Build the Building Blocks

The mandate that the United Progressive Alliance (UPA) received from the
people of India in the last General Elections is one of the most clear that the
Indian electorate has given to any party/alliance in recent times. With the
expectations still running high, it is not going to be easy for the finance
minister, Mr Pranab Mukherjee, to do the perfect balancing act, when he goes on
to the present the Union Budget for 2009-10 in the first week of July.

On one hand, there are the promises made to the aam aadmi that have to be
addressed; on the other, there is the immediate challenge of a global recession
and the Budget must be seen to be doing something that would boost the economy
immediately and the Indian industry. On one hand, there are pressing national
issues that require immediate action, such as national security; on the other,
the long-term priorities like bettering education and healthcare cannot be
overlooked.

Very often, the expectations from the industry also needs a delicate
balancing. Like the country itself, its industry is diverse and the needs and
expectations are very often diverse.

Indian IT industry is no exception. In most countries, the local industry is
just the supply side of the market. Not so in India, which has an export
services industry that is two-third of the total IT industry. The part of the
industry that serves the domestic market is just the other one-third. This means
the needs are completely diverse. While the exports industrys consistent demand
is the governments continued policy measures that would keep them competitive
in the global market, the part of the industry focusing on the local market
expects the usual stuff like duty reduction and other such incentives.

When Dataquest decided to ask the CEOs and country heads of large IT
companies in India about what they expect from the new government, we expected
these diverse needs to come out. And they did. While the software services firms
want policy measures like continuation of STPI schemes, the domestic industry
expects more wide-spread deployment of IT in government services, something seen
as the best hope in a recession-hit economic environment.

Yet, when it comes to the big message, it is anything but fractured. It is
almost unanimous, loud and clear: better infrastructure. Call it unity in
diversity if you like, but fifteen of the twenty-two CEOs that we asked said
creating better infrastructure should be the topmost priority for the new
government.

Honorable Finance Minister, at least this communitythe global face of
Indianot just spares you from getting into another balancing act but
emphatically endorses what you yourself have outlined as one of your top
priorities: infrastructure. The IT industry is solidly with you on this one.

In early to mid-90s, when India was beginning to undertake the reforms with
prime minister Manmohan Singh driving the agenda as the finance minister, most
visiting senior executives from global companies would present Power Point
slides on what they perceived as Indias strengths and weaknesses. Some common
strengths were perceived as its demography, quality of education, and a free and
open society, infrastructure was always seen as a minus. Many even singled out
the infrastructure area that was considered most important for them (this
writer, of course, got to see more of the technology industry presentations):
telecom. Since then, telecom has got transformed completely and in turn, has
transformed India. Despite initial hiccups, telecom remains Indias only success
story in infrastructure. The challenge is to repeat that story in other areas of
infrastructure, more specifically roads, airports and powerthe last becoming a
top-of-the-mind issue for most of the industry, as they compete as equals in the
new global economy.

However clich it may sound, the consensus message from India IT,
Incirrespective of whether they sell products or services, whether they sell to
Indian customers or overseas ones, whether they earn in rupees or dollarsis
that infrastructure is key.

The Specific Expectations

The IT industry captains may agree when it comes to what they think is the
broader agenda before the government, but the immediate business concerns show
up, when it comes to specific policy thrusts in the realm of IT that they expect
from the government. As many as twelve out of sixteen CEOs from export-focused
companies that participated in the survey say the #1 step for the government
should be to extend the STPI scheme and incentivize the recession-hit export
services companies. Five out of six participating CEOs/country heads from
domestic-market focused companies say that the #1 government measure that would
help the IT industry is to deploy IT in all governance areas including citizen
services, intra-government functions and national security.

Since we spoke only to large companies, and in that base, there is a definite
skew towards export services firms, our sample also had a similar skew. As many
as sixteen companies were export-focused while only six were domestic focused.
However, some of them like Aegis and Intelenet do considerable business in both
India and overseas. While based on their revenue mix, they have been classified
as export-focused companies, their interest also lies in India where growth is
coming from and that arguably dilutes the skew.

