information technologies
n To focus on critical elements of the national
infrastructure as high performance computing,
large-scale networking, and high assurance
software and systems design
n To review the Federal Networking and IT
R&D program
n To help guide the administration's efforts to
accelerate the development and adoption of
information technologies vital for American
prosperity in the 21st century
Software
§ Software engineering
§ Component Technologies
§ Human-computer interaction
§ Information Management
Scalable Information Structure
High-end Computing
Socio-economic research
§ High-end software§ Architectures§ High-end
acquisitions
§ Transformation of social institutions
§ Governance§ E-commerce
research§ Social and
economic simulation and modeling
§ Network Research
§ Large Scale systems and applications
Areas of Focus recommended by PITAC
Setting up an Expert Committee
Defining National Challenges and Transformations required
Defining the Government’s role in R&D
Recommendations of Committee to the Government
– A Committee represented by eminent scientists, academicians and industry professionals
– The objectives of the Committee are to recommend key focus areas and funding necessities and to provide an external perspective rather than an internal resource based perspective
– R&D activity to be based upon top issues faced by the country and people
– Identification of needs, the challenges faced, and the benefits to the society will determine the key focus areas of technology
– Defining the areas where the government will provide support to IT R&D activity based on Phase 2 results
– Defining the areas that the Government will not undertake and leave to industry players
– The recommendations were related to:
– Amount of government funding required for focus areas of R&D
– Channelization of funding-based on Phase 2 and Phase 3 results
– Completeness of R&D portfolio
Case study: R&D in US
* President’s Information Technology Advisory Committee
56
A review of specific efforts being made in other countries to develop and encourage
human resources in the knowledge space shows a structured approach involving
attracting more talent, driving curricular changes to meet employment requirements
and managing R&D activity more efficiently.
Some of the Scandinavian countries especially Sweden and Finland are forerunners in
R&D initiatives. Australia and Canada are also carrying out significant work in science
and technology.
Most of the efforts are directed towards curriculum improvements, better supply of
competent teachers, incentives to industry involvement and improving public sector
R&D efficiency.
57
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Other countries have taken specific, structured steps to
promote HRD for their planned R&D requirements . . .Illustrative
n Increasing / encouraging overall
funding (public + private) for R&D
n Putting available research funds to
optimal use
n Directing research efforts into
priority areas
n Improving research capabilities
of institutions / industry
n Developing evaluation structures and processes for institutions, related to R&D
n Making best provisions for future
supply of quality researchers
n Strengthening the international
R&D links
Overall agenda for R&D
Feeding the supply pipeline
Adapting to meet resource requirements
Efficiency in public sector
R&D
n Improve interest in R&D related
courses through:
- Curriculum improvements
- Increasing supply of teachers
- Increased funding for PhDs
n Finland’s LUMA program (since 1996) has helped
improve science / mathematical knowledge within
teaching fraternity at a national level by adding to
teaching tools, materials and through free training
n Sweden, despite huge base of R&D staff has set
aside EUR 12 million to attract young researchers
n Attracting women and under-
represented minorities through:
- Incentives
- Part-time optionsn The US and Australia have systematically grown the
share of non-tenured, temporary staff in R&D
n The ATHENA project (UK) is addressing women’s
under-representation in higher edu. employment
n Attracting talent from abroad through:
- Educational centers of excellence
- Administrative / Fiscal incentives
n In 2001. Sweden passed a law to alleviate tax
burden on highly-skilled foreign workers upto 5 yrs.
n Australia is extending immigration opportunities to
2,500 Australia-educated overseas students
n Increasing industry involvement in
Ph.D. training through:
- Curriculum changes
- Co-funding
- Industry / academia involvement
n The US national academy has recommended
changes to PhD curriculum to facilitate employment
n The NSERC in Canada encourages industry
involvement through co-funding of fellowships
n Since 1990, Netherlands has supported special
‘graduate schools’ focused on high-quality research
n Improving public sector R&D
efficiency through:
- Private sector partnerships
- Process / systems revamp
n Most other countries have managed significant
private sector involvement and process automation
to ensure reduced administration costs
HRD strategy for R&D Case examples
Source: UNDP-HRD. OECD Best Practices. KPMG. 2003.
58
A centralized common test and certification for ITeS skills offers
a number of benefits for the ITeS industry . . .
. . . however a completely common testing model may not be possible given the diversity of skills required for the ITeS / IT sectors
Ben
efi
tso
fcert
ific
ati
on
test
for
ITeS
Reduced recruitment costs
Reduced training costs
Higher agent productivity
n More effective hit ratios for recruitment and selection as compared to
2–5 : 100 as currently
n Lower time for recruitment screening with standard certification
n Lower training time required for certified skill-sets at a common level,
leading to reduced trainer and other overhead costs
n Certified skills could be deployed faster into client service operations
n Attrition rates could be higher given that agents would have invested in
training for ITeS as at least a mid -term career option
Design of standards and common test for ITeS skills based on industry requirements
This chapter discusses potential options to design and use a common test for ITeS
skills.
It also provides a case example of attempts at common tests for ITeS being tried out in
various states.
Having a common test could benefit the ITeS / IT industry in terms of reduced
recruitment costs, reduced training costs and higher productivity brought about by the
process of specialized certification.
However, as discussed, different functions within ITeS / IT may lay greater stress on
specific skills and qualifications, thereby making a common test difficult to develop and
administer.
In this context, it is better to consider a common test for necessary skills as a pre-
certification for employment. The test could also be used to identify specific training
requirements or even counseling against entry into ITeS / IT.
High-level estimates suggest that an ITeS / IT could save as much as 19–23 per cent of
relevant costs associated with recruitment and training through the use of a common,
certification test that could be used as a pre-screening tool for potential applicants.
While training costs for an ITeS company could come down from INR 6400 to INR 5200,
recruitment costs could come down from an average of INR 11250 to INR 8700.
The assumptions for these calculations have been stated in the exhibit above.
High-level estimates suggest that a pre-certification of core skills could save as much as 19-23 per cent of relevant costs . . .
. . . this is in addition to benefits associated with higher employee productivity as mentioned
Illustrative
Revised
estimates
Current
estimates11,250
8,700
Savings in agent recruitment costs
for ITeS company
Savings in agent training costs for
ITeS company
INR / agent INR / agent
Key assumptions:
1. Costs shown as loaded cost for an ITeS company for a 500 agent call center company in Delhi / Gurgaon with growth estimates of 30 per cent and targeted attrition of 30 per cent
2. Recruitment channel costs assumed to be INR7,000 (1 month salary at agent level)
3. Recruitment executive and trainer costs assumed as INR 17,000 –20,000 per month
4. Overhead costs associated with executives assumed as 2 – 3 x salary costs
5. Standard training time assumed as 40 hours for voice/accent, 40 hours for soft skills under a class size of 10 - 15
Source: Industry interactions. KPMG. 2003-2004.
Revised
estimates
Current
estimates6,400
5,200
23 per cent reduction
19 per cent reduction
59
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Companies in the ITeS industry have been able to use alternative certification from
specialized post-graduate courses in lieu of their requirements for domain-specific
testing.
For example, the ITeS industry is employing qualified chartered accountants for back-
end accounting operations as well financial statement preparation and analysis.
However, the industry lacks a common certification for the basic skills requirement and
ends up spending an additional amount related to screening and training.
‘Pro
xy’
filt
ers
use
dfo
rh
igh
-en
dw
ork
The ITeS industry has already identified alternative certification
for domain-specific skills . . .
Examples: Resourcing for high-end ITeS in India
Source: Press reports. Industry interactions. KPMG. 2003-2004.
MCSE / CCNE certified IT staff
Doctors / Genetic
Engineers
Chartered Accountants
Masters in Business
Administration
- Use of Microsoft Certified Software Engineers and Cisco Certified Network Engineers for IT help-desk requirements
E.g.:
- IT help-desk- Network equipment support- Application support
- Use of qualified doctors / pharmacists for transcription
- Use of genetic engineers / PhDs for research support
E.g.: - Special coding for claims adjudication- Genetic research
- Use of ICAI certified chartered accountants for back-end accounting and financial statement / tax preparations
E.g.:
- Finance processing and Accounting- Tax preparation and Accounting
- Use of second-tier MBA graduates for back-end research, economic research, presentation preparation and special filings
E.g.: - IPR filings- Macro-economic research- Equity research
. . . but lacks a common certification for the basic skills requirement
60
Some of the common skills necessary for ITeS could be tested using a mix of questions /
situations and these could be modeled upon existing standard / proven testing methods.
