On Telecom's Role in Indian IT

In all the excitement and euphoria surrounding the growth of telecom in
India, it is pertinent to pause and reflect on the role that telecom has played
in the overall development of Indian economy in general, and the Indian IT and
ITeS industries, in particular. I am very happy to note that the editors of Dataquest
have chosen this topic, because it has relevance for a better tomorrow.

It is a well-established fact that India's competitive advantage helps to
ensure huge cost savings, and provides QoS and business process reengineering
capabilities. The productivity gains have given India an edge in the global ITeS/BPO
marketplace. Apart from the traditional cost advantage that India offers,
Nasscom pinpoints the following two factors as the major reasons behind India's
success in this industry:

• Improving telecom and other infrastructures, which are at par with global
  standards
• Fast turnaround times and the ability to offer 24x7 services based on the
  country's unique geographic location that allows for leveraging time zone
  differences

The inter linkages between the growth of telecom services and the Indian IT
and ITeS segments could be listed as follows:

• One of the major drivers for international bandwidth is software exporters
  and BPO service providers who are targeting newer geographical areas.
• Increasing off-shoring. Sensitive services like infrastructure management
  and network management, in particular, are driving the service providers to
  offer SLA and uptime commitments. This helps in improving backend
  infrastructure. Similarly, the ability of service providers to offer the SLA
  encourages service providers to take on complex and big projects
• More emphasis on convergence leads to higher amounts of bandwidth
  requirements. Higher instances of video-conferencing, tele-conferencing etc
  will lead to higher bandwidth requirements and will in turn pressurize the
  telecom service providers to offer these services.
• World class connectivity in tier 2 cities is helping the Indian BPO
  industry to be competitive as well as helping the fruits of development
  reach the hinterland

It is estimated that the telecom spends of IT and ITeS industries constitute
around 10% of their annual revenue expenditure. These industries have displayed
an average bandwidth demand growth rate of around 100% over the last 3 years.
According to industry observers the relative high cost of international
bandwidth and IPLC circuits is one of the areas, which erode the competitiveness
of Indian industries. Hence, though telecom has played a key role, a lot more is
still to be done.

The onset of high growth rates in the IT services exports coincides with the
liberalization of the Indian telecom sector through the NTP of 1999. This new
policy brought in further changes with the introduction of IP telephony and
ended the state monopoly on international calling facilities. This brought about
drastic reduction and heralded the golden era for the IT/ITeS/BPO. Indian
entrepreneurship bloomed.

Today's telecom has come a long way-from wired heavy telephones to smart
wireless phones that are now standard accessory to any Indian; from telegrams to
SMSs; and from postal letters to emails. The telecom revolution that is sweeping
across the country is poised to transform the lives of a billon people. It is
now well accepted that the increasing tele-density can be a powerful stimulant
to the growth of the Indian economy. Studies suggest that the incomes of
business entities and households increase considerably with the use of telecom
services.

However, the ways and means in which it benefits different sectors is still
to be researched to aid the policy initiatives of the government and the private
sector.