Creating space: the role of the state in the Indian IT-related offshoring sector

Abstract

By facilitating the separation of the production and consumption of services, the information and communication technology (ICT) revolution has transformed the way companies do business (Fernández-Stark et al. 2011). The huge growth in ICT, competition for ICT work and increased economic freedom have made the ‘offshoring’ of services to developing countries financially attractive for developed countries (Penfold 2008). This has allowed developing countries like India to perform a wide array of skill-intensive activities, particularly in the information technology (IT) services industry, once considered strictly the domain of the industrialised world (Fernández-Stark et al. 2011). Today, India is the worldwide offshore services market leader with a share of 58 per cent of the global outsourcing industry. The aggregate revenues in 2013 were about $108 billion, with exports contributing $75.8 billion of the total industry revenues. As a proportion of national gross domestic product (GDP), the sector has grown from 1.2 per cent to 8 per cent and with regard to the share of total exports, from 4 per cent to 25 per cent between 1998 and 2013, providing direct employment to 3 million people and indirect employment to 9.5 million (NASSCOM 2013). This success of India in IT services in recent years has become an important model for other developing countries to follow (Radhakrishnan 2007). On this road to becoming a market leader, Indian IT firms over the past decades have offered a range of services in the value chain, such as information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO) (Fernández-Stark et al. 2011), which in this paper we will refer to as IT and related services.