For example, the TOEFL (Test of English as a Foreign Language) and TSE (Test of Spoken
English) have become internationally recognized and accepted as tests for fluency,
vocabulary and comprehension in English. The common test for ITeS could be modeled
upon the testing philosophy and approach of these examinations.
Various existing common entrance tests (Management Entrance, Clerks’ Entrance, IAS,
CAT etc.) could also be used to design the test, along with inputs from industry
practitioners in the non-formal ITeS / IT training system (e.g. Aptech, NIIT).
Components of the common testing system could be modeled
upon some existing standard and proven testing methods . . .
Source: Industry / Academia interactions. KPMG. 2003-2004.Note:
Easy to test
Testing possible under constraints
Difficult to test
n Ability to speak and write foreign languages
n Will measure fluency, vocabulary, sentence construction
n Will measure fluency, clarity, quality of speech and intonations n Tests such as the TOEFL ® (Test of English
as a Foreign Language), TSE ® (Test of
Spoken English), IELTS ® (International
English Language Testing)
n Objective reasoning type of items consisting of numerical ability
problems, syllogisms, analogies, logic games etc.
n Assessment of creative pursuits and review of performance under
specific problems
n Can be measured using situational, simulated exercises
n Aptitude tests such as the DAT ®
(Differential Aptitude Test)
n Objective tests for these skills such as The
Guilford Creativity Test ®
n Behavioral skills are best measured using
simulation exercises.
Spoken English
Written English
Foreign Languages
Accent Understanding
Listening / empathy
Initiative/Enthusiasm
Multitasking / Time management
Language Skills
Customer Service Orientation
Team Player
Assertiveness and Confidence
Integrity / values and discipline
Motivation / Drive
Behavioral traits
n Ability to comprehend and respond to various accents
n Will consist of standard personality measurement type items
n Standard personality measures such as the
16PF, MBTI (Myers -Brigg Type Indicator),
EPQ ® (Eysenck Personality Questionnaire)
Ease of testing
Nature of testingStandard tests on which specific components could be modeled
Illustrative
Logical reasoning
Problem Solving / Num. ability
Comprehension / Creativity
Keyboard skills / Browsing etc.
Analytical Skills
n On-line practice test involving speed of response, accuracy and PCapplications usage n Standard computer typing tests
Computer proficiency
Candidate profile
Basic skills
Technical / programming skills n Structured paper tests for problem-solving, syntax/structure etc. n Standard programming problems tests
Sociability / Dependability / Reliability
61
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The overall philosophy of designing the common test involves an understanding of
how the test would be administered, the frequency of administration, period of validity
for the scores and standardization / norming processes to be adopted.
The Indian ITeS Certification Test (IICT) would be a computer adaptive pattern test that
measures the aptitude of candidates. Details of the employment of the test have been
illustrated above.
Testing for domain-specific skills would require a separate set-up. These could be called
ITeS Domain Tests (ITDT), and could be better managed by individual business-specific
tests, depending on their specific function requirements. Details of the employment of
the test have been illustrated above.
Overa
llp
hil
oso
ph
yfo
rIT
eS
test
desig
n
The common test for ITeS should be designed to meet the basic
skills requirement of the industry . . .
Nature of test and delivery
n Objective measure of the candidates aptitude
(inherent abilities) and not educational achievement.
n Computer adaptive test pattern providing a
consolidated score on each section
n Will be available for administration at authorized
testing centers around the country
n Can be accessed and taken during specific periods
during a month / quarter
n Score will be valid for a period of six months as
industry standards and requirements are fast
changing and the test will be required to be
constantly revalidated
n Once employed, the test need not be taken again.
n Standardization and norming processes must be
well established
n Score reports will provide individuals score along
with a comparative percentile rank for the last six
months.
Indian ITeS Certification Test (IICT) ITeS Domain Tests (ITDT)
n Objective measure in various key domain areas
n Paper pencil tests that will be developed into a
computer adaptive pattern over the next two years
n Students can take as many domain specific test as
desired
n Score will be valid for a longer period, of 10 - 12
months
n Once employed, the test need not be taken again.
Frequency of administration
Period of validity of scores
Standardization and Norming
Source: Industry / Academia interactions. KPMG. 2003 - 2004.
n Paper pencil tests will be available for
administration over six months. Testing agency may
tie up with educational institutions to use their
infrastructure to conduct large scale group testing
n Standardization and norming processes must be
well established
n Test content must be created with inputs from the
industry in terms of content and proficiency levels
62
A common test in the form of the ‘Indian ITeS Certification Test‘ (IICT) could help certify
basic skill levels required for ITeS (L1), related to language capabilities, analytical
abilities and computer proficiency as well as candidate profile characteristics (L2) such
as orientation for customer service and basic personality traits.
The certification mechanism could even classify applicants based on performance on
each of the parameters chosen as employable, trainable or non-trainable.
Personnel with L1 certification as employable could join the industry directly or after
undergoing L2 and IDT certifications if required specifically by employers.
Personnel with L1 certification as trainable would undergo training at their own or
company-sponsored expense before they are deployed into ITeS.
Personnel with L1 certification as non-trainable could be counseled against applying for
ITeS jobs and seek alternative opportunities.
A hybrid model with a base-level common testing andcertification supported by company-specific requirements is
more suitable . . . Illustrative
ITeS Domain Test (IDT)
Company-specific tests
n Structured interviews
n Problem-solving (paper-pencil)
tests
n Situational tests / workshops
n Domain specific testing
related to, for example:
- Finance / Accounting /
Insurance
- Pharma / Healthcare
- Design
- HR
- Legal
L1: Basic Skills
n Language skills
n Analytical skills
n Computer
proficiency
n Training for ITeS skills under
formal or non-formal systems
Note: IICT and even IDT would be common tests under a body that is recognized by the government and accepted by the industry
Source: Industry-academia interactions. Department of IT. KPMG. 2003-2004.
L2: Candidate
Profile
n Customer service
orientation
n Basic personality
Indian ITeS Certification Test (IICT)
Certified Employable at L1
ITeS training
Denotes required test
Denotes optional test
Certified Non-Trainable at L1
Certified Trainable at L1
63
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Categorization of Employable / Trainable / Non-trainable categories could be based on a
normalized score with agreed cut-offs that may be tuned based on industry demands.
Those that are ‘Employable’ may not necessarily have to appear for the ITDT. However,
that would be determined by the specific requirements of the companies. They can
further enhance their employability by taking the L2 test as well.
Those in the ‘Trainable’ category would need to clear the L1 test and become
‘Employable’ before they can be considered eligible for the L2 test. However, in some
cases, where companies have large training budgets, they may even get hired.
‘Non-trainable’ people would need to review their basic skills before considering ITeS
as a feasible career option. A strong counseling system would need to be in place in
order to guide such people.
Thus, this system would ensure quality control for the industry when it comes to
recruitment.
Results of the test could categorize potential applicants into
specific categories to also identify training requirements . . .
EmployableTrainable
Scoring System (for L1 under IICT)
0 100
Non-Trainable
Employable:
Trainable:
Non-trainable:
Score Range
n Those scoring above pre-determined score in L1 test could
be certified as employable under the IICT
n These personnel can appear for L2 test, if required and could
also apply to specific companies with their certificates and
may / may not have to undergo the domain-specific test
(IDT), depending on employer preferences
Illustrative
n Those scoring above the minimum requirements but less
than the pre-determined score could be signaled as
‘trainable’ for ITeS
n These personnel may not be eligible for L2 test until they
are certified as ‘employable’ under L1 but may be hired by
companies willing to invest in their training
n Those scoring below the minimum requirements may be
signaled as ‘non -trainable’ for ITeS
n These personnel may not appear for L2 certification test and
may be counseled against an ITeS career without first
improving upon basic skills required
Source: Industry / Academia interactions. KPMG. 2003-2004.
64
The Government of Andhra Pradesh has already initiated pilots to review and certify
specific skills for the ITeS industry and has reported some success.
It has introduced a Graduate Employability Test that specifically caters to certification
for the ITeS / IT industry. It is administered online and is offered at various training and
testing centers.
Learning from the experiment could be used to drive the roll-out of a nation-wide
certification test as planned.
The state of Andhra Pradesh is experimenting with such
centralized testing and certification under its Graduate
Employability Test (‘GET’) . . .Case study: Andhra Pradesh
Policy and legal framework
Funding andbudgetary allocation
Infrastructure and institutional
set-up
Source: Press reports. KPMG. 2003.
