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Home > Business > Special

IT revolution enters new phase

Leslie D'Monte in New Delhi | December 26, 2005

The year 2005 has indeed been eventful for the Indian information technology sector. IT and electronics majors like Microsoft, Intel, Motorola and Philips have committed to invest billions of dollars in R&D and manufacturing.

This would eventually translate into more jobs, cheaper electronic goods (especially mobiles) and better branding. Incidentally, India has a low level of IT investment – only 3.5 per cent of the total capital, which leads to lower direct contributions to the GDP (currently less than 4 per cent) and lower productivity.

This year also saw a rise in the number of business process outsourcing and knowledge process outsourcing. While there was a backlash in the US and Europe over the questionable loss of jobs to Indians, Nasscom estimated that growth in India's BPO sector alone in 2005 would be around 40 per cent, taking the IT-enabled services industry to $5.1 billion. The worldwide offshore BPO market is expected to grow to about $24 billion by 2007 of which India is expected to earn about $13.8 billion.

However, a recent Gartner report cautions that a labour crunch and rising wages (Ireland's case is fresh in many minds) could spoil the party, eroding as much as 45 per cent of India's market share by 2007.

Emerging countries such as the Philippines, Malaysia, Vietnam and Eastern European nations including Hungary and Poland, are also starting to challenge India's leadership in offshore BPO. BPOs/KPOs should also take care that the security of their data and employees is not compromised, else their image could be tarnished. Besides, trade unionism is a potential threat.

As the year comes to an end, one cannot but fail to mention the mobile revolution. The Cellular Operators Association of India estimates that the Indian cellular industry has the potential to reach about 200million by 2007.

Currently the number is said to be around 70 million. The Indian mobile services contribute Rs 313 billion to the GDP. Indian consumers already spend almost the same proportion of GDP on mobile services as those in the European Union.

However, a recent Ovum research report reveals that 53 per cent of that GDP is exported due to the lack of national network equipment and terminals manufacturing business.

Estimates show that 3.6 million jobs are dependent on the mobile services industry, and this figure is expected to rise by 30 per cent over the next 12 months. The sector generates around Rs 145 billion for the Indian government. Of this, 30 per cent comes from taxes that are specifically levied on the mobile services sector alone.

And with mobility, comes the talk of wireless technologies. The government is expected to introduce 3G (four to five times higher voice capacity than the current 2G services) by 2006. Intel and BSNL have introduced Hot Spots (wherein you can connect your Wi Fi-enabled (or Centrino) laptop to wireless network and logon to the Net instantly).

3G will help in enhancing India's competitiveness in the ITeS/BPO segment. All this will entail an increase in India's optical fibre network, which currently stands at 670,000 km (all providers including BSNL).

The talk on wireless technologies and standards will be incomplete without names like Wimax and Ultra wideband. Wimax, for instance, is the new kid on the block. Taking over from Wi-Fi or the 802.11 b technolgy , Wimax (802.16 a) promises to bring bandwidth to the masses at higher speeds.

Though Wimax is thought of as a migration path to 4G technologies, others feel that the equipment cost of Wimax will compete with those of more advanced 3- and 4G wireless systems, providing similar bandwidth by 2010.

Internet penetration in India is increasing with around 40 million Net users, predicted to touch around 100 million by 2007. The digital home will establish a foothold, boosted by broadband.

Ecommerce is slated to touch Rs 2,300 crore (Rs 23 billion) in 2006. RFID (radio frequency identification) tags are replacing barcodes in retail malls like Shoppers Stop and Pantaloon. Gartner estimates worldwide RFID spending to total $504 million in 2005. With broader industry adoption, it may surpass $3 billion by 2010.

The open source movement (expected to account for 20 per cent of the global software market by 2010, says Gartner) is gaining momentum with big names like IBM and Sun backing it. Gaming is becoming serious business. Blogging, virtualisation, robotics, automated management, voice-over-IP, converged devices, integration platforms, and composite applications and Web services - all have taken off this year.

Services and utility computing are becoming buzzwords. The Indian enterprise IT spending (hardware, software, telecom and IT services) is expected to touch Rs 1,09,300 crore (Rs 1093 billion) in 2006, growing at a CAGR of 20.8 per cent - Rs 73,900 crore (Rs 739 billion) was spent on telecom services and equipment, Rs 17,200 crore (rs 172 billion) spent on hardware, Rs 14,100 crore (Rs 141 billion) on IT services and Rs 4,100 crore (Rs 41 billion) on software.

The total worldwide enterprise ICT spending (excluding internal IT spend on salaries) is expected to reach $1,768 billion in 2006. Enterprise ICT spending in Asia Pacific will reach almost $210 billion in 2006.

Products incorporating nanotech are already in the world market. Samsung has nano-silver addititves in its washing machines. Lee Jeans offers spill-resistant pants using "nano-whisker" fabric technology developed by NanoTex.

Other trends include the fact that gadgets are becoming smaller, slimmer (check out the nano Apple iPods), smarter and more aesthetic (the Nokia N-series and Motorola Razr, for instance). To sum up, the age of convergence has dawned.

Striding Ahead

  • IT and electronics majors have committed to invest billions of dollars in R&D.
  • Nasscom estimated BPO sector growth in 2005 would be around 40%.
  • COAI estimates that the cellular industry would reach out to 200 million by 2007.

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