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The success of India is intrinsically linked to its ability to keep pace with technology. Using technology is the most significant component of the holistic approach towards the goal of building a developed India. The world has seen an unprecedented change in the technology landscape over the last decade and innovation has become more important than ever before. Technology can help build a digital India—a knowledge-based society and economy— by empowering, connecting and binding everyone. For India to become a global knowledge hub by 2022— the diamond jubilee of its Independence—innovation, research and technology will have to play a major role.

Innovation and technology will have to be the enabler for empowerment, equity and efficiency by joining people with governments, bringing them closer to knowledge and bridging the gap between demand and supply.

Despite India having become the software services capital of the world, the benefits of technology have not percolated down. The lack of a proactive political vision in not appreciating the full potential of technology in the last decade is primarily responsible for restricting the spread of information technology domestically.

The Next Phase

India has a long history of cultural innovation driven by necessities. It's time that we take our innovations globally and solve societal problems. It is in this context that India must embark upon the next phase of innovation and technology revolution with renewed vigour. It would be unwise to be satisfied with successes in instalments and not tap the vast potential of Indian talent.

The success and brand established by the Indian software services industry needs to be leveraged with next wave of "Made In India" technology, products and innovations.

That the ruling party BJP has seized upon this opportunity and responded to the aspirations of the country is evident in its Manifesto 2014 that has laid unprecedented emphasis on innovation and technology and its cross sector potential.


E-governance is easy, efficient and empowered governance and has to become the backbone of good governance paradigm. A digital India—where every household and every individual is digitally empowered—is key to the concept of new age, efficient & incorruptible governance. This can be made possible by increasing the internet penetration and usage of broadband across the country.

‘Follow the Fiber’ Policy is another path-breaking proposal that can refurbish the digital outlook of the country. Smart cities will be developed around digital highways. The example of the 'E-Gram, Vishwa Gram' scheme in Gujarat, that ensured significant empowerment of the rural population by bridging the digital divide between the rural and urban areas by providing e-services to all its villages is worth emulating across the country. The scheme helped control corruption significantly since all transactions between government and citizens are computerised.


Spurring innovation and research in India is essential to reduce dependence on foreign technology. Innovation is an evolving process and there cannot be a fixed blueprint for it. However, the basic pre-requisite for driving innovation is to have 1.2 billion Indians digitally connected through our own technologies and networks.

The BJP manifesto talks about such innovations in governance as promotion of e-Bhasha (National Mission for the promotion of IT in Indian Languages), content digitisation of all archives and museums, financial inclusion and participative governance.

Today, social media has the potential to transform all interactions. They are powerful catalysts that are changing the ways people use technology to interact with the world around them. India must include these interfaces in its governance models and take full advantage of them. Youth, the biggest driver and user of social media, ought to be involved in policy formulation and legislation. Social media campaigns which let volunteers and citizens collaborate and contribute can be leveraged.

In a country where nearly 70% of the population lives in villages, a significant segment of about 6.5 lakh villages do not have a single bank branch, access to quality healthcare, and higher education, BJP has done well to recognise these handicaps and addressed them in its manifesto with the ideas such as National Rural Internet and Technology Mission for use in Tele-Medicine, Mobile Healthcare, Massive Open Online Courses and setting up a National e-Library.

As a matter of fact; policy, institutions and market factors will determine the fate of India in coming years. The existing market factors are quite favourable but it now needs a set of "good policies" and "good institutions".

There is an inescapable clamour by the young and capable nation for a proactive and innovative policy framework that goes beyond being stuck in a reactionary mode. The nation is looking up to the new political dispensation for providing such a visionary roadmap.

(Based on views expressed by Arvind Gupta. He is an Entrepreneur in Hibernation, Innovation Evangelist, Founder Circle member of iSPIRT, and is currently heading the BJP's Information and Technology Cell. The views are personal)

Digital Infrastructure- How Technology Aligned Infrastructure Would Impact India

Technology can have tremendous impact in the domain of infrastructure- one of the main pillars of overall economic and social development. Even as India is seeing a high pace of urbanisation, the resources remain limited. The power of real time analytics can bring the required transformation in handling a range of urban issues from smart utilities and traffic management. Using enterprise wide resource planning systems can deploy human and financial resources better. Project management systems can help manage complex projects and ensure closure of pending projects.