Monitoring systems
n The state government instituted the GET / IITeST as an ‘employability test’ following an 11 -week
training program related to voice skills
n The course content has been designed by various non-formal, private-sector education service
providers in association with Linguaphone (UK) and Monster.com (India)
n The test is not mandatory and the scores are shared with leading ITeS companies in the state
n The GET / IITeST is subsidized by the state government to the extent of 50 per cent and applicants
need to pay a fee of only INR 100 for each administration
n The GET / IITeST is administered on-line, at facilities of various training and testing partners of the
state government (e.g. NIIT, Aptech, Hero MindMine)
n The state government has identified the APSCHE (State Council for Higher Education) as
responsible for execution of the GET / IITeST and uses its own marketing body (APFIRST) to
generate awareness about the test
65
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The Government of Karnataka has introduced an aptitude test called the BPO-SAT or
BSAT to measure verbal and analytical skills.
A private company has assisted the government in designing the test and is also
helping out in the assessment of candidates.
However, currently the test is not mandatory and the scores are only revealed to ITeS
companies if the candidate desires so at the time of application.
While being a good source of revenue to the government, it also provides the
necessary confidence to companies at the time of recruitment.
. . as is the Government of Karnataka with its BPO Skills Assessment Test (BSAT) . . .
Case study: Karnataka
Policy and legal framework
Funding andbudgetary allocation
Infrastructure and institutional
set-up
Source: Press reports. KPMG. 2003.
Monitoring systems
n The BSAT measures generic skills related to verbal, numerical and analytical abilities in addition to
communication skills (written and oral) as well as key-board skills
n The test is not mandatory and the scores are shared with ITeS companies, if desired by applicant
n The total cost for the test is INR 200 and the ‘Board for IT Education Standards’ (BITES) contributes
around INR 100 for every eligible candidate, providing a 50 per cent benefit
n The BSAT is administered through an identified third-party service provider (MeriTrac) as an on-line
test at facilities of other non-formal, private-sector education service providers
n The BSAT is administered by the BITES, registered under the state government as a non-profit
society, in co-operation with the local IT industry and other educational institutions
n MeriTrac, an independent local firm, has been identified as the assessment partner for the BSAT
66
As much as 93 per cent of annual graduates in India prefer to join non-IT related work
or prefer to be non-employed (i.e. opt out of work-force participation due to social or
other factors).
For example, in 2002, out of the total 2.4 million graduates, 0.9 million opted out of the
work-force (higher share for women as compared to men) while around 1.4 million
joined non-IT jobs.
67
Non-IT personnel represent a significant proportion of India’s resource pool . . .
. . . these could potentially be trained for and attracted into the ITeS and R&D occupations
Source: Institute of Applied Manpower Research (2002). Press reports. NASSCOM. KPMG. 2003–2004.
0
500
1,000
1,500
2,000
2,500
Annual Graduate
output
Graduates not
participating in the
work-force
Engineers
(Deg./Dip.) in IT
Other Engineers
entering into IT
Other Graduates
entering into IT
Graduates in the
work-force in non-
IT areas
(000s)
2,356
825
91 36 32
1,372
Manpower profile of graduate employees in India (2001–02)
Of total annual graduate output 35
per cent is non-employed Of total annual graduate
output 58 per cent is in non-IT work and some of these
could be attracted based on demands in the other sectors
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Measures for optimizing deployment of non-IT personnel in ITeS and R&D
This chapter highlights the potential resource available in the form of non-IT / non-
employed personnel. It also looks at the possible actions required to attract and deploy
these personnel into ITeS / IT.
Personnel entering the work-force have a number of potentialemployment options based on their qualifications . . .
Source: Press reports. Interaction with industry and academia. KPMG. 2003-2004.
Illustrative
Graduation
Post-graduate Diploma / Courses
Post-graduation /
Masters
n B.A. n Journalism, Market Research, Social work, Administration, Sales, Airline Services
n B.Sc. n Market Research, Social work, Administration, Sales, Airline Services, Med. Reps.
n B.Com. n Sales, Accounting & Book-keeping, Airline Services
n LLB. n Legal research, Corporate law, Administration, Practicing law
n B.Ed. n Teaching, Social work
n B.Pharm. n Clinical research, Medical Representatives, Chemists
n B.M.M. (Mass Media)
n IT, Product testing / design, R&D, Sales
n B.C.A. (Comp Appln)
n Journalism, Advertising, Digital Content, Market Research
n B.E. / B.Tech. / B.Arch.
n IT
n Armed Force (Officers) n Teaching, Social work, Administration / Security services
n Finance / Banking - Function specific role (officer / supervisor / executive)
n HR
n Travel & Tourism
n Design
n Hotel Mgmt / Catering
n Sales & Marketing
n Secretarial
- Function specific role (officer / supervisor / executive)
- Function specific role (officer / supervisor / executive)
- Function specific role (officer / supervisor / executive)
- Function specific role (officer / supervisor / executive)
- Function specific role (officer / supervisor / executive)
- Function specific role (officer / supervisor / executive)
n ICWA
n CA
- Function specific role (officer / supervisor / executive)
- Function specific role (officer / supervisor / executive)
n M.A./ M.Sc./ M.Comm.
n M.B.A.
n PhD. / Doctorate
n High-end expert role in specific area (e.g. VLSI design, Library services)
n Managerial / Advisory role (e.g. HR, Operations, Finance. Strategy)
n Expert role and R&D work in specific area (e.g. Bio-informatics)
68
Graduates preferring to join non-IT work have a number of options available to them,
based on their specific background. This has been highlighted in the table above.
Specialized post-graduate diploma courses narrow down the employment options to
some preferred sectors. For example, a Ph.D. or Doctorate course necessitates
employment as an expert in a very specific area. At the same time, a course like B.Com.
(graduation in commerce) opens up careers in sales, accounting and book-keeping,
equity research and analysis etc.
Even within ITeS / IT industry, based on the nature of work required and empirical
evidence of current practices, some qualifications may be better suited for specific roles
/ functions.
For example, the nature of training for a graduation in education (Bachelor of Education
- B.Ed.) enables the person to be better equipped for customer contact support services
as compared to a graduation in Commerce (Bachelor of Commerce - B.Comm.), which
may be better suited for data entry and processing work.
Also, specific qualifications such as Chartered Accountancy could enable a person to be
in a better position to support knowledge services related to data modeling and
advisory services.
Graduates have specific opportunities in the ITeS/ IT sector . . .
Source: Press reports. Interaction with industry and academia. KPMG. 2003 - 2004.
Data entry
Data Proc.
Doc. Mgmt.
Data entry / Back-office processing
Cust. services Collectn Mktg and
sales
Customer contact support
HR Finance IT
Corporate support functions
Search andanalyses
Decision support
Consult. and advise
Knowledge services andDecision support
IT andElectr.
BioChem/ Pharma
Engg. Design
R&D and Development
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Note:
Direct fit with requirements
Fit into requirements with some specific training / some stretch
üü
ü
B.A.
B.Sc.
B.Com.
LLB.
B.Ed.
B.Pharm.
B.M.M. (Mass Media)
B.C.A. (Comp Appln)
B.E. / B.Tech. / B.Arch.
Armed Force (Officers)
Finance / Banking
HR
Travel & Tourism
Design
Hotel Mgmt / Catering
Sales & Marketing
Secretarial
ICWA
CA
M.A. / M.Sc. / M.Comm.
M.B.A.
Ph.D. / Doctorate
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69
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Over the years there has been a large base of ‘non-employed’ people, some of which
may be interested in re-entering the work-force but may find it difficult to do so due to
lack of awareness of opportunities or the capabilities required.
A large portion of this base includes women who complete graduation but opt out of
work-force participation.
Others include handicapped staff, early retirees (especially given the increasing
adoption of Voluntary Retirement Scheme – VRS – in most large businesses) and those
who opt to continue education.
No
n-e
mp
loyed
seg
men
tso
fed
ucate
dp
ers
on
nel
In addition, there is a large base of people not participating in the labor force directly (i.e. prefer to be non-employed) . . .
Source: IndianNGOs.com. Institute of Applied Manpower Research. KPMG. 2003.
