Geo-political, Economic, and Human Factors

Domestic Policy on Information Technology / Outsourcing:

Legislative power vested in Parliament consisting of President and two legislative bodies

■ Council of States: 245 members (six year terms)

■ House of the People: 550 members (two year terms)

Domestic Policy on Information Technology / Outsourcing:

For fiscal year 2010: measure extended to exempt IT-BPO (information technology and business process outsourcing) firms  from paying taxes on their profit from export of software and services

Economy of India

■ Gross National Income (GNI): $1.07 trillion

Equivalent to $950 per head

■ Gross Domestic Product (GDP)

Increased by an average of 6.1%, per head, per year

■ Trade Deficit (projected 2009): $28.7 billion

Equivalent to 3.5% of GDP

■ Inflation, average annual rate (2008): 8.7%

Geo-political, Economic, and Human Factors

Human Factors

Population: ■ The world’s second most populous country: 1,028,610,328

■ Population density is 325 persons per sq km.

Language: ■ Official language is Hindi - spoken by about 30% of the population.

■ English is used as an associate language for many official purposes.

Education Enrollment: ■ The world’s second most populous country: 1,028,610,328

■ Primary school enrollment: 88.7% of pupils in the relevant age-group

■ Secondary school enrollment: 54.6% of pupils in the relevant age-group

■ Collegiate universities enrollment: 10.0% of students in the relevant age-group

Education Funding: ■ Budgetary expenditure on education and literacy for 2008-09 was forecast at US$5,570 million, equivalent to 3.7% of total spending.

Vendor Capabilities

■ IT-BPO or IT/ITES (IT Enabled Services) industry came into existence roughly 2 decades ago.

■ As of end 2007: contributed to roughly 5.2% of India’s GDP. Industry revenues (2008): 64 billion.

■ Direct employment expected to reach 2.23 million and indirect employment approx 8 million by the end of 2009.

■ Industry matured considerably over the last decade.

■ Expansion of services from basic transaction-based services to more complex research and analysis-based services requiring knowledge of various verticals/domains.

■ Focus shifting from being a provider of purely low cost services to high quality at a competitive price.

■ Increased geographical penetration of services to countries apart from the U.S.

Number of vendors: the current NASSCOM membership base has over 1200 companies that include Indian as well as multinational companies (such as IBM, HP) that have a presence in India.

Top 5 vendors:

■ Tata Consultancy Services Ltd: Revenues (2008): US$5.7 billion; No of employees: 108,800

■ Infosys Technologies Ltd: Revenues (2008): US$4.2 billion; No of employees: 91,217

■ Wipro Technologies Ltd: Revenues (2008): US$2.9 billion

■ Mahindra Saytam (formerly Satyam Computer Services Ltd): Revenues (March 2008): US$2.1 billion; No of employees: 50,570

■ HCL Technologies Ltd: Revenues 2008: US$1.9 billion; No of employees: 52,714

Others Important vendors:

■ Mindtree, Polaris Software Laboratories, Patni Computers, I-Flex Solutions

Vendor Capabilities

Risk:  Business interruption due to terrorism, military dispute, or Acts of God

Mitigation:  Anticipate delayed business operations and staffing shortages Increase physical security measures in areas / times of high risk Develop emergency contingency plans

Risk:  Corruption within the local business and political communities

Mitigation:  Seek local legal advice to identify common forms of local briberyDetermine legitimate payments and refuse illicit bribe requests

Risk:  Bureaucratic delays and governmental confusion

Mitigation:  Develop contracts with clarity and precisionEnsure familiarity with required regulations at all levels of government

Risk:  Power shortages and electric outages

Mitigation:  Anticipate delayed business operationsProvide back-up generating power if acquiring physical space

Risks and Mitigation

Risk:  Security Risks due to contractor access to private and/or secure data

Mitigation:  Share only the minimum amount of data necessary for the contractor to perform the contracted services

Develop best practices for security with the contracting firm, including:

■ Data protection policies and requirements in the contract; review with the contractor■ Frequently review where data are and all parties that have access to data■ Identify new vulnerabilities and risks■ Review and audit the contractor's security practices and handling of data■ Require security reports from the contractor■ Request employee security training from the contractor, where possible

Risk:  Outsourcing contractor is not familiar with the industry or business operations being outsourced

Example :  A noted American telecom firm outsourced a software coding project to an Indian-based contractor.

■ The contractor had no experience with the American telecom industry■ Contractor did not know how to code the required software applications ■ Project languished and had to be finished in-house

Risks and Mitigation

Benefits of Outsourcing to this Location

Favorable Economic and Political Environment for IT outsourcing in India

For over a decade India has been at the forefront of the IT outsourcing movement, with nearly 60% of that activity coming directly from the US.

India exhibits a high level of cooperation between the private and public sector in setting pro-IT policies:

■ Software Technology Parks of India (STPI) (government)

■ National Association of Software and Services

Companies (NASSCOM)

Benefits of Outsourcing to this Location

Human benefits of outsourcing to India

English is the recognized business language, with over 250 million English speakers in the country

Virtually Unlimited talent pool

India adds 3.5 million grads and post grads to the talent pool annually allowing for almost unlimited expansion capability.

India offers significant labor cost savings

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