Bangalore's IT Industry: A Techno-economic Profile*
The study sponsored by National Science and Technology Management Information Systems, a Division of Department of Science and Technology, Government of India in 1998, and conducted by STEM, an NGO, comprised four constituents of the IT industry, viz. : i) 711 software firms; ii) 221 hardware firms; iii) 212 maintenance and distribution firms; and iv) 254 software and hardware training institutions. The study reveals that the type of management and activity has direct influence on turnover, employment, export and other aspects of IT industry. Multinational corporations (MNCs) and software companies dominate the industry. The overall performance of the Indian corporations and limited liability companies (ICLCs) is good, but that of MNCs is better. About 7 percent companies comprising 60 percent MNCs and 9 percent ICLCs have annual turnover of more than Rs. 200 million, and about 35 percent of the companies comprising about 66 percent partnership and proprietary companies and 13 percent ICLCs have an annual turnover of less than Rs. 2 million.
The total turnover of the IT industry during 1997/98 has been estimated to be around Rs. 61 billion of which software companies alone accounted for 70 percent. The total export during 1997/98 estimated to be Rs. 24 billion, constituted about 37 percent of the total turnover of the IT industry. Software companies accounted for 97 percent of the total export. The estimated employment in the IT industry during 1997/98 was about 60,350, of which 21 percent were female. The companies usually employed engineering graduates, people with special IT training, MCAs, diploma holders from polytechnics, postgraduates, MBAs, and other graduates. More than half of the employees were below 25 and unmarried. On average, an employee in administration with required qualification drew a salary of Rs. 92,000 per annum whereas an employee in the professional group with technical qualifications drew around Rs. 115,000 per annum. It is predicted that by 2005 there will be 4460 IT firms comprising 2606 software firms, 463 hardware firms, 525 maintenance and distribution companies, and 863 training institutes in the area. The report includes some major observations and recommendations also.
KEYWORDS: IT industry, Bangalore; Techno-economic profile
The study sponsored by National Science and Technology Management Information Systems, a Division of Department of Science and Technology, Government of India was commissioned in 1998, and conducted by STEM, an NGO.
The study comprised the following four constituents of the IT industry concentrated in Bangalore and its environs: i) software firms; ii) hardware firms; iii) maintenance and distribution firms; and iv) software and hardware training institutions.
The major findings of the study are as follows:
The study reveals that the type of management and activity has direct influence on turnover, employment, export and other aspects of IT industry. Multinational corporations (MNCs) and software companies dominate the industry. Partnership and proprietary companies (PPCs) and training institutions contribute the least. The maintenance and distribution companies (MDCs) showed a better performance than the hardware sector. The overall performance of the Indian corporations and limited liability companies (ICLCs) is also good, but that of MNCs is still better.
About 35% of the firms (comprising about 66% PPCs and 13% ICLCs) had an annual turnover of less than Rs. 2 million where none of the MNCs figured, and 7% (comprising 60% MNCs and 9% ICLCs) had annual turnover of more than Rs. 200 million. The type of management and the size of the unit appear to have a bearing on the annual turnover.
The total turnover of the IT industry during 1997/98 was estimated to be around Rs. 61 billion. Software companies accounted for the 70%, MDCs 19%, hardware companies 10%, and training institutes 2% of the turnover.
The total export during 1997/98 estimated to be Rs. 24 billion, constituted about 37% of the total turnover of the IT industry. Software companies accounted for 97% of the total export.
Prior to 1980, the city had eleven IT firms comprising one MNC, one PPC, and nine ICLCs. During 1980s as many as 89 firms were established. The big boost came in 1990s with the entrance of MNCs.
On average, the extent of investment is highest in the software sector and least in the training sector.
Majority of the firms reported independent operations. About 11% has joint venture operations and 7% sub-contract operations.
The activities of a few firms especially belonging to MDCs and training sector are being carried out from different locations of the city. MNCs generally are operating from a single location. All MNCs, 77% ICLCs, 87% PPCs have units outside Bangalore. All the MNCs, 22% ICLCs, and 5% PPCs have units outside India.
Many firms comprising 61% MNCs, 82% ICLCs, and 81% PPCs do not have buildings of their own. As such, they operate from rented buildings. Most of the firms are located in residential areas without any opposition from local inhabitants.
Employment Generation and Training
The estimated employment in the IT industry during 1997/98 was about 60,350, of which 21% were female. In MNCs, 25% of the work force comprise women. About 78% of the employment was generated by software firms, followed by hardware firms and MDCs. The training institutes employ 5% of the total workforce.