Driven by real time data with insights from analytics, Smart Grids and Smarter Cities can be developed. For example, power distribution infrastructure in cities will have to be built on Smart Grid technologies based on power demand patterns and grid supply variations by reducing outages, faults, T&D losses and so on. Similarly, an intelligent water management solution like advanced metering systems would have to be developed.

In order to deliver the government’s vision of transforming India into a superpower by empowering, connecting and binding Indian citizens, there is a need to focus on leveraging IT to build smarter cities in India. The citizens want effective delivery of services, improved governance and transparency in the functioning of big, complex and constantly changing cities. To ensure better government-citizen connect and community collaboration, the government is working towards building a ‘Digital India’ where innovation, research and technology will play a major role.

It is also the vision of the government to take governance to the gram panchayat level. The work has already been expedited towards connecting more than 250,000 gram panchayats through optical fibre.

The concept of building infrastructure will have to go beyond conventional understanding of just being physical infrastructure. The infrastructure for the India of tomorrow will also have to include digital infrastructure such as digital highways, integrated e-portals, social hubs and so on.

An integrated and single window e-platform for the processes of tendering, procurement and grievance redressal and litigation will play a major role in removing these infrastructure project bottlenecks and bring about more transparency to the system, along with better governance.

Hence, infrastructure will be helped by technology at every step, and truly will be the game changer that will make the infrastructure vision come alive.

Electronics and Information Technology

Electronics and Information Technology is the fastest growing segment of Indian industry both in terms of production and exports. Today, the electronics industry is completely delicensed with the exception of aerospace and defence electronics, and alongwith the liberalization in foreign investment and export-import policies of the entire economy, this sector is attracting considerable interest not only as a vast market but also as potential production base by international companies.

In recent times, ‘software development and IT enabled services’ have emerged as a niche opportunity for India in the global context. The Government of India is taking all necessary steps to make India, a Global Information Technology Superpower and a front-runner in the age of Information Revolution. The Government of India has announced promotion of Information Technology as one of the top priorities of the country and constituted a National Task Force on Information Technology and Software Development.

Information Technology Industry in India has the potential of tremendous growth as a global IT solutions provider. Increasingly, India is being regarded as the hub and the base for world-wide IT solutions development. In addition to the global market that the Indian IT industry is well placed to tap, there is also a huge market within India to transform conventional brick and mortar industry through IT solutions. Likely economic and industrial growth and a large consumer base are the additional and significant growth drivers for Indian IT industry.

Convergence of Information Technology, Communication, Entertainment, Content and Consumer Electronics and the increasing penetration of internet, PC, desktop sets, mobile phones, cable TV etc. should result in a massive surge in world-wide demand for IT solutions for internet based activities and e-commerce. India today is well placed to offer quality and competitive IT products and services.  

India's IT industry ranks among the fastest growing sectors within the country's economy. Driven primarily by software exports, the industry has been logging in extremely impressive year on year growth. The software industry in fact has been growing well with a CAGR exceeding 50% over the last five years, and only in the last year, impacted by the worldwide economic downturn, has the momentum reduced marginally.

India's international-class manpower, that creates high quality software and services solutions is finding favor among overseas customers. The success story being played out by the IT industry at the global level is also being reflected on Indian soil, with more and more organizations embracing IT. The Government too is getting IT enabled and using state-of-the-art technology solutions to bring greater benefits to Indian citizens and improve its internal efficiencies.

India has become one of the most preferred destinations for sourcing software and IT enabled services. In comparison to other low cost locations, India ranks high in several critical parameters, such as, level of government support, quality of the labour pool, English language skills, cost advantage, project management skills, entrepreneurial culture, strong customer relationships and exposure to new technologies. India's strength has been enhanced by the industry's strong focus on quality software and processes.

Major Initiatives in Information Technology Sector

E-Governnance : One of the areas in which Information and Communication Technologies (ICT) is having a profound impact is the way Governments function and the manner in which government services are made available to citizens. This has had a revolutionary impact on citizen's lives through the computerisation of the Railways Reservation System at the national level, and through projects like e-Seva and Bhoomi at the State level. Considering the potential benefits which can accrue to the cirizens of this country through the use of ICT, the government has approved the National e-Governance Action Plan.

The plan envisages formulation of certain core policies and strategies to ensure a coordinated approach, creation of Core Infrastructure required for the long-term growth of e-Government services and implementation of a number of identified Mission Mode Projects to bring about a citizen-centric and business-centric environment within the government.

