<< . .

. 34
( : 53)



. . >>

Source: Heeks, 1999.



primarily driven by the export market, the growth of this sector remains an enclave of the
general economy without many forward or backward linkages. In terms of the spatial
location of the industry, approximately 90 percent of software development and export
is confined to the four major metropolitan areas of Bangalore, Mumbai, Delhi and Chennai
(as shown in Table 3), leading Mansell (1999) to perceive that export-oriented IT growth
would seem to have generated marginal spillover benefits.
The IT sector export-based strategy has been successful in India primarily as a result of
the outsourcing of services by the firms based in the developed economies. India has
been the focus for many Western firms as its competitive advantage is based on
technological agility, flexibility, cost control, time-to-market and quality. These advan-
tages are rooted in the established education sector, and Indian technology institutes
are acknowledged as world-leading institutions that select and train IT professionals.
115,000 Indian IT professionals graduate annually in a country with an English speaking
population of around 1 billion people. There is expansion in the IT market with more than
3,000 Indian software exporting companies currently having export relationships with
over 100 countries. Some of the leading Indian companies are registered with the NYSE
or Nasdaq.



Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
ICT Growth and Diffusion 245


Table 3. Distribution of software sales and exports across major locations in India

Sales % Exports %____________

Location 1997 1998 1997 1998
Bangalore 33.9 27.9 30.3 29.7

Mumbai 24.3 24.7 27.5 24.0

Delhi/Noida 15.9 20.3 15.3 18.5

Chennai 14.8 16.8 15.5 17.3

Hyderabad 4.2 5.4 5.3 6.3

Calcutta 3.3 2.3 1.5 1.3

Others 3.6 2.6 4.6 2.9

Source: Joseph, 2002:16.



It should be noted here that the IT sector is highly labour intensive, and one that employs
mostly skilled labour, although the level of this varies with the nature of a firm™s activities.
Available empirical evidence suggests that the IT export boom of the last decade should
be considered in the context of India™s labour cost advantage (as shown in Table 4). The
IT sector upswing has lead to increases in the demand for labour and also wage rates.
Table 4 reflects India™s cost advantage in relation to skilled employable labour in the IT
sector. More than this, off-shore IT work is also cheaper for MNCs than employing Indian


Table 4: IT labour costs across different countries in 1995 (Note: Figures are averages
for 1995 and were likely to rise 5 to 10 percent approximately per annum, with rates
being slightly higher in lower-income countries.)

Switzer USA Canada UK Ireland Greece India
__land_________________________________________________________
(US$ per annum)
Project leader 74,000 54,000 39,000 39,000 43,000 24,000 23,000
Business analyst 74,000 38,000 36,000 37,000 36,000 28,000 21,000
System analyst 74,000 48,000 32,000 34,000 36,000 15,000 14,000
System designer 67,000 55,000 36,000 34,000 31,000 15,000 11,000
Development programmer 56,000 41,000 29,000 29,000 21,000 13,000 8,000
Support programmer 56,000 37,000 26,000 25,000 21,000 15,000 8,000
Network analyst/designer 67,000 49,000 32,000 31,000 26,000 15,000 14,000
Quality assurance specialist 71,000 50,000 28,000 33,000 29,000 15,000 14,000
Database data analyst 67,000 50,000 32,000 22,000 29,000 24,000 17,000
Metrics/process analyst 74,000 48,000 29,000 31,000 - 15,000 17,000
Documentation/training staff 59,000 36,000 26,000 21,000 - 15,000 8,000
Test engineer 59,000 47,000 25,000 24,000 - 13,000 8,000

Source: Heeks (1999), adapted from Rubin (1996).



Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
246 Borbora


IT labour onsite. For example, using data invoice processing as an example, onsite work
at the client™s site would cost US $8,000 (plus local taxes) as opposed to US $4,600 offsite
in India (Heeks,1999).




Policy Measures Supportive of IT
Growth in the Indian Experience
The importance of promoting the software development industry has long been recog-
nized in India by the Department of Electronics (DoE), and suitable supportive policies
were in place as far back as in 1972 (Parthasarathi and Joseph, 2002). By 1982 the DoE
had begun concentrating on software export promotion policies, and the Computer
Policy of 1984 gave further thrust to the industry by underlining the need for institutional
and policy support in key areas. The accelerated growth of the computer industry after
1984 created calls for the rationalization of the import policies and for additional export
promotion. As a result of this, a new policy was announced in 1986 that identified
software specifically as one of the key areas for export promotion and underlined the
importance of an integrated approach to the development of software for both domestic
and export markets. This policy had the following major objectives:
• To promote software exports to take a quantum leap and capture a sizeable share
in international software markets;
• To promote the integrated development of the national software industry for both
domestic and export markets;
• To simplify existing procedures allowing the software industry to grow faster;
• To establish a strong base for the national software industry in India;
• To promote the use of the computer as a decision-making tool, to increase work
efficiency, and to promote appropriate applications in order to gain long-term
benefits of computerization for the economy.