The companies usually employ engineering graduates, people with special IT training, MCAs, diploma holders from polytechnics, postgraduates, MBAs, and other graduates. The industry prefers to employ people specially trained by training institutes. Of the employees working in hardware and software industries, about 26% have professional degrees, whereas most of the employees working in training institutes have general degrees and 14% have professional degrees.
Quality of Training
The majority of the firms reported that the quality of training imparted in India is in tune with the industry needs. About 5% of the firms ranked the quality of training as excellent, 46% ranked it as good, and 45 % as adequate. However, the quality of training in the domain area seems to be inadequate. It is also reported that the trained manpower is in short supply.
Demand for Courses
The major demand in training institutions is for basic courses, followed by other courses. The study showed that 42.6% students applied for basic courses, 21% for application courses, 12.4% for long-tem courses, and only 5.4 % for system level programming courses.
The average fee for a IT training course varies widely from as low as Rs. 2,169 for a basic course to as high as Rs. 26,143 for a mainframe course.
Socio-economic Status of Employees
The section comprises age distribution, marital status, salaries, working hours, house and vehicle ownership and female employees.
Age Distribution and Marital Status
The age distribution of the employees is skewed towards youngsters. In terms of proportion, female employees are younger than the male employees. More than half of the employees are below 25. Most of the employees are not married. Percentage-wise 83.6% male and 75.9% female employees are not married.
As can be expected, the professionally and technically qualified employees draw a higher salary compared to employees with general qualifications. An employee in administration with required qualification draws a salary as high as Rs. 92,000 per annum. On the other hand an employee in the professional group with technical qualifications draws Rs. 115,140 per annum.
The salary level of female employees is found to be low compared to their male counterparts. Several factors are responsible for this. They enter late into the industry, and most of them enter in low-paid jobs such as computer operators, secretaries, and so on. The difference in qualification is also a contributing factor. About 69.2% male employees have a professional degree or equivalent as against 34.5% female employees.
The salary levels found in the industry are low compared to international levels. About 52% of the firms ranked the salary levels as low, 20% ranked them as substantially low, and the rest ranked them as comparable to international levels.
About 50% of the companies favour flexible working hours only for a particular category of employees, while 34% do not have a specific preference for fixed working hours. Only about 11% companies expressed that flexible working hours are ideal for employees.
House and Vehicle Ownership
Nearly half of the employees are living in their own houses and more than half own cars or two-wheelers or both.
The industry feels that female employees are as suitable as male employees. About 61% firms opined that there is no difference between male and female employees as far as work performance is concerned. Another 34% felt that female employees are more suitable for certain jobs than males. The overall performance rating of female employees is found to be higher than the male employees. Moreover, 96% companies reported that they do not face any problem with female employees.
Of the female employees, 63.3% got married after taking up employment. About half of them reported that their employment helped them to get married. About 53% married women have children, of which 65% have elderly people in their house to take care of the children. Most of the female employees reported that they have adequate/moderate time to spend with their family members and children.
The understanding and amicability between the women and their respective spouses are found to be very high in 74% cases and satisfactory in 20% cases.
SCENARIO OF 2005 - A FORECAST
In 1997/98, the city had in all 1398 firms comprising 711 software firms, 221 hardware firms, 212 MDCs and 254 training institutes. By 2005, it is likely to have 4460 IT firms comprising 2606 software firms, 463 hardware firms, 525 MDCs, and 863 training institutes.
MAJOR OBSERVATIONS AND RECOMMENDATIONS
The observations are:
The type of management and the size of the firm hold the key in future.
The industry may notice either acquisitions or amalgamations of smaller units.
The share of women workforce is to go up by more than 25 percent.
There may be an overall improvement in the quality of training and frequent curriculum changes by training institutes.
The IT industry may seek more concessions on tax structure and financial investments.
Availability of reliable infrastructure and trained manpower determines the location.
The recommendations are:
Liberal financial assistance to smaller units of IT industry is needed.
Domestic market to be tapped to improve the turnover.
Hardware sectors and MDCs need a boost from government policies in terms of excise duty, service tax, etc.
Need assessment of small and medium size firms to be carried out.
Recommendations of the taskforce on excise, export and import to be implemented.
* Based on the report published in STEM Reporter, June 2000. - Editor
Information Today & Tomorrow, Vol. 19, No. 4, December 2000, p.8-p.10