Emergic: Rajesh Jain's Blog

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IT’s Diffusion in India

April 13th, 2004 · 2 Comments

Professor Sadagopan writes how IT will move away from the Indian metros into smaller towns:

ITES (IT-enabled Services) industry has been growing fast; today it employs nearly quarter million professionals; it is expected to grow into two million jobs in the next five years. The jobs are moving to India because of our size (ability to produce so many graduates), English language and their relatively low wages (compared to International wages). Cost is the key driver for the jobs to shift to India; over the years our own costs will increase – wage increase for senior people); real estate costs are not going down either; transportation costs (particularly because of timeliness at odd hours) are already a major component of the costs. With our urban infrastructure falling apart already, any further over-crowding can hurt the Metros. Unlike software services industry, engineering services industry or R & D services industry, ITES does not need technical manpower; good graduates with English speaking skills are available in plenty in the secondary towns.

the communication infrastructure has improved dramatically; fiber links are there all over; we get much larger bandwidths from satellite links these days; mobile infrastructure is there too. Real estate prices are significantly lower in these towns; you can retain people much better in these town with the same wages or even lower wages compared to Metros; there will be no need to bus around people; even if done, the distances will be in kilometers in place of hundreds of kilometers that call centers in Metros have to reckon with today. With lower communication costs, real estate prices and reduced transportation costs, Indian call centers can demonstrate further cost competitiveness! That would be the sure way to keep and grow the ITES business which might go away to other low cot countries like Philippines and Vietnam.

Tags: Emerging Markets

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