Higher education aspirants
Women
Handicapped people
Retirees
n Around 7 – 10 per cent of graduates each year opt out of the labor
force and continue to study post-graduate / other doctoral courses
(another 0.1 per cent go abroad to study)
n Only 25 – 30 per cent of women graduates in India (compared to 80 –
85 per cent men) participate in the workforce, very often due to family
reasons (marriage / social pressures)
n Personnel with physical disabilities (60 – 75 million) either rely on
government subsidized employment opportunities or drop out of labor
force due to lack of industry / social support for pursuit of employment
n Retired people and people with short-term employment / short-service
commissions often find it difficult to get re-employed in other sectors
70
ITeS/ IT as a profession offers some specific benefits and issues which could drive the
choice of employment amongst the potential employee base.
While ITeS / IT in general offers greater financial benefits in addition to development
and growth opportunities, they may involve shift-working and monotonous work.
However, these depend on the specific nature of the service provided and the specific
HRD policy of the company related to job rotation / promotions.
It must, however, be noted that a number of issues related to ITeS are common to other
professions like airline services (monotonous), secretarial work (work-related stress)
and nursing (night-shifts) and proper counseling could help attract these segments.
The choice of ITeS / R&D as a profession by these groups of
personnel will be driven by their understanding of specific
benefits and issues . . .
Ben
efi
tso
fw
ork
ing
inIT
eS
Financial benefits
Training and skills
development
Work environment
Global exposure
Issu
es
rela
ted
tow
ork
ing
inIT
eS
Shift working
Work-related stress
Monotony
Career progression challenges
n ITeS employment offers 20 – 50 per cent
more salaries, including other benefits
related to transportation / food, as
compared to other employment options
n ITeS employment involves significant
domain specific training as well as soft
skills and voice training opportunities
n The workplace in most ITeS businesses is
more ergonomically designed as compared
to other occupations and offers an
environment and culture of fun and youth
n The prominent ITeS companies in India
include MNCs or large Indian set-ups and
employment offers a global exposure
including internal rotation opportunities
n Personnel have often identified late night
and inconsistent shift working as the
primary reason for leaving the industry
n Increasingly, agents are found to be
complaining of food / digestion and sleep
problems, associated with work-related
stress
n Majority of the work in ITeS involves
rigorous and often monotonous work with
high repetition, which may lead to loss of
interest
n The nature of the operations and need for
high agent base implies that the
competition for career advancement within
the organization is very intense
Source: KPMG. 2003.
. . . however, the issues related to ITeS employment exist in other occupations
(like nursing / airline services, sales, secretarial work, production) as well
Illustrative
71
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Specific actions would be required to position ITeS as a favorable employment option,
attract the right kind of talent and retain selected staff from across the different target
categories.
This may require changes in policy and incentives provided to relevant companies,
infrastructure made available and a monitoring mechanism to review success of
companies with these categories.
For example, to attract housewives into the workforce, especially for ITeS, there needs
to be an awareness drive managed through the relevant channels such as social groups
and TV advertising, This must be supported by specific incentives related to flexi-time
and availability of day-care / creches to meet the specific requirements of this category
of potential employees.
Similarly, special efforts are required to attract high-end professionals such as actuaries,
trained lawyers, management graduates and Ph.D.s for specific high-end support work
required.
Attracting personnel from these groups of personnel into ITeS
will require a structured approach . . .
Positioning Attracting Retaining
n Generating awareness as a
preferred occupation, through:
- Career fair representation
- Pointed news articles
- Youth oriented advertising
n Simultaneous higher education affiliations with partial fee support (upto 50 –70 per cent)
n Cross functional training (Sales, Operations, HR, Quality) and career progression options
n Generating awareness about
flexibility in ITeS, through:
- Social group workshops
- Articles in women’s mags.
- TV advertising
n Greater control over work-place
and work-timing with additional
facilities related to child care
n Special concessions related to
family support
n Simplicity in exit / re-entry into
ITeS occupation through
sharing of background records
and employment history under
a central database
n Awareness drives and
discussion on skills required for
ITeS, through:
- Rehabilitation / support
center workshops
n Provision of special workplace
related facilities (ramps /
elevators / medical support ) as
well as work operation
concessions (frequent breaks)
n Flexibility in minimum working
hour requirements
n Subsidies and support related
to extended leave under
medical considerations
n Awareness drives and
presentation on skills required,
through:
- Presentations in schools
- Teachers’ fora
n Describing (during interactions),
the overall workplace
environment (culture, flexi-time,
youth) as well as financial
benefits (salary, other support)
n Foreign travel opportunity
n Career progressions options
including foreign placements
for teaching
Graduates (employed / non-
employed)
Housewives
Handicapped / Disabled
Teachers
Source: KPMG. 2003 - 2004.
Illustrative
n Better structuring of benefitsn Specialized and on-the-job
training opportunitiesn Possibility of foreign travel
related to process migration, training or exchange programs
n Positioning based on
opportunities for challenging
work and recognition with
world-class working facilities
n Providing salaries comparable /
exceeding those in other
domestic professions
n Defining career growth path
options
n Interactions with global client /
peer group
n Job rotation and content
enrichment
Professional / Technical personnel
72
Many companies in India have begun utilizing the resource pool mentioned earlier and
are slowly bringing about changes in their hiring policies. Some of these companies
and their hiring initiatives have been illustrated above.
The biggest advantage for companies that have offered employment to some of these
categories include higher loyalty of employees at a relatively lower salary cost.
Some companies have even been able to leverage past skills and experience to
enhance the overall service delivery under ITeS / IT.
Some companies in India that have experimented with such an
approach are already realizing its benefits . . .
. . . efforts must be made to broad-base these through government support
Source: Press reports. KPMG. 2003-2004.
Case studies: Attracting non-IT personnel into ITeS
III party service provider in NCR
n Developed relations with resettlement
boards of the Army and Air Force to recruit
retiring personnel
n Employs retired school teachers and
housewives as agents / support staff
n Planning to employ handicapped personnel
BPO subsidiary of an IT services company
n Employs a number of Chartered
Accountants / ICWA certified staff for
support with tax preparation / filing and
account preparation related work
BPO division of one of the leading IT
companies
n Employs 10 – 15 Ph.D.s in microbiology /
bio-technology to support research
requests from clients
n Plans to expand this team to build a
‘Knowledge Center’ in India with a
database on R&D in biology
VC-funded III party outfit in Mumbai
n Action plan to hire handicapped and retired
people
n Facilities and equipments to meet special
requirements of these employee groups
n Developing plan to attract housewives for
morning / afternoon half-shifts
High-end BPO company in NCR
n Employs over 180 MBAs from India as
well as abroad to support economic /
business research services
n Also hiring specialized skills to support IPR
filing and other legal documentation
services
One of the largest captive BPOs
n Employs scientists and doctoral staff in
the John F Welch technology center to
focus on R&D support services for group
companies world-wide, in the areas of
materials, heavy engineering and
electronics / medical systems
n Ability to leverage past experience
and maturity which reflects in
higher productivity and end-
customer empathy
n Realistic salary and growth
expectations for personnel
employed
Attracting ‘non-employed’
people into ITeS / R&D
Attracting highly qualified staff into ITeS /
R&D
Attracting high-end PhDs into
ITeS / R&D
n Ability to leverage qualifications
and certification to meet
regulatory as well as work related
requirements at lower costs,
without additional training
n Ability to attract right profile of
people at lower costs by offering
access to global knowledge base
and emerging opportunities
n Greater loyalty by personnel due
to lack of adequate alternative
employment options
Typical benefits to organization
73
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Best practice efforts by some OECD countries related to attracting resources to specific
employment opportunities suggest that there needs to be a stronger push from the
industry side as well as the potential applicant’s side.
For example, in the US and Canada job search assistance within training and financial
incentives have been combined to re-deploy sections of the labour force into specific
occupations. Similarly, in Germany and Netherlands special laws have been introduced
to allow greater control over working hours for part-time employment options.
Thus, in India, efforts could be made in the areas of policy as well as funding and
infrastructure, in order to attract non-IT persons into ITeS / IT employment.
Efforts being considered in other countries suggest action steps
for the government and other related bodies in India to attract
non-IT personnel into ITeS / R&D . . .
Source: OECD Employment Outlook. KPMG. 2003.