Interestingly, if the question of what should be the top priority for the
government divides the industry along domestic-export lines, as the immediate
need overshadows the long-term thinking, when it comes to the next priories, the
industry is united again. As many as twelve of the CEOs, cutting across the two
camps, list intervention in the education system to sustain Indias competitive
advantage in talent supply, as their #2 or #3 choice when it comes to what
specific policy measures the government should take, pushing it to the #2
position in the combined wish list. Two of them say it should be the #1
priority.

The top choice of the domestic industrymore spending by the government on
ITis a close third. With five #1 choices, investment in telecom infrastructure
comes in as #4 in the combined wish list. Some of them also feel that the duty
incentives for the domestic market should continue to grow the market. However,
not a single CEO thought it to be the most important measure.

While cyber security and strong cyber lawssomething that does not directly
impact the IT industry so muchexpectedly got a low score, what is noteworthy is
that few thought the government should do something to boost local
manufacturing. This was one of the most important points in the BJPs IT vision
document, as it was in sync with its digital sovereignty ideology.

Budget Expectations

As the finance minister Mr Pranab Mukherjee has indicated, the IT exports
industry may well get what it is demanding: extension of STPI scheme in some
form or the other. He is also expected to announce some measures for boosting up
primary and secondary education, which the entire IT industry sees as one of the
most important measures on part of the government, if India has to truly realize
its dream of becoming global services hub.

What, however, will be interesting to see is what budgetary provisions would
be there to dramatically increase adoption of IT in government.

But more important than all theseas the IT industry so unequivocally saysis
putting up the basic building blocks. What the government does to speed up
faster creation of basic infrastructure is something that will be closely
watched by everyone. Through this survey, the IT industry has conveyed that, it
is no exception.

Shyamanuja Das

shyamanujad@cybermedia.co.in

When it comes to IT, what are the most important tasks before the
government?

Vishnu R Dusad, CEO & MD, Nucleus Software

• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Extending the STPI scheme by a further three years, which is slated to
  come to an end in March 2010
• Promoting innovation and creation of Intellectual Property and National
  Innovation clusters. Enhanced focus of government in shaping the innovation
  infrastructure will help tap Indias large potential for creating wealth.

When it comes to IT, what are the most important tasks before the
government?

Phaneesh Murthy, CEO, iGate

• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Duty incentives for growing domestic IT market
• Extension of STPI scheme and other sops to boost recession-hit exports
  industry

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Create a multilateral policy that will allow free movement of IT
  professionals to different countries
• Bring greater transparency in citizens interaction with different sections
  of the government through IT
• Ensure regionalization of computing, ie, spreading the use of computers to
  citizens through local language applications

When it comes to IT, what are the most important tasks before the
government?

Kishor Patil, CEO & MD, KPIT Cummins

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Intervention in education system to sustain Indias competitive advantage
  in talent supply

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Extension of STPI scheme to small and medium enterprises to help them
  improve their liquidity position. The government should try to increase SEZ
  investments
• The government should take proactive steps to increase domestic IT spend,
  by incentivizing IT implementations at Indian companies, public sector units
  and government enterprises
• Steps should be taken to provide bigger bandwidth/ flexibility for Indian
  companies to build operations in tier-3 cities, thereby providing opportunity
  for multi-locational working

When it comes to IT, what are the most important tasks before the
government?

Aparup Sengupta, CEO & MD, Aegis

• Duty incentives for growing domestic IT market
• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Ensure that the government creates a very healthy economic climate as the
  next decade of Indias IT/ITeS revolution will be in the domestic business
• The government should focus on incentivizing this segment to propel growth
  in order to make this a $100 bn plus industry in the next ten years

When it comes to IT, what are the most important tasks before the
government?

PR Chandrasekar, CEO, Hexaware Technologies

• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions.
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Education system and talent supply
• Infrastructure

When it comes to IT, what are the most important tasks before the
government?

Kris Gopalakrishnan, CEO, Infosys

• Extension of Software Technology Parks of India (STPI) scheme and other
  sops to boost recession-hit exports industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Extend the STPI scheme so that smaller companies can benefit from this in
  the current environment.
• Make sure of the speed of decision making of government and clarify
  pending issuesfor example, taxation of SEZs.
• Invest in building up the supply by improving higher educationgovernment
  can open education sector as it did with the industry in 1991.

