IT Services exports Domestic

4. 5; 150 2. 1; 160

7. 3; 220 2. 7; 190

13. 2; 345 3. 9; 250

23. 1; 510 7. 9; 400

36. 7; 720 14. 3; 615

54. 5; 975 24.0; 870

76. 9; 1,225 101. 7; 1,490 37. 5; 1,155 54.0; 1,485

Engineering Services,
R&D, Software Products
exports
Domestic

1. 6; 55 0.5; 40

2. 5; 75 0.8; 60

3. 9; 105 1. 3; 85

6.3: 145 2. 2; 115

10.0; 205

3. 2; 135

15. 1; 280 5. 1; 165

21.0; 365 6. 7; 200

27. 8; 430 9. 6; 240

Total IT Industry (excluding hardware and BPO sectors)

8. 7; 405 13. 3; 545 22. 3; 785 39. 5; 1,170 64. 2; 1,675 98. 7; 2,290 142.1; 2,945 193.1; 3,645

USD (Billion); Number of IT Professionals (‘000) *Expected

 

˲ Realizing the Indian college system was unable to provide much IT training, three Indian entrepreneurs took it upon themselves in 1982 to provide IT tutorials and training classes. Their early days were often marked with one of them driving a motorcycle and the other riding behind with a PC in his lap so that they could impart this training in some rented school space (in evenings and on weekends). Today, their institute (NIIT) is a multinational company that has helped build a substantial base of IT skills in India.

˲ In 1985, Texas Instruments set up an office in Bangalore with a direct satellite link to the U.S. By 1989, the government had also commissioned a direct 64Kbps satellite link to the U.S.,

economic hardships
forced u.S. companies
to reduce costs.
as a result, they
transferred even
more it work to
india, thereby fueling
the growth of an
industry that was
already growing.

which offered software exporters a new way to transfer data and services and set the foundation for offshore business models that could compete with the onsite “body shopping.”

In 1993, the U.S. Immigration and Naturalization Service made changes that made it difficult to get B- 1 visas. Furthermore, the U. S. Department of Labor required that companies applying for new H- 1 visas needed to certify that prevailing market wages were being paid to immigrant workers. Also, Indian software professionals who were brought under the umbrella of the Immigration Act, had to pay Social Security and related taxes to the U.S. government, creating an additional burden on the employees as well as their employers. These factors led a few IT companies in India to adopt a mixed model, which satellite links had already enabled, and in which some software programmers would work at the client’s premises (in the U.S.) whereas others would continue to work in their offices in India. Nevertheless, the move to this new business model was gradual because cost savings for the onsite model were still quite large, and there were clearly advantages of being in close proximity to the client. Even today, some IT companies continue to follow the old model and send 15%–25% of their programmers to the U.S. and other developed countries.

By 1998, the IT industry in the U.S. and other developed countries was consumed by the Y2K problem, and two industries—telecommunications and

the Internet (with its associated dot-com start-ups)—were booming. This resulted in U.S. companies hiring increased numbers of computer programmers, and since the Y2K problem was mainly related to legacy software written in old languages like COBOL, India was one of the few countries that could still provide a sufficient number of such programmers. Consequently, the U.S. government was forced to increase its H- 1 quota from 65,000 in 1998 to 130,000 in 1999 and then to 195,000 soon thereafter, and many Indian IT professionals moved temporarily or permanently to the U.S. However, in spite of the large influx of IT professionals, the U.S. industry still could not fulfill its programming needs and started outsourcing large amounts of programming and maintenance work to India.

By early 2000, the Y2K problem had been solved, and both the telecommunications and dot-com booms had suffered downturns. In 2001, the U.S. went into a recession and the U.S. government reduced its H- 1 quota back to 65,000. Far from harming India, though, these events showed that offshore outsourcing grows in both good times and bad times. Economic hardships forced U.S. companies to reduce costs. As a result, they transferred even more IT work to India, thereby fueling the growth of an industry that was already growing exponentially.

The table here lists the revenue earned and the number of professionals employed by the Indian IT services industry during alternate years spanning 2001–2002 and projects numbers