Driving preference to be
employed
n The US and UK have long been practicing employment-
conditional benefits under which specific benefits (tax credit,
subsidies, access to social support facilities) are made available
to individuals / families that are gainfully employed
n France and Netherlands have encouraged personnel to develop
higher skills through reduction in employers’ contribution
towards social security (pension) for low-end jobs
n Austria provides corp. tax deduction for specific training invstmt.
n Countries like Ireland direct 0.5 per cent of GDP and approx.50
per cent of spending towards labor market development
towards targeted employment subsidies (of which 33 per cent
is related to employment in the private sector)
Driving appropriate
skill-ing
Driving employer
preferences
n The US and Canada have combined job-search assistance within
training and financial incentives to re-deploy sections of the
labor force into specific occupations
n Significant spending on vocational rehab. for disabled personnel
Enabling employment
n Germany and Netherlands introduced special laws in 2001, to
allow greater control over working hours for part-time
employment options
Special situation support
n Counseling at the graduate level on employment
benefits
n Implementing fiscal incentives / disincentives to
drive employment-seeking (esp. women)
n Highlighting typical skills requirements for
various employment options
n Co-financed educational schemes in association
with industry/ pvt training centers (upto 70 percent)
n Mandating special reservations / providing
specific subsidies related to employment of
under-represented groups
n Working with industry to redesign labor laws,
workplace standards to attract specific groups
n Co-ordinating efforts by industry to attract non-
conventional talent into ITeS through seminars
n Implementing special requirements in
conjunction with the ITeS industry (e.g. flexi-
hours) as well as independently
Illustrative
74
This chapter reviews the direct / indirect incentives available within the Indian context.
It also looks at possible changes based on practices in other countries to encourage
private sector participation and individual preference for higher education related to
ITeS / IT.
A number of fiscal incentives are in place related to labor laws, income tax benefits and
location preferences. However, most of these are relevant at the institutional / company
level rather than individual.
As a result, there is a lack of individual interest and inclination towards spending
towards higher education / vocational training.
The example of the housing finance industry suggest how tax breaks on housing loan
repayments led to massive growth in the housing finance industry – a similar elasticity
could be expected if educational expenses including expense on vocational courses
were to be given tax breaks.
75
There are already a number of fiscal incentives in place related
to support for HRD in ITeS / IT . . .
n Tax rebates for expenses towards children’s education
n Shops and Establishment Act has been liberalized to allow for around the clock functioning (subject to certain conditions being met)
n Commercial training or coaching provided by certain computer coaching / training centers are currently exempt under service tax regulations
n Certain exemptions from Customs to computers and peripherals donated to educational and research institutions by units under 100 per cent EoUs, STP, EPZs
n Certain exemptions from Customs for research equipment imported by public-funded and non-commercial research and academic institutions
Note: List of incentives / concessions mentioned is indicative not exhaustive.
Source: Government of India. KPMG. 2003-2004.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Fiscal policy measures to maximize privatesector participation in HRD for ITeS / IT
If we were to consider countries with a similarity of approach to education as in India (i.e. the US, UK and Canada), analyses by the OECD indicates that higher education leads to cash flows with a positive IRR, greater than the real interest rates (e.g. commercial lending rates) for the respective economies. This suggests that investment in human capital is a more attractive way for an average person to make wealth.
Different countries have introduced varied fiscal measures to provide incentives to personal investments in higher education.
– For example, in the US, this is driven by the substantial increase in wages possible through higher education – an indirect appreciation of skills gained through education.
– In the UK, the high availability of funding support in the form of scholarships / grants etc. makes up for up to 47 per cent of tuition costs involved – an indirect way of the state influencing funding for employment. Funding is available in the form of Career Development Loans for vocational courses.
– In Canada, incremental salary from higher education is not substantially high although the risk of unemployment decreases (i.e. term of employment increases) substantially, to provide a net benefit from education.
A review of OECD countries shows how policy is designed to
make investment in tertiary education more attractive . . .
. . . different countries have used different mechanisms to ensure that higher
education remains an attractive choice for people
4.7
2.3
14.9
2.1
0.9
18.9
Comprehensive
benefit
Funding
support
Tuition fees
Unemployment
risk
Taxes
Earningsincrease
Note:
n Methodology
Costs involved with higher education include:
= Tuition fees + Foregone post -tax earnings (adj. for employment prob.) - Resources through grants / loans
Benefits from higher education include:
= Post-tax earnings (adj. for employment probability) - Repayment associated with public-support grant / loans
n Assumptions
Full-time employment with no income during study; Course drop -out not considered
2.7
2.1
18.5
3.6
1.6
18.1
2.3
0.5
8.7
1.8
1.3
8.4
IRR for choice of higher education, per cent United States United Kingdom Canada
Industry appreciation of skills gained
Tax on additional income
Application lifetime of skills gained
Cost of higher education
Government / Industry funding support for higher education
Source: OECD Economic Studies (2002). KPMG. 2003-2004.
Commercial lending rates 1.3 5.85.1
76
The Malaysian government believed that the industry in Malaysia spent little on Human
Resource Development in the form of education / training.
Hence it invested in specific contributory funds as well as instituted specific incentives,
at the individual and company level. The table above highlights some of these
incentives.
The primary objective of these initiatives was to drive greater spend on education and
training.
Malaysia has made specific efforts at promoting private and
personal investments into HRD . . .
Incentives directed at individuals
n Attracting global ICT skills
- Income remitted within two years of arrival exempted
from tax
- Personal effects brought are tax exempt
- Owned assets in country of residence (e.g. cars)
exempted from import duty and sales tax
- Permanent Resident status to close family of
applicants within six months from the date of arrival
n Investing in skills development fund
- Skills Development Fund Division to use the fund to
provide loans to students in technical / vocational
courses
- Loans available at nominal administrative charges and
long repayment terms
Incentives directed at institutions / corporates
n Double Deduction Incentive for Training (DDIT)
- The DDIT scheme (allowing double deduction of
training expenditure for tax calculation) between
1988 -1993 was very attractive to MNCs operating in the
electronics industry in Malaysia
- Since 1993, the scheme has been restricted to small
firms (less than 50 employees) and a levy rebate has
been offered to larger companies
n Human Resource Development Fund (HRDF)
- HRDF instituted in 1992 as a contribution fund
managed by the government and industry, reimbursed
against training expenses
- Led to increased training expense for almost 50 per
cent of those companies registered under the HRDF,
especially those in the instrumentation industry
Source: Press reports. KPMG. 2003.
Case study: Malaysia
77
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
The Philippines government has introduced an ICT scholarship scheme for students
wanting to pursue a career in information and technology.
It has provided incentives in the form of tax holidays to training institutes. There are
also additional incentives like unrestricted use of consigned equipment.
The private sector has also been provided incentives by taking up socially relevant
projects as well as sponsoring the computer classrooms in schools.
Philippines have specific fiscal incentives directed towards HRDfor the ICT industry . . .
Incentives directed at individuals
n ICT scholarship program
- Administered by the TESDA for students who pursue
careers in ICT sector
- Assistance includes tuition fee subsidy for approved
courses and up to 50 per cent subsidy for ICT skills
certification
Incentives directed at institutions / corporates
n Incentives to ICT training institutions
- ICT training institutions (formal / non-formal) are
eligible for a three-year income tax holiday
- Additional incentives are provided in terms of
additional deduction of labor expenses (teachers) and
unrestricted use of consigned equipment (computers)
n Private sector involvement
- ‘Adopt -a-school’ programs allow generous tax
incentives to the private sector in return for
technology systems provided to schools
Source: Press reports. KPMG. 2003.
Case study: Philippines
78
Sweden has undertaken initiatives to build the competence of its working population.
For example, the state provides support to individuals who are keen on getting trained.
It also provides them with incentives to learn.
At the institutional level, incentives are provided for specialized vocational training and
connectivity support through computers and internet provision.
All these initiatives have helped Sweden develop into one of the front-runners in global
IT, innovation and R&D.
Sweden has been very successful in developing requisite HRD
skills for R&D, through special incentives . . .
Incentives directed at individuals
n Financing of competence building
- Swedes can open an Individual Learning Account
where their investments for training and competence
building are matched by state investments and
incentives
- Adult education under the state schools system is free
- Special grants are provided to the unemployed
towards higher secondary education
Incentives directed at institutions / corporates
n Specialized vocational training
- Advanced Vocational Education (AVE) is financed by
the Education Administration budget to offer a new
form of post-secondary training involving theoretical
and practical applications
n Connectivity support
- The state and municipal funds provide limited period
support to special computer / education centers to
enable connectivity to the Internet
Source: Press reports. KPMG. 2003.
Case study: Sweden
79
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
A review of practices in other countries such as Malaysia, Philippines and Sweden,
suggests that India could adopt a number of tax-related incentives.
The focus should be more so at the individual level, to drive HRD as well as
employment preference towards ITeS / IT industry.
Detailed recommendations on specific policy initiatives are provided under the Action
Plan.