The initiative also envisages provision of necessary guidance and assistance to the State Governments for implementing in parallel, a set of projects of national priority, as well as a set of integrated services projects, which would help bring these various initiatives onto a common platform for delivery of services in an integrated manner to citizens and businesses. The Government has accordingly identified 22 Mission Mode Projects which would be taken up on a priority basis by the concerned Line Ministries/Departments and the State Governments.

Community Information Centres: Based on the experience of the Community Information Centres (CICs) in North-Eastern States, it has been decided to set up 139 CICs in all the Block Headquarters of Jammu and Kashmir at an outlay of over Rs 40 crore.

Rural Connectivity: An integrated approach for universal rural connectivity is being worked out by dovetailing the initiatives of Community Information Centres, Public Tele-information Centres (PTICs) of the Universal Service Obligation Fund (USO) and the scheme for Providing Urban Amenities in Rural Areas (PURA).

Indian Computer Emergency Response Team: Internet has emerged as the preferred medium of communication. This open system of sharing information needs a secure environment that prevents prowlers from taking away or compromising digital assets. It is essential to raise the confidence level of our own public so that they can use the network with absolute faith for commerce, communication, entertainment, software development and governnance and esnure the safety of the government network. The Indian Computer Emergency Response Team (CERT) has been set up at Delhi with a mirror location at Bangalore to ensure that India's IT assets are appropriately and adequately protected.

High performance Computing: C-DAC has established a Terascale Supercomputing Facility (CTSF) at its Knowlege Park at Bangalore using an indigenously developed high performance interconnect switch and system software tools to extract maximum performance from the supercomputing cluster of nodes. The applications, which run on this system, are in the areas of Weather Forecasting, Seismic Data Processing, Evolutionary Computing, Structural Mechanics, Computational Fluid Dynamics and Bioinformatics. This system, PARAM Padma, figures at serial number 171 in the list of World's Top 500 supercomputers, announced by the International Consortium of Top 500 Supercomputers at the International Supercomputing Conference (ISC-2003) held at Heidelburg, Germany.

Braille Transcription: A computerized Braille transcription and embossing system has been developed. This system operates in English and all major Indian languages and enables blind persons to read the files from a computer, using an indigenously developed Tactile Braille Reader.

Task Force on Human Resource Development in IT: A Task Force on human resource development in IT was constituted in August 2003 to prepare a long-term strategy for significantly increasing the number of trained IT professionals in the country. The Task Force finalised its key findings and recommendations and submitted its report in December 2003.

On-line Election Results, Budget and Examination Results: On-line transmission of Election results for the States are being facilitated through NICNET. The election feedback from the NIC was used by Doordarshan and other channels for providing live transmission of election results to the viewers. On-line transmission of the Union Railway Budget and the Genral Budget was facilitated through NICNET all over the country and was widely used by the media, industry and other agencies. NIC also published the results of various examinations on its web server ( The network also provided the facility of downloading admit cards for certain examinations directly from the net.

The Indian IT industry has the following constituents:

• Software and Services

• IT Enabled Services

• Internet Services

• E-Commerce

• IT Hardware

• IT Applications

IT Software and Services

The Indian software and services industry is responsible for placing India on the global map. The world is today looking towards Indian companies for outsourcing their software requirements and Indian software majors are gradually moving up the value chain in terms of capabilities and breadth of solutions offered.

Apart from the high growth export segment, the domestic software market also continued on its growth path, albeit gradually.

IT Enabled Services

India is now globally well established as an IT services destination. In fact it is this success in the IT services sector that has empowered the country to take its initial steps into the IT-enabled outsourcing domain.

The Indian IT-enabled outsourcing market has its roots in the mid-1990s when companies such as American Express, British Airways and GE Capital set up captive units for customer support and transaction processing services. Independent BPO vendors began emerging few years ago, though some healthcare BPO and CRM services companies existed earlier. IT services companies have also made a foray into the IT- enabled outsourcing realm.

Over the past decade then, India has emerged as a preferred location for organizations planning to outsource a variety of services ranging from call centers and other customer interaction services, insurance claims processing, payroll processing, medical transcription, e-CRM, SCM to back-office operations such as accounting, data processing, and data mining.

This phenomenon is reflected in the fact that the ITES sector logged in the highest growth among segments in India's burgeoning software and services marketplace according to a study conducted by Nasscom. The survey indicates that this growth is in line with overall global industry trends, and is likely to continue over the next few years.