To achieve these objectives various commercial incentives were provided to software
firms. These measures included tax holidays, income-tax exemption on software exports,
and the subsidized and duty-free import of hardware and software used for export
industries.
In 1991 the Indian government began to open the economy with a programme of market
liberalization and economic reform. At that time the Indian government™s assessment of
the IT industry was that India had a comparative advantage in the software export market
but not the hardware sector. Following this evaluation, the government consciously
prioritized software exports and new policy measures were initiated to support this
strategy, including the removal of entry barriers for foreign companies, the lifting of
restrictions on foreign technology transfers, the participation of the private sector in
policymaking, the provision of finance through equity and venture capital, reforms for


Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
ICT Growth and Diffusion 247


faster and cheaper data communication facilities, and the rationalization of taxes and
tariffs (Narayanmurthy, 2000).
In addition to these measures the Indian government also undertook a series of
institutional reforms including the establishment of an integrated Ministry of Commu-
nications and Information Technology. One key development stemming from these
reform was the establishment of Software Technology Parks (STP) to provide the
necessary infrastructure for software exports. At the time of this writing, there are 18 STPs
in India throughout the country and these play a significant role in exports. The total
number of units registered with the STPs increased from 164 in 1991 to 5,582 in 1999,
accounting for about 68 percent of all Indian IT Exports (Table 5). The facilities in these
STPs include, amongst others, modern computers and communication networks that are
beyond the reach of individual firms. In June 2000 a new STP consisting of a business
support center and an India Infotech Center was set up in Silicon Valley to facilitate
software exports by small and medium Indian firms to the US (Economic Times, 2000). The
center also fosters business relationships by providing access to US financial institu-
tions, venture capitalists and specialized trade bodies to promote partnership between
the US and Indian ICT software and service companies.
The success of the aforementioned policies and of the STPs led to an appreciable growth
of investment in ICT exports (Venkitesh, 1995). The growth of the sector outstripped that
of the workforce, leading to eventual labour constraints (Schware, 1987; Sen, 1995).
Traditionally the main source of ICT and software professionals was from Indian public-
sector educational institutes such as the Indian Institutes of Technology (IITs),
Industrial Training Institutes (ITIs) and engineering colleges, as well as additional
public-sector institutions such as C-DAC and CMC, Ltd. engaged in training computer
personnel. With the demand for skilled IT-sector labour increasing in the early 1980s, the
Government permitted private investment in IT training. Today, there are private
companies running training centers throughout the country through franchise networks
offering many courses. These institutes primarily cater to the middle and lower-skill-level
labour demand. In addition to this, seven Indian Institutes of Information Technologies
(IIITs) were established to provide excellence in IT with the input of academics. Available
estimates indicate that in 1999 there were over 1,832 educational institutions providing


Table 5: Trends in IT exports from units registered with software technology parks

Year No. of units registered Total exports from India Share of STP units
With STPs (US$million) in total exports
1991-92 164 164 na
1992-93 227 225 8
1993-94 269 330 12
1994-95 364 485 16
1995-96 521 734 29
1996-97 667 1085 46
1997-98 844 1750 54
1998-99 1196 2650 58
1999-2000 5582 3900 68

Source: Joseph, 2002.



Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
248 Borbora


training in IT to 67,785 professionals (Nasscom, 1999). The breakdown of the current
labour pool indicates that holders of the three main awards relevant to the sector,
B.Techs, diplomas and ITI certificates, account for some 70 percent of the total IT
workforce in India.
Besides development of the infrastructure and labour pool for the IT sector, the Indian
government has taken measures to address the problem of software piracy by including
the protection of the computer software copyright within the established Indian Copy-
right Act of 1957, reinforcing active role of the state in promoting the industry. Other
factors which have added to India™s comparative advantage in this sector have been the
availability of a highly skilled English speaking workforce and also the time difference
between India and major export markets such as the USA.
It is clear that over the last decade the Indian IT sector has benefited enormously from
a national system of innovation comprised of many actors working effectively together
in order to develop international competitive advantage and credibility. This successful
strategy has been the result of a focused state development strategy toward the
promotion of the ICT software and service sector for foreign exchange earnings. This
export-oriented strategy has so far overlooked the importance of ICT diffusion to the
economy in general, such as improved efficiency, productivity, and competitiveness to
domestic industries and services.