There are a number of additional fiscal measures possible to
promote personal and private sector involvement in HRD . . .
n Tax incentives could be extended to training / coaching activities even under IT related industry.
n Investments in educational / coaching activities in IT sector could be given incentives by way of tax exemptions / 100 per cent depreciation treatment, etc.
n Grants/ donations could be made by the government to English speaking colleges / schools to give an impetus to the ITeS industry.
n Vocational training / coaching in IT related sectors could be made compulsory in colleges with linkages to fiscal directives.
n Expenses incurred with respect to training and certification for ITeS could be supported through special loans, repayment of which could qualify for individual tax exemption.
n Allowances received for working late shifts by personnel in the ITES industry could be tax exempt.
n Special incentives could be provided to women for employment in ITeS / IT sector.
Source: Department of IT. Industry interactions. KPMG. 2003.
Illustrative
80
Studies in the past have highlighted that implementation of action plans often falls
behind targets due to the inability to define a specific group accountable for the
implementation.
The inability of different groups from across ministry boundaries to work together is
another major cause of the failure of such action plans.
It is therefore critical to identify the key individuals who would take responsibility for
the implementation and be accountable for their actions.
Continuous monitoring of progress, supported by strong leadership would be the key
to successful implementation.
81
Studies in the past have highlighted what drives and inhibits
successful implementation . . .
. . . actions planned must therefore be supplemented by specific performance monitoring criteria, timeline and responsibilities
n Agreement on a common agenda and the benefits of achieving it by all the key stakeholders
n Strong support from influential individuals within the government who can drive the agenda and resolve roadblocks
n Focused, dedicated leadership and ownership by relevant bureaucrats to drive the process through to conclusion
n Continuous pressure to achieve planned objectives through reviews and performance criteria
Successful implementation
n Lack of involvement of all the key stakeholders including ministerial departments, industry and academia
n Lack of agreement on and acceptance of a common implementation plan and responsibilities
n Lack of accountability and inability to achieve planned actions by those appointed
n Lack of continuity and focus / direction by the government
Failure in implementation
Source: BCG-High level Strategic Group. Department of IT. 2003.
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Comprehensive action plan for HRD in ITeS/IT
This chapter provides suggested recommendations of the Task-force on actions to meet
HRD requirements for the ITeS / IT industry.
Specific responsibilities have been assigned under each of the recommendations and
the overall implementation structure has also been discussed.
Bridging the manpower requirement gap for ITeS / IT requires specific actions on a
priority basis:
– Priority 1: Improve the employment conversion ratio through use of pre-
certification and counseling such that the resources attracted invest in developing /
assessing specific skills and are focused on working in ITeS / IT as a career.
– Priority 2: Use of counseling as well as providing adequate industry awareness
building opportunities to attract a greater share of applicants from target employee
base. This could be the biggest source of manpower as the ITeS / IT is still
concentrated in specific clusters and attracting of talent from other smaller towns
has not been utilized to the fullest extent.
– Priority 3: Expand the workforce pool through specific incentives to drive workforce
participation, especially by women and other under-represented groups who
otherwise drop-out of the workforce due to social or economic pressures.
82
Meeting the manpower requirements by 2012 could require a
number of actions directed at specific objectives . . .
2,717
1,367
549
605
195
0
1,000
2,000
3,000
Expected demand
(2012)
Projected supply
at current trends
Priority 1:
Improving
conversion ratio
Priority 2:
Improving
applicants share
Priority 3:
Increasing work-
force participation
Estimated gap based on current trends
Number (000s) Options to bridge the gap
n Requiring changes in the curriculumn Requiring a pre-certification mechanism
for ITeS / IT skills
n Requiring greater awareness of ITeS opportunities
n Requiring interaction platform between industry and potential employees
n Requiring specific fiscal incentives n Requiring work environment changes to
attract workforce participation
Illustrative
. . . requiring policy, infrastructure and funding related actions
Note: Calculations are illustrative only and assume that actions are conducted as per priority and the effects are multiplied.
Key assumptions include -
1. Increase in pure conversion ration from 25 per cent to approximately 35 per cent (adj. for double-counting of repeat applicants)
2. Increase in applicant share from approximately 11 per cent to approximately 15 per cent (adj. for double-counting of repeat applicants)
3. Growth in workforce participation from 65 to approximately70 per cent
Source: Industry interactions. KPMG. 2003.
We have developed a comprehensive framework to suggest recommendations related
to attracting, training, certifying and deploying resources for ITeS / IT industry
requirements, on a long-term, sustainable basis.
This framework would help define the policy changes, funding requirements,
infrastructure /institutional support as well as monitoring mechanism required for the
action plan to be successful.
Across the education lifecycle, the primary objective would be to generate awareness
of ITeS / IT , provide specific skills, certify students through a common test and finally
involve the industry to effectively deploy human resources.
Our framework for overall recommendations for action
encompasses the multiple dimensions that can influence
manpower development . . .
Policy changes / extension required
Funding / Fiscal incentives required
Infrastructure / institutional
support
Monitoring mechanisms
required
Attract Educate Certify Deploy
Policy measures to clarify / guide / enforce
Funding allocation and incentives
Infrastructure / facilities and institutional
support (formal / non-formal)
Monitoring body, frequency and
reporting
Involving industry in employing trained and
certified resources
Use of common certification test for
basic skills
Providing specific skills as part of general / special education
Generating awareness and preference
amongst graduates as well as non-employed
83
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Currently, the Indian education system is not well geared up to cater to the specific
needs of the ITeS / IT industry.
One of the main issues related to attraction to the industry is that most employees do
not look upon ITeS as serious career option. This results in high rates of attrition.
Lack of a proper placement mechanism in most educational institutions is another
major hindrance in students getting good jobs. The industry interface is not well
established especially in smaller cities and towns.
A number of gaps have been identified associated with the
entire life-cycle of education in India . . .
Attract Educate Certify Deploy
n People are not aware
about employment
options, including
flexibility offered
n ITeS perceived as largely
requiring IT skills
n Jobs in the ITeS industry
lack esteem
n Employment not seen as
a long-term career option
n In-industry attrition
remains high
n Key skills required by the
industry are not
developed through
current educational
system
n Lack of adequate
interaction between
formal and non-formal
education systems
n Lack of a standardized,
modular curriculum for
ITeS
n Lack of national-level
mechanism for pre-
certified pool of
resources
n Lack of understanding of
specific parameters to
test and certify upon
n Lack of feedback loop on
resource deployment
and skills provided
n Lack of direct placement
links between
institutions and ITeS
industry, especially in
Tier-II and smaller cities
Source: Industry / Academia interactions. Department of IT. KPMG . 2003.
Illustrative
84
In order to tackle the issues highlighted previously, it is imperative that certain steps are
taken in a focused manner across the education lifecycle.
One of the main focus areas would be to generate awareness of the various career
options that are available to students and professionals. With India being increasingly
looked at as a destination of choice, more and more opportunities would be available.
Another key area would be the revision of curriculum to create a more IT sensitive
workforce with greater domain knowledge. Specialized training courses would need to
be developed for enhancing human resource skills.
Certification of skills would need to take place by the creation of a standardized test for
checking basic ITeS skills. At the same time a monitoring mechanism with adequate
control would need to be set up.
Finally, the loop would be completed with effective deployment of trained and certified
personnel. A greater role would need to be played by placement cells in colleges and
universities.
The key recommendations and time–frame for implementations have been highlighted
further in the report.
As a result, the recommended solutions must effectively be
designed to address these gaps . . .
Attract Educate Certify Deploy
n Awareness creation
programs
n Systematic counseling to
enhance the perceived
image
n Define career paths
under employment in
ITeS / IT industry
n Provide specific
incentives for ‘out-of-
industry’ hiring
n Changes in the
educational curriculum
from the primary to
graduate level as well as
new vocational courses
n Increase co-operation
between non-formal and
formal systems through
sharing for
infrastructure, faculty,
testing systems etc.
n Creation of institutional
capacity for specialized
training
n Creation of a national
testing institution
framework and
infrastructure
n Develop and norm a test
for basic ITeS skills
n Encourage placement
cells within the
education system
n Establish platforms for
industry – academia
interface to assess
employability of
resources, especially in
Tier-II and smaller cities
Source: Industry / Academia interactions. Department of IT. KPMG . 2003.
Illustrative
85
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Recommendations:
1. Create an ‘ITeS / IT awareness fund’ with industry support to generate awareness
about ITeS / IT employment, especially in Tier II / III cities through advertisements,
workshops, seminars and counseling sessions.