When it comes to IT, what are the most important tasks before the
government?

Alok Ohrie, president, India & SAARC, EMC

• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax
• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions

What, according to you,are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Deployment of IT in the citizen services area will improve transparency
  and efficiency in governance
• Encouraging IT oriented curriculum in our education system
• Formation of an IT Task Force, which could be an apex body for the IT
  industry comprising representatives from the IT Ministry, academia and
  industry. IT organizations could approach the Task Force for any
  issues/recommendations/assistance they might require. The Task Force would
  then provide recommendations based on these inputs. This would further the
  cause of IT in the country by enabling greater participation from both the
  industry and the government.

When it comes to IT, what are the most important tasks before the
government?

Arun Jain, CEO & MD, Polaris

• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Duty incentives for growing domestic IT market
• Extension of STPI scheme and other sops to boost recession-hit exports
  industry

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

Current Tax structure is based on simultaneous schemes like STPI, SEZ,
FreeTrade Zone, Export Processing Zone and New SEZs. This is complex and
sometimes leads to ambiguous interpretations.

I would like to share just two suggestions:

• Flat Tax structure for domestic and exports
• Slab wise tax structure on Industry maturity

8% Tax rate for companies profits having over 1000 crore

12% for the companies having profits over 100 crore

8% for the companies having profits below 100 crore

When it comes to IT, what are the most important tasks before the
government?

Ravi Venkatesan, chairman, Microsoft India

• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Duty incentives for growing domestic IT market

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• The first one is building infrastructure, whether it is consistent power
  supply or broadband connectivity to schools, colleges, every village panchayat
  and the like. It is staggering to think that we are at less than 5 mn
  broadband connections todayand we generously define broadband that is
  anything above 56 Kbps. This has to change if we are to become an IT
  superpower in the real sense of the word. The IT industry is constrained by
  this problem of low connectivity, and if the government is thinking of an
  economic stimulus package, this would be a wise investment to make.
• The biggest potentialas well as needfor IT to bring about a
  transformation is in the field of education and skill building. Providing
  access to skills training at a very large scale, ensuring high quality
  training resulting in effective mastery of skills, a low cost delivery
  mechanism and affordable solutions and devices are key issues requiring deep
  engagement and attention. Low cost computing devices, broadband access and
  using services through the Internet cloud will be key in overcoming these
  challenges. A connected focus will be to have trained teachers to meet the
  target of 500 mn trained people. Making ICT the primary enabler for driving
  quality in education by creating ICT enabled class rooms in 500,000 secondary
  schools by 2012 and 1 mn elementary schools by 2015 will be key. A laptop for
  each teacher is a must to enable ICT to not only ensure quality in education
  but also make education IT enabled. National PC programs for adoption of IT
  for teachers, students, civil servants, defence forces, etc, should be
  supported by the government.
• The stated policy of the Government of India has consistently been one of
  technology neutrality and this has served the country well on its path to
  development by encouraging competition, choice and innovation. As technology
  evolves, innovation will lead to heterogeneous environments wherein different
  platforms will co-exist, and in this scenario, the country will be served well
  by focusing on interoperability.

When it comes to IT, what are the most important tasks before the
government?

Rohit Kapoor, CEO, EXL

• Intervention in the education system to sustain Indias competitive
  advantage in talent supply
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• The government should build systems that would help in creating a pool of
  employable graduates. The recession is a temporary and passing phase of the
  economy. When the economy is back on the track, there will be a surge in the
  demand for talent. Therefore, a proactive, approach based on public-private
  partnership model, on this front would be useful in capitalizing on the
  opportunities in the future
• A lot has happened in the recent past in terms of infrastructure
  development including roads, public transportation, schools and colleges,
  telecom, power, etc, which is extremely important for a successful and smooth
  functioning of businesses. Nonetheless, we are still away from what can be
  called as a robust infrastructure, which would reduce some of the variable
  costs such as transportation and multiple power backup management cost.
  Further, most of the development activities have been limited to a few metro
  cities and their suburbs. The development should be extended to tier-2 cities
  because it would be helpful in bringing down other costs such as real estate
  costs. It would eventually help companies regain their competitiveness against
  emerging global locations
• Bringing about transparency and minimizing red tape in SEZ policy
  implementation. Red tape is the biggest inhibitor in companies setting up
  their facilities in SEZs

When it comes to IT, what are the most important tasks before the
government?

