Impetus to growth

Software houses from India have effectively provided many of the Fortune 500 corporations with efficient software solutions. These solutions have helped these companies to be more responsive to their customers and more attractive to their shareholders. No wonder, companies like Citibank, Morgan Stanley, AT&T, General Electric, Reebok, General Motors, Fujitsu, Boeing, Coca-Cola, Pepsi, Swissair and British Airways continue to remain ahead of their rivals, thanks to the efforts of many software companies in India.

This is a result of the government (In 1991) passing a series of favorable tax laws and building specialized commerce zones in order to stimulate industry activity. A wave of U.S. high-tech companies began rushing to India to set up sales and R&D operations. Companies such as Computer Associates, Microsoft, Cisco, Baan etc have turned to India for high value-add product development including conceptualization.

Today the list of software multinationals operating from India reads like a Who's Who of global software giants -IBM, Microsoft, Novell, Computer Associates, Oracle, AT&T, Fujitsu, Motorola, EDS, SAP, Computervision, Digital, Hewlett Packard During 1998-99, more than 203 of the Fortune 1000 companies outsourced their software requirements to India. This has produced an industry realizing a compounded annual growth of 53.84% over the last five years making India a growing source of worldwide software development.

The improved infrastructure, combined with more favorable policies allow companies to begin following an "outsourcing" model, whereby companies could bring projects (and add more value) back to India. By leveraging India's inherently large English speaking technical professionals and lower costs, outsourcing propelled Indian software industry to $3.9 billion in 1998-99 from just $835 million in 1994-95, according to NASSCOM.

However the vast majority of this growth has been fueled by India's export software market using its offshore model. Software exports increased over threefold to $2.65 billion in 1998-99 from only $485 million in 1994-95.

The Indian central government has singularly targeted the information technology sector as a strategic source for national growth. The Prime Minister publicly has vowed to "make India one of the largest generators and exporters of software in the world -within ten years". The government projects software export revenue to grow to $9.5 billion in 2001-02 from $1.75 in 1997-98. This implies nearly 50% CAGR during the forecast period, suggesting the relative importance the government places on stimulating Indian IT production.