2. Leverage existing infrastructure in the form of universities / colleges and existing
vocational counseling centers, especially in Tier II and smaller towns to provide
career counseling on ITeS / IT opportunities.
3. Provide special incentives (e.g. tax exemption, resettlement allowance, residence
status) to attract experienced expatriate talent for high-end ITeS / IT and R&D work.
4. Introduce changes in the telecom and customs / excise regulations to enable
working from home for ITeS / IT industry.
The specific recommendations on actions required include . . .
nAttracting resources into ITeS / IT (including R&D)
Create an ‘ITeS / IT awareness fund’ with industry support to generate awareness about ITeS / IT employment, especially in Tier II / III cities through advertisements, workshops, seminarsand counseling sessions
- Ministry of Finance- NASSCOM
1.
Leverage existing infrastructure in the form of universities / colleges and existing vocational counseling centers, especially in Tier II and smaller towns to provide career counseling on ITeS /IT opportunities
2.
Provide special incentives (e.g. tax exemption, resettlement allowance, residence status) to attract experienced expatriate talent for high-end ITeS / IT and R&D work3.
Introduce changes in the telecom and customs / excise regulations to enable working from home for ITeS / IT industry
4.
- Ministry of HRD
- NASSCOM
- Ministry of External Affairs- Ministry of Finance
0 – 6th month: Assess impact on Telecom / Tax and prepare a benefits case for representation
6 – 12th month: Work out specific details and reporting requirements
- Ministry of Finance- Ministry of Labor
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
0 – 3rd month: Prepare relevant information to be disseminated
0 – 6rth month: Identify industry involvement opportunities for counseling
0 – 6th month: Identify potential contributors to the fund, size of the corpus as well as the administration
6 – 9th month: Pilot the use of the fund to check effectiveness in select cities
0 – 6th month: Identify and agree on nature of benefits to be provided and the specific eligibility criteria
6 – 9th month: Establish specific monitoring and reporting mechanisms
Attract Educate Certify Deploy
Illustrative
Note:
High priority
Medium priority
Low priority
86
- Dept of Science and Tech.
- Ministry of Comm. & IT
- Ministry of Comm. & IT
- Ministry of Comm. & IT (DOT)
- Ministry of Comm. & IT
5. Bridge gaps in the formal education system to provide specific skills related to ITeS
/ IT as part of the primary/secondary, higher secondary and tertiary education
systems.
6. Update curriculum under the formal education system more frequently to reflect
global industry developments and skill requirements.
7. Change the evaluation system under the formal education system to encourage
creativity and learning through continuous evaluation and learning through
experience.
8. Develop specialized vocational courses for ITeS / IT under the formal and non-
formal systems to achieve speed–to-market, lower costs and better penetration of
specialized courses with industry support for training and curriculum.
9. Establish and encourage global linkages within the formal education system (e.g.
student / faculty exchange, joint R&D, internships) by linking funding to such
efforts.
Recommendations (continued) . . .
n Educating / providing skills to resources for ITeS / IT (including R&D)
Bridge gaps in the formal education system to provide specific skills related to ITeS / IT as part of the primary/secondary, higher secondary and tertiary education systems
0 – 12th month: Encourage industry and academia to review and recommend changes required
12 – 24th month: Implement and monitor impact of change
- Ministry of HRD- Ministry of Comm. & IT- NASSCOM
5.
Update curriculum under the formal education system more frequently to reflect global industry developments and skill requirements
0 – 6th month: Agree on framework for review and revision of curriculum
6 – 12th month: Appoint a nodal body to monitor need for curricular changes and to recommend changes
- Ministry of HRD (AICTE, NCERT, CBSE, IGNOU)
- NASSCOM
6.
Change the evaluation system under the formal education system to encourage creativity and learning through continuous evaluation and learning through experience
0 – 6th month: Assess the nature of change required with respect to evaluation
6 – 12th month: Work with the formal sector of education to roll-out revised evaluation process
- Ministry of HRD (AICTE, NCERT, CBSE, IGNOU)
7.
Develop specialized vocational courses for ITeS / IT under the formal and non-formal systems to achieve speed –to-market, lower costs and better penetration of specialized courses with industry support for training and curriculum
0 – 6th month: Identify specific colleges / universities in select cities to introduce specialized courses
0 – 9th month: Launch ‘train-the-trainer’ programs with industry support
- Ministry of HRD (UGC, Assoc. of Universities, NIEPA)
- Ministry of Comm. & IT- NASSCOM
8.
Establish and encourage global linkages within the formal education system (e.g. student / faculty exchange, joint R&D, internships) by linking funding to such efforts
0 – 9th month: Revise and clarify funding norms by the Department of IT with respect to R&D funding
- Ministry of HRD (UGC, Assoc. of Universities, NIEPA)
- Ministry of Comm. & IT- NASSCOM
9.
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
Attract Educate Certify Deploy
Illustrative
Note:
High priority
Medium priority
Low priority
87
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
10. Emphasize and promote the uptake of alternative languages (e.g. W. European,
Japanese) through courses at the graduation level, with support from specialized
agencies.
11. Revise R&D funding norms for universities / colleges from current plan-based
system to a project-based system across universities and monitoring output targets
(e.g. publications, patents, consulting revenues etc.) .
12. Ensure networking of institutions at the graduate and post-graduate levels to
promote ‘networks of excellence’ as well as to share knowledge on industry trends,
curriculum and teaching practices.
13. Provide easy access to the IT systems and Internet facilities within the formal
education system for registered students, at minimal fees.
14. Allocate specific share (10-20 per cent) of funding support towards faculty
development and training through workshops, paid sabbaticals into the industry
and knowledge-sharing practices across universities.
n Educating / providing skills to resources for ITeS / IT (includi ng R&D)
Recommendations (continued) . . .
Revise R&D funding norms for universities / colleges from current plan-based system to a project-based system across universities and monitoring output targets (e.g. publications, patents, consulting revenues etc.)
0 – 9th month: Identify R&D performance monitoring metrics with norms for awarding project-based funding
12 – 24th month: Roll-out new system
- Ministry of HRD
11.
Emphasize and promote the uptake of alternative languages (e.g. W. European, Japanese) through courses at the graduation level, with support from specialized agencies
0 – 6th month: Agree on supporting agencies and curriculum structure for alternative language courses
6 – 12th month: Identify courses / institutions where to be introduced
- Ministry of HRD (UGC. Assoc. of Universities, AICTE)
- NASSCOM
10.
Networking of institutions at the graduate and post-graduate levels to promote ‘networks of excellence’ as well as to share knowledge on industry trends, curriculum and teaching practices
0 – 12th month: Co-ordinate efforts of the UGC and ERNET to classify major institutions under clusters and negotiate bandwidth required with BSNL and other players
- Ministry of HRD (UGC)12.
Provide easy access to the IT systems and Internet facilities within the formal education system for registered students, at minimal fees
0 – 12th month: Work with the ERNET, UGC and industry to find options to reduce costs for IT and Internet usage by students (e.g. bulk discounts, fiscal incentives)
- Ministry of HRD (UGC)
- NASSCOM
13.
Allocate specific share (10 - 20 per cent) of funding support towards faculty development and training through workshops, paid sabbaticals into the industry and knowledge-sharing practices across universities
0 – 12th month: Work with the universities and industry to finalize options for faculty development and link to funding
- Ministry of HRD (UGC)
- NASSCOM
14.
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
Attract Educate Certify Deploy
Illustrative
Note:
High priority
Medium priority
Low priority
88
- Dept of Science and Tech.
- Ministry of Comm. & IT(ERNET)
- Ministry of Comm. & IT
- Ministry of Comm. & IT(ERNET)
- Ministry of Comm. & IT(ERNET)
- Ministry of Comm. & IT
15. Impose greater discipline associated with information security adherence through
propagation of data security policies and related training.
16. Support alternative use of the ITeS / IT facilities and infrastructure of various
industry players for training and domestic services.
17. Extend tax incentives under Section 12A to recognized vocational training
institutions as well as companies focused on IT / IT-enabled services.
Recommendations (continued) . . .
n Educating / providing skills to resources for ITeS / IT (including R&D)
Impose greater discipline associated with information security adherence through propagation of data security policies and related training
- Ministry of Comm. & IT- NASSCOM
15.
16.
17.