Col Bedi, CMD, Tulip

• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Necessary policy steps to boost local IT manufacturing

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Institutionalizing R&D with greater thrust towards product development
• Broadband penetration
• Incentivize organizations towards IT adoption

When it comes to IT, what are the most important tasks before the
government?

Ganesh Natarajan, CEO, Zensar

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Duty incentives for growing domestic IT market

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

Governments in the past have so far played a stellar role through innovative
policies that have spurred the growth of the industry through the nineties till
it reached global dominance earlier this decade.

While some argue that the industry now has come of age and does not need
policy support like the STPI Scheme to sustain and enhance its leadership, this
is far from the truth. The biggest beneficiaries of the STPI scheme have been
the small, and medium sized companies and if the STPI and Section 10 A benefits
are withdrawn these small and medium scale industries will seize to exist. So
the new government should most definitely look at an extension of the STPI
scheme.

The new government should look at enhancing our education system if not
revamping it completely and should focus on collaboration with the industry to
develop a more robust education system right from the grassroots, as the time
has come for a new breed of business education in our country which is aimed at
building a new generation of business and technology analysts who can walk into
organizations within the industry and start contributing from the first day they
join the company.

When it comes to IT, what are the most important tasks before the
government?

Naresh Wadhwa, president & country manager, India & SAARC, Cisco

• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Extension of STPI scheme and other sops to boost recession-hit exports
  industry

What, according to you,are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Announce a MEGA project to increase broadband penetration for the current
  level of 6 mn to at least 150 mn by the year 2014 (China is already at 75 mn
  today)
• Monitor and execute the National e-Governance Plan (NeGP) on a mission
  mode and time bound manner and spend the $10 bn allocated for NeGP without
  delays
• Use IT for improving delivery mechanism of government schemes and plug
  leaky pipes

When it comes to IT, what are the most important tasks before the
government?

Ravishankar G, CEO & MD, Geometric

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Duty incentives for growing domestic IT market
• Intervention in education system to sustain Indias competitive advantage
  in talent supply

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Increase competitiveness of Indian IT sector through continued export
  incentives, simplified SEZ regulations and faster service tax reimbursements
• Promote technical education by starting more technical institutes or
  incentivize private sector participation through tax reductions or other
  benefits
• Develop infrastructure to help the sector move to tier-2 and tier-3 towns
  to cut cost and leverage local talents

When it comes to IT, what are the most important tasks before the
government?

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
  

  R Chandrasekaran, president & MD, Cognizant

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

We welcome the results of the countrys general elections, which bear yet
another testimony to our democratic credentials. A stable government at the
center augurs well for the country, given the difficult economic times the world
is passing through. The decisive mandate will enable the UPA government to
pursue aggressive policies for inclusive growth, and do so rapidly.

In addition to the imperatives of long-term policy measures to ensure the
sustainable development of the country, matters of infrastructure development
and security also call for meaningful action. Considering the significant
contribution that the Indian IT and BPO industries have made to the countrys
economy, we look forward to more proactive policy initiatives and extension of
tax and other benefits from the government to boost the competitiveness of the
industry and enable it to seize the opportunities thrown up by the changing
world economy.

Thus the three most important steps would be:

• Proactive policy initiatives and extension of tax and other benefits from
  the government to boost the competitiveness of the Indian IT and BPO industry
• Fresh impetus to infrastructure development (physical, educational, and
  telecom), not just in the key metros, but also in tier-2 and -3 cities
• Boost security to discourage acts of terrorism and violence and help
  project India as a safe and secure IT destination

When it comes to IT, what are the most important tasks before the
government?