Concluding Remarks
Today there is an increasing realization that the benefits offered by IT for improvements
to human welfare, economic productivity, and growth are mainly limited to the developed
economies. Even though this International Digital Divide is a feature of the current global
environment, there is potential to reducing the gap between the leading and developing
countries with appropriate government policies. The development of such policies
requires an integrated approach with the involvement of actors in counties across the
public and private sectors. Sustained development requires both revenues from ICT-
growth strategies and from improvements to the economy obtained through ICT
diffusion. With reference to the Indian experience, we can observe that an export-
oriented IT-growth strategy has deflected attention away from ICT diffusion at a time
when a recent study by the IMF (2001) has reported that IT-using countries tend to
benefit more than IT-producing countries. The disappointing welfare gains for IT
producers have been attributed to the deterioration in the terms of trade between the
producers and users. Despite the growth of the software industry, India is also among
the losers. These finding underline the importance of the complementary roles of the
domestic market in promoting innovation and exports and export-orientated, IT-induced
productivity and growth. The policy implication for developing countries, and for India
in particular, would suggest that ICT diffusion should be prioritized for economic
development and growth.
The growth of the service sector has been one of the key drivers of economic develop-
ment in both the developed and developing world in the last decades, underlining the


Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
ICT Growth and Diffusion 249


fact that international competitive advantage will in the future be determined more by
trade in intangibles rather than goods. Developing countries such as India can obtain
the benefits resulting from the internationalization of services with the adoption of liberal
trade and investment policies designed to support IT growth. However, in order to
maximize the wider economic and social benefits, complimentary policies supporting
national ICT diffusion cannot be overlooked, and should be the focus of future policy
development.




Acknowledgments
I would like to express our gratitude to Professor K. J. Joseph (Jawaharlal Nehru
University, India), Dr. Richard Heeks (University of Manchester, UK), and the informa-
tion officer of Bridges.org for allowing the use of the duly acknowledged sources in the
development of this chapter.




References
Arora, A., Arunachalam, V.S., Asundi, J. and Ronald, F. (2000). The Indian Software
Services Industry. Research Policy, 30, 1267-1287.
Bedi, K., Singh, P.J. and Srivastava, S. (2001). Government @ Net: New Governance
Opportunities for India. New Delhi: Sage Publications.
Braga, C.A.P. (1996). The Impact of the Internationalization of Services on Developing
Countries. Retrieved February 17, 2002 from the World Wide Web: http:/
www.worldbank.org/fandd/English/0396/articles/070396.htm.
Bridges.org. (2001). Spanning the Digital Divide: Understanding and Tackling the Issues
Retrieved February 17, 2002 from the World Wide Web: http://proto.bridges.org.za/
spanning/pdf/SpanningTheDigitalDivide.pdf.
Compaine, B.M. (Ed.). (2001). The Digital Divide: Facing a Crisis or Creating a Myth?
London: MIT Press.
D™Costa, A. (2001). Export Growth and Path Dependence: The Locking in of Innova-
tions in the Software Industry. New Delhi: University of Pennsylvania Institute for
the Advanced Study of India, Mimeo.
Economic Times. (2000). STPI Now Opens Office at Silicon Valley, USA. Special
Supplement on Software Technology Parks of India, June 11, New Delhi, India.
The Economist. (2000). Falling Through the Net? Print Edition, September 21.
Government of India. (1972). Annual Report. New Delhi: Department of Electronics.
Government of India. (1982). Annual Report. New Delhi: Department of Electronics.




Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
250 Borbora


Government of India. (1985). New Computer Policy. The Gazette of India, August 31, 679-
681.
Government of India. (1986). Policy on Computer Software Exports, Software Develop-
ment and Training. New Delhi: Department of Electronics.
Government of India. (1996). Guide to Electronics Industry in India. New Delhi: Depart-
ment of Electronics.
Heeks, R. (1996). India™s Software Industry: State Policy, Liberalization and Industrial
Development. New Delhi: Sage Publications.
Heeks, R. (1999). Indian Software Labour: Cost Breakdown and Comparison. Retrieved
March 15, 2002 from the World Wide Web: http://idpm.man.ac.uk/rsc/is/isi/
isicost.shtml.
IMF. (2001). World Economic Outlook: The Information Technology Revolution. Wash-
ington, D.C.: IMF.
Joseph, K.J. (1997). Industry Under Economic Liberalization: The Case of Indian Elec-
tronics. New Delhi: Sage Publications.
Joseph, K.J. (2001). IT Boom, the Economy and Labour. Labour and Development, 7(2),
1-36.
Joseph, K.J. (2002). Growth of ICT and ICT for Development: Realities and Myths of the
Indian Experience. World Institute for Development Economics Research. Discus-
sion paper No. 2002/78. Retrieved February 15, 2002 from the World Wide Web:
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-78.pdf.
Joseph, K.J. and Harilal, K.N. (2001). Structure and Growth of India™s IT Exports:
Implications of an Export-Oriented Growth Strategy. Economic and Political
Weekly, 36(34), 3263-3270.
Kanungo, S. (1999). Making Information Technology Work. New Delhi: Sage Publica-
tions.
Kiely, R. and Marfleet, P. (Eds.). (1998). Globalization and the Third World. London:
Routledge.
Kraemer, K.L. and Dedrick, J. (2001). Information Technology and Economic Develop-
ment: Results and Policy Implications of Cross-Country Studies. In M. Pohjola
(Ed.), Information Technology, Productivity and Economic Growth. Oxford: OUP.
Kumar, N. (2001). Indian Software Industry Development: International and National
Perspective. Economic and Political Weekly, 36, 4278-4290.
Mansell, R. (1999). Global Access to Information Communication Technologies.
Johannesburg and Canada: International Development Center.
Michie, J. and Smith, J.G. (Eds.). (1998). Globalization, Growth and Governance:
Creating an Innovative Economy. Oxford: Oxford University Press.
Monen, P. (2001). International R&D Spillovers and Economic Growth. In Pahjola, M.
(Ed.), Information Technology, Productivity and Economic Growth. Oxford: OUP.
Narayanamurthy, N.R. (2000). Making India a Significant IT Player in This Millennium.
In Thapar, R. (Ed.). India: Another Millennium. New Delhi: Viking and Penguin
Books.


Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
ICT Growth and Diffusion 251


Nasscom. (1999). Directory of Indian Software and Service Companies. New Delhi:
Nasscom.
Nasscom. (1999). The Software Industry in India: A Strategic Review. New Delhi:
Nasscom.
Nkrumah, G. (2000). Digital Divide. Al-Ahram Weekly, 27 July to 2 August. Retrieved
August 25, 2000 from the World Wide Web: http://weekly.ahram.org.eg/2000/492/
in3.htm.
Norris, P. (2001). Digital Divide: Civic Engagement, Information Poverty and Internet
Worldwide. Cambridge: Cambridge University Press.
Oberoi, S.S. (1991). Software Technology Park: Concepts, Procedures and Status.
Electronics Information and Planning, 19(3), 42-46.
OECD. (2000). Information Technology Outlook. Paris:OECD.
Parthasarathi, A. and Joseph, K.J. (2002). Limits to Innovation Set by Strong Export
Orientation: The Experience of India™s Information Communication Technology
Sector. Science, Technology and Society, 7(1), 13-49.
Planning Commission. (2001). India Knowledge Super Power: Strategy for Transforma-
tion. New Delhi: Planning Commission.
Pohjola, M. (2001). Information Technology and Economic Growth: A Cross-Country
Analysis. In M. Pohjola (Ed.), Information Technology, Productivity and Eco-
nomic Growth. Oxford: OUP.
Rodrik, D. (1995). Trade and Industrial Policy Reform. In J. Behrman and T.N. Srinivasan
(Eds.), Handbook of Development Economics, Vol. III B. New York: Elsevier.
Rubin et.al. (1996). Worldwide Benchmark Project. Pound Ridge, NY: Rubin Systems.
Schware, R. (1987). Software Industry in the Third World: Policy Guide Lines, Institu-
tional Options and Constraints. World Development, 15(10/11), 1249-1267.
Schware, R. (1992). Software Entry Strategies for Developing Countries. World Devel-
opment, 20(2), 143-164.
Sen, P. (1995). Indian Software Exports: An Assessment. Economic and Political
Weekly, 30(7-8), 2053-2058.
UNDP. (1999). Human Development Report 1999. New York: Oxford University Press.
Venkitesh, P. (1995). India™s Software Exports: A Study with Special Reference to
Technology Parks. Trivandrum: Center for Development Studies, JNU. Unpub-
lished M.Phil dissertation.
Wong, P.K. (2001). The Contribution of Information Technology to the Rapid Economic
Growth of Singapore. In M, Pohjola (Ed.), Information Technology, Productivity
and Economic Growth. Oxford: OUP.




Copyright © 2005, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
252 Roberts & Mukonoweshuro




Chapter XIII



Digital Technologies
and the Cross-Border
Expansion of South
African Banks
Joanne Roberts
University of Durham, UK

Chipo Mukonoweshuro
University of Durham, UK



<< . .

. 34
( : 53)



. . >>