Support alternative use of the ITeS / IT facilities and infrastructure of various industry players for training and domestic services
0 – 6th month: Assess specific issues related to infrastructure sharing / utilization and prepare a benefits case
6 – 12th month: Launch pilot with volunteer companies in select cities
- Ministry of Comm. & IT(DOT)
- NASSCOM
Extend tax incentives under Section 12A to recognized vocational training institutions as well as companies focused onIT / IT-enabled services
12 – 18th month: Assess tax implications and monitoring / reporting requirements associated with the same
- Ministry of Finance- Ministry of Comm. & IT- NASSCOM
0 – 6th month: Work with the industry and associations to develop specific regulations based on practices in EU / OECD / US to develop a framework for India
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
Attract Educate Certify Deploy
Illustrative
Note:
High priority
Medium priority
Low priority
89
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
Recommendations (continued) . . .
n Certifying skill levels of resources for ITeS / IT (including R& D)
Co-ordinate efforts to develop a common, on-line test for ITeS (IICT) with inputs from the industry and academia to test and certify relevant skills
0 – 6th month: Agree on on-line testing framework in terms of specific skills to be tested and possible existing tests to be drawn upon
- Ministry of Comm. & IT
- NASSCOM18.
Provide partial funding support for IICT certification in the form of soft-loans / bonds / subsidies by the central / state government and industry players
0 – 12th month: Agree with industry and academia the costs for a common test and the alternative options for funding
- Ministry of Finance- Ministry of Comm. & IT- NASSCOM
19.
Appoint a non-government, industry-approved national body like NASSCOM for administration of the IICT and to gather feedback from industry on the testing / certification process
0 – 6th month: Decide on the body for implementation and monitoring of the IICT across the country and define specific responsibilities
- Ministry of Comm. & IT- NASSCOM
20.
Design standards for the IICT (including nature of test, delivery mechanisms, testing benchmarks) based on industry requirements and with inputs academic experts
0 – 12th month: Design, test and roll-out of the IICT based on inputs received from industry, academia and the learning from various state government efforts
- Ministry of Comm. & IT- NASSCOM
21.
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
Attract Educate Certify Deploy
Illustrative
Note:
High priority
Medium priority
Low priority
18. Co-ordinate efforts to develop a common, on-line test for ITeS (IICT) with inputs
from the industry and academia to test and certify relevant skills.
19. Provide partial funding support for IICT certification in the form of soft-loans /
bonds / subsidies by the central / state government and industry players.
20. Appoint a non-government, industry-approved national body like NASSCOM for
administration of the IICT and to gather feedback from industry on the testing /
certification process.
21. Design standards for the IICT (including nature of test, delivery mechanisms,
testing benchmarks) based on industry requirements and with inputs academic
experts.
90
Recommendations (continued) . . .
nDeploying trained / certified resources into ITeS / IT (including R&D)
Note:
High priority
Medium priority
Low priority
Attract Educate Certify Deploy
Illustrative
Reform labor laws to support part-time and temporary working with clarifications on benefits, employment policies, rights in case of disputes etc.
0 – 12th month: Work with the ITeS / IT industry to assess specific issues and changes required
- Ministry of Labor- Ministry of Comm. & IT- NASSCOM
22.
Providing exemptions under the Income Tax Act for expenditure on IT equipment and communication for employees working from home
12 – 18th month: Assess tax impact and monitoring / reporting requirements and responsibilities related to such incentives
- Ministry of Finance- Ministry of Labor- Ministry of Comm. & IT- NASSCOM
23.
Set-up a database of trained and certified personnel and trainers for the ITeS / IT industry under a common, national body, to be shared with industry players as required for marginal fees
0 – 12th month: Define and parameterize the database to be shared with industry participants
On-going: Update database based on regular reports / filings by industry
- Ministry of Comm. & IT- NASSCOM
24.
Using industry and institutional inputs to develop ‘National Technology Plans’ on R&D focus area to guide deployment of R&D personnel and drive efforts in specific R&D areas
0 – 12th month: Involve all key stakeholders to assess potential opportunities and specific strengths for India to address those
On-going: Monitoring of technology focus plans
- Ministry of Comm. & IT- NASSCOM
25.
Appoint a dedicated committee to undertake periodic reviews and suggest corrective / alternative actions in order to ensure that HR development efforts match industry requirements
6 – 12th month: Identify sub-committee participants and their roles / responsibilities
12 – 18th month: Identify key metrics and reporting systems
- Ministry of Comm. & IT- NASSCOM
26.
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
91
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
National Association of Software and Service Companies
22. Reform labor laws to support part-time and temporary working with clarifications
on benefits, employment policies, rights in case of disputes, etc.
23. Provide exemptions under the Income Tax Act for expenditure on IT equipment and
communication for employees working from home.
24. Set-up a database of trained and certified personnel and trainers for the ITeS / IT
industry under a common, national body, to be shared with industry players as
required for marginal fees.
25. Use industry and institutional inputs to develop ‘National Technology Plans’ on
R&D focus area to guide deployment of R&D personnel and drive efforts in specific
R&D areas.
26. Appoint a dedicated committee to undertake periodic reviews and suggest
corrective / alternative actions in order to ensure that HR development efforts
match industry requirements.
The implementation of the recommendations should be
coordinated by a dedicated team that is representative and can
be held accountable . . .
Illustrative
Ministry of Comm. & IT
Ministry of HRD
Ministry of Finance
Ministry of External Affairs
IT/ ITeS industry
Industry associations
IT/ ITeS training service providers
Government
Industry
Committee on HRD in IT
Sub-committee on awareness efforts monitoring
Sub-committee on educational changes monitoring
Sub-committee on certification performance monitoring
Sub-committee on industry deployment / feedback measurement
Appointment for a term of six years with rotation of members every two years;
Accountability for development and performance targets
Sub-committees involving dedicated resources for
long-term support
Source: Dept of IT. Industry interactions. KPMG. 2003-2004.
The illustrative identifies the key stakeholders from both government and the industry.
A dedicated team would be needed to effectively coordinate activities of both the
spheres.
The Committee on HRD in IT would be the nodal point for all suggestions and action
points. This committee would in turn be organized into four sub-committees looking
after various activities related to each aspect of the education lifecycle.
This Committee on HRD would be appointed for a term of six years with rotation of
members every two years. The sub-committees as well as the Committee on HRD
would be accountable for the implementation of programmes and would have key
performance indicators to measure success.
92
93
Strengthening the human resource foundation of the Indian IT enabled services/ IT industry
KPMG
KPMG is the global network of professional services firms whose aim is to turn
understanding of information, industries, and business trends into value. With nearly
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The firm has access to the resources of Indian and expatriate professionals with diverse
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internationally trained.
NASSCOM
National Association of Software and Service Companies
The National Association of Software and Service Companies (NASSCOM) is the apex
boy and umbrella organization of IT services and IT-enabled services organizations in
India. It was formed in 1988 with the primary objectives of being a catalyst for the
growth of the software-driven IT industry in India. NASSCOM is a non-profit
organization and is registered under the Societies Act, 1896. It currently has over 850
member companies who collectively contribute to more than 95 per cent of the
revenues of the IT services and IT-enabled services industry in India.
NASSCOM’s aims and objectives include facilitating trade and business in IT services,
IT-enabled services and the e-commerce industry; encouraging the advancement of
research, facilitating the education, employment and growth of the Indian economy.
NASSCOM works with the Government of India and various state governments to
formulate policies and procedures in the IT services and IT-enabled services industry.
NASSCOM organizes conferences, seminars, workshops and exhibitions in India and
abroad. These events focus on areas such as Internet, e-commerce, e-governance, IT-
enabled services, ERP, networking and banking. It also organizes specialized export
promotion events in various countries of the world where overseas companies are
encouraged to interact with Indian companies.
National Association of Software and Service Companies
Key contacts for the report
Kiran Karnik Narayan Seshadri
kkarnik@nasscom.org nseshadri@kpmg.com
Sunil Mehta Rajesh C Jain
sunil@nasscom.org rcjain@kpmg.com
NASSCOM KPMG
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New Delhi - 110 021 448, Senapati Bapat Marg
http://www.nasscom.org Lower Parel
Mumbai 400 013
Phone : +91 11 23010199 http://www.in.kpmg.com
Fax : +91 11 23793936
Phone: +91 22 2491 3030
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National Association of Software and Service Companies I n d i a
Strengthening thehuman resource foundation of the
Indian IT enabled services/ IT industry
Report by KPMG Advisory Services Private Limited in association with
NASSCOMunder the aegis of the
Department of IT, Ministry of Information Technology and Communications,
Government of India
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