The coming boom

Print edition : March 25, 2005

At the entrance of the 100-hectare Infopark in Kochi. - K.K. MUSTAFAH

Kerala has everything that is needed for an explosive growth of the IT and ITeS industry, and the proactive initiatives of the government and entrepreneurs have made it possible to exploit the advantages fully.

THE most recent stocktaking undertaken by the National Association of Software and Service Companies (NASSCOM) with regard to the Indian Information Technology and Information Technology-enabled Services industry against the backdrop of global trends yields an extremely promising outlook. All the sectors catering to both domestic and international markets are poised for significant expansion in the foreseeable future. India is unquestionably an emerging superpower in this sector.

Increasing the availability of the most critical resource for this industry - an easily trainable pool of fresh engineering and science graduates at a scale unmatched anywhere in the world and a growing number of experienced professionals with competency across the entire range of skill sets - the maturing of the industry, which is increasingly getting adept at unlocking values at costs unbeatable by other countries, the benefit of the Indian telecom sector nearly matching global standards in terms of quality and costs, pro-industry government initiatives, increasing confidence of the global clients in Indian software and services, all contribute to the continuing growth of the IT and ITeS industry.

KERALA has several advantages to ride this high tide. In fact, the recent spurt in investment in this sector in the State point to the shape of things to come. Most of the existing successful players are substantially ramping up their operations. They include US Software, IBS, SunTec, Gemini, NeST, Ernst and Young and Tata Consultancy Services. Leading IT companies setting up major facilities in Kerala include Infosys, Wipro, ACS Inc. and Allianz Cornhill.

At Technopark, near Thiruvananthapuram.-BY SPECIAL ARRANGEMENT

The key advantages of Kerala for the IT and ITeS industry are:

* Availability of the most comprehensive telecommunication and data communication infrastructure with international gateways - 75 per cent of India's data communication traffic passes through Kochi;

* The vast pool of easily trainable human resource;

* Highly evolved socio-economic overheads; * Growing base of IT industry; and

* Large non-resident Indian (NRI) population with investment and networking capabilities.

Exploiting these possibilities, however, warrants proactive initiatives from the State government, not only to attract investments into the sector, but also to promote the use of IT in governance and other areas, which themselves will spawn a large number of small enterprises.

There is a need for a strategic framework that would enable the government to take the right initiatives in the short-term.

* The programmes identified and promoted by the State government in the IT sector during the next year or two should pass the following `tests': their impact must begin to be felt immediately; they should be capable of reaching the largest possible number of people in the State; they must be credible and sustainable; the expenditure/investment from the State government must be minimal.

These preconditions suggest that there has to be a clear focus on a limited set of sectors, projects and even regions so that the available resources, are not allowed to be dispersed too thinly on too many things or on grandiose projects, programmes or pronouncements that are difficult to be achieved within a short period.

The IT sector is to be considered from two broad angles: as a producer and a consumer. Policies for promoting IT as a production sector involve development and strengthening of IT-related industries, including software, hardware, telecommunication and so on. As a consumer of IT, the state uses technology for a wide range of socio-economic development programmes, which concurrently promotes the domestic IT market.

It is against this background that the following suggestions are presented:

State governments are promoting investments in the IT sector - comprising software development, ITeS (such as call centres, business process outsourcing) and hardware - by offering financial and other incentives; building physical facilities to meet the requirements of the industry; relaxing the regulatory environment; training professionals with the required skill sets and promoting public-private partnerships.

The Kerala government should see whether its package of incentives (which in any case is increasingly becoming less relevant) is competitive as compared to those of neighbouring States and take immediate action to strengthen it.

As far as physical facilities are concerned, Technopark, Thiruvananthapuram, set a model and benchmark for excellence. Now that the built-up space at Kochi under the IT Mission is in the process of being fully occupied by IT companies, the role of the government in building physical facilities must progressively give way to public-private or fully private-driven initiatives.