Susir Kumar, CEO, Intelenet Global

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax
• Take necessary policy steps to boost local IT manufacturing

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

Documentation time with regard to paperwork with regard to import of
equipment as this could lead to quicker turnaround time in the delivery.

When it comes to IT, what are the most important tasks before the
government?

Samir Yajnik, president global services & COO APAC, Tata Tech

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Duty incentives for growing domestic IT market
• Intervention in education system to sustain Indias competitive advantage
  in talent supply

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Extension of STPI scheme for another three years at least, together with
  laying better infrastructure
• The government needs to provide maximum support to induce intellectual
  property development. Grants and financial support for R&D is required to
  build critical IP that would help fulfill global ambitions of IT companies
• Cost arbitrage is not perpetual and Indian IT services firms cannot always
  depend on cost advantages to thrive. The government needs to take proper
  policy steps especially on the tax front to aid the growth of global IT MNCs
  from India

When it comes to IT, what are the most important tasks before the
government?

Ninad Karpe, CEO & MD, Aptech

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Duty incentives for growing domestic IT market

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Extension of the STPI scheme beyond the year 2012 will definitely help the
  Indian IT sector in facing the global recession (client losses, cut in
  retainers bill, cut in IT expenditures)
• Investment and development of IT infrastructure
• Promoting e-governance in government sector, education and public
  administration. Also deployment of technology for enabling web security

When it comes to IT, what are the most important tasks before the
government?

PV Kannan, CEO, 24/7 Customer

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Easing tax regulations: The taxes applicable for BPO and IT companies are
  at par with each other. The BPO industry is a smaller industry and the profit
  margins are lesser in comparison to the IT industry. Similar taxation applied
  for dissimilar industries will definitely affect the growth of the industry,
  especially during the current global economic recession. The government should
  re-evaluate withdrawing sops from STPI and providing the same to the SEZs. The
  BPO industry falls under STPI and hence will lose out on the benefits. These
  issues affect our competitiveness in the global arena.
• Improving supply infrastructure: In terms of skilled workforce, though
  India has a vast number of engineers graduating every year, due to an outdated
  curriculum, there is an employability gap as the potential candidates are not
  industry ready.
• Foreign affairs: Tightening of regulations by the US government
  specifically with respect to taxation on companies moving jobs offshore will
  have an impact on the IT/BPO industry and the new government must help ease
  the situation

When it comes to IT, what are the most important tasks before the
government?

Anurag Jain, MD, Asia Pacific, Perot Systems

• Extension of STPI scheme and other sops to boost recession-hit exports
  industry
• Intervention in education system to sustain Indias competitive advantage
  in talent supply
• Acceleration of deployment of telecom infrastructure such as broadband and
  Wimax

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

• Extension of the STPI Scheme for a few years would bring back confidence
• Duty incentives and SOPs for manufacturing of technology products/devices
• Deployment of quality IT infrastructure and software in the delivery of
  services to the people by the government
• The government should focus on furthering the national skills development
  agenda, which in turn will lead to holistic balanced growth, which would raise
  the purchasing power of the country and lead to long term sustainable growth
  of the IT industry

When it comes to IT, what are the most important tasks before the
government?

Anand Sankaran, sr VP & head, India & Middle East, Wipro

• Deployment of IT in all governance areas including citizen services,
  security and inter governmental functions
• Duty incentives for growing domestic IT market
• Take necessary policy steps to boost local IT manufacturing

What, according to you, are the three most important steps that you want
from the new government that would help the cause of IT in India?

We would like to congratulate the new government on winning the elections
with a clear mandate. Having a stable government at the helm of affairs will
also provide a steadier impetus towards economic recovery. We are confident that
the government, led by Dr Manmohan Singh, will continue the reforms initiated
and provide astute economic foresight.

A few focus areas for the new Government could be

• Encourage spending in the economy especially on public infrastructure like
  roads, power, transportation, etc
• Control inflation to ensure that it does not mitigate the net growth
• Speedy deployment of IT in all governance areas
• Provide SOPs for R&D activities in IT which will create a treasury of IPR
  and built stability in this industry.
• Provide duty incentives to the domestic IT market
• Encourage local IT manufacturing