Schoolchildren access the Internet through a wireless network in a remote village in Mallappuram district.-BY SPECIAL ARRANGEMENT

The government should, during the next year or so, concentrate on Thiruvananthapuram and Kochi, providing on a war-footing whatever the industry requires. Diverting its attention to other cities will be counter-productive.

Even operations and management of the existing IT parks should be made more effective so that they can compete with high-quality private parks within and outside the State.

The time and resources of the State government should be re-directed to more pressing areas such as creating and enforcing a regulatory environment conducive for the growth of the sector.

ITeS, for instance, operates on a 24 x 7 mode and cannot accommodate any disruption of their activities even for a day. Declaring IT as an essential service is certainly in order.

More proactive government initiatives are also required for creating an army of young people with excellent communication skills in English for the enormous requirements of the ITeS segment. Programmes are also to be initiated to offer facilities for teaching foreign languages such as Japanese and German.

IT Mission, an initiative of the State for promoting IT, may also provide such support as required to select real estate developers to provide:

* Multi-option, ready-to-move-in ITeS office space;

* Reliable, redundant power supply; * Public and private transport services;

* Cost-effective telecom infrastructure with adequate redundancy; and

* Appropriate amenities in such facilities.

Given the basic characteristics of IT, a State can be home to a large number of thriving small entities if they have access to the local market.

The largest domestic consumer of IT products and services in a region could well be the government and its agencies. Particularly in Kerala, dynamic e-governance programmes and policies offer the greatest opportunity for expanding the domestic market significantly within a short time.

The government has to put in place a proactive outsourcing programme whereby all non-complex, non-strategic IT development projects are outsourced to local enterprises. Complementing this programme will be a deliberate policy of outsourcing all IT-enabled services that are likely to emerge within the government. Such a strategy would lead to, among other things, creation of a large number of small IT/ ITeS enterprises distributed across the State; generation of additional productive employment opportunities, especially among ordinary graduates; expansion of the base of IT literate people in the State; enhancement of the efficiency and the economy of government operations and improvement of the response of the government in service delivery; and foundation of a robust e-governance platform in the State.

Digitising government data represents the single largest market opportunity, which an e-governance project could offer to a large number of graduates with minimum computer skills. Some of the Kudumbashree units are already equipped to handle these jobs. Such models could be replicated across the State and across departments.The Kudumbashree project of the Government of Kerala is a highly successful poverty alleviation programme, which, among others, uses IT for creating job opportunities for women with minimal skills at minimum level of investment.

Promoting tele-centres as a multipurpose platform for realising the benefits IT offers assumes great importance. The Friends model or a variation of it is what is suggested. Now that the government has proved the feasibility of providing a range of services leveraging IT, although limited in terms of geographical and other coverage under the existing format, the service should be expanded through a public-private participation plan. In fact, the possibility of Friends getting dovetailed into the Akshaya programme (with necessary changes based on the pilot programme) is to be quickly explored for offering the widest possible range of services (at a price) including: payments to government for various services; examination results and college admissions; verification of personal data; pension processing; e-polling and surveys; voter registration; information about government services; redress of public grievances; permits and license renewals; application for caste certificates; registration of birth and death; welfare schemes; benefits and health information; government e-procurement and tendering.

Few States offer an enabling environment for the comprehensive promotion of IT and ITeS industry as does Kerala. Piggy-riding on the growth waves experienced in the national as well as international context warrants identifying the best-of-the-best practices followed successfully around the world, with specific reference to e-governance, and quickly and aggressively incorporating them into the initiatives of the State government. Such initiatives have necessarily to be driven by public-private cooperation to exploit effectively the emerging opportunities; of course, the State government has to take the lead in creating and benefiting from such partnerships.

G. Vijaya Raghavan, president, VMA Consulatants Pvt. Ltd, is a former CEO of Technopark, Thiruvananthapuram.

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