  • The ITES segment is also attracting the attention of Venture Capitalists, and around 40 percent of VC investments are expected to go into this market.
  • While projecting an overall growth of 30 percent for the Indian software and services sector, Nasscom has indicated that this will include a blended growth of 22 percent in the IT services space and 60-65 percent in the It enabled outsourcing segment. The ITES market, which grew at a hefty 71 percent, accounted for around 20 percent of the total software and services export revenues in that period.
  • The current trends also indicate that within the ITES segment, insurance, banking and automotive are the key verticals opting for these services. In terms of service lines, according to Nasscom, telesales, benefits administration, credit/debit card services are the major services lines.
  • The indications are also there that the ITES market is growing beyond the traditional metropolitan geographies of Gurgaon, Mumbai and expanding to cities such as Chennai, Bangalore and Kolkata.
  • In terms of the popular ITES/BPO models being followed in India, captive centers are the most prevalent, accounting for about a third of all employees in this market.


The Indian ITES is currently segmented along the following lines:

  • Customer interaction services (including call centers).
  • Back office operations/revenue accounting/ data entry/data conversion (including finance and accounting/HR services.
  • Transcription/ translation services.
  • Content development/ animation /engineering and design/GIS.
  • Other services including remote education, data search, market research and network consultancy and management.


According to McKinsey & Co., both the captive and third party markets are expected to witness growth and market share expansion. While the existing captive units, bolstered by their success will scale their operations and move further up the value chain, other global players, encouraged by the performance of their contemporaries and the potential of the Indian ITES market will foray the Indian market through partnerships with third party ITES players. At a later stage some of these companies may opt for a direct presence, they are likely to make an entry through third party players.


Recognizing the growing importance of the IT- enabled outsourcing sector, the Government of India has introduced various policy concessions and initiatives to accelerate the growth of the market. The Indian software and services industry, spearheaded by associations such as Nasscom has also taken various steps to ensure that India becomes the global hub for IT-enabled outsourcing in the future. Some of the steps take by the Government and industry for the ITES/BPO sectors are as follows:

The Government of India has accepted Nasscom's recommendations and removed certain procedural bottlenecks that were hampering the growth of the Indian call center industry.

  • Highlight of Telecom Recommendations
    • Allow sharing of bandwidth for disaster recovery and mission critical applications between multiple entities
    • Permit sharing of bandwidth between multiple locations of a single entity and also within the same group of companies
    • Call Center approval should not to be customer-specific
    • Allow Internet & IPLC connectivity on same LAN
    • Allow connectivity of a LAN in an international call center to a domestic ISP
    • ITES companies be allowed to set up their own gateways
  • The Government of India has allowed total income tax exemption on the export of IT initiative enabled outsourcing services under Sections 10A/10B of the Income Tax Act. They are:
    • Customer interaction Services
    • BPO / Back office operations
    • Medical Transcription
    • Legal databases
    • Digital Content development
    • Engineering & Design services
    • Support Centres
    • Payroll/ HR services
    • Web-site services
    • Data Digitization/ GIS and Online education
  • Foreign Direct Investment (FDI) for 100 percent of the equity has been permitted in BPO companies
  • Duty-free imports of capital goods are permitted (under the Export Promotion of Capital Goods scheme) for BPO companies.
  • The Government has promoted several Software Technology Parks (STPs) which provide ready-to-plug IT and telecom infrastructure. STPs also allow single-window clearance for all regulatory compliance issues. Currently, STPs have been established in 20 locations across India covering most of the major towns/cities.
  • Various Indian states have introduced regulatory and infrastructure-related initiatives to encourage ITES investments within their territories

The Indian Scenario

The segments within ITES that will witness tremendous growth include back office operations, remote education, data search, market research and customer interaction services.

India's irresistible and sustainable value proposition

India currently offers a strong value proposition of all IT enabled services hubs owing to the following reasons:

  • India's abundant skilled manpower is drawing corporate hubs to back end their operations in India. The country's English speaking manpower rates high in areas such as qualifications, capabilities, quality of work and work ethics. This places India ahead of competitors such as Singapore, Hong Kong, China, Philippines, Mexico, Ireland, Australia and Holland, among others.
  • India's telecom and physical infrastructure is approaching parity with other countries
  • Indian companies have unique capabilities and systems for setting, measuring and monitoring quality targets. Nasscom is working with international certification agencies to set standards.
  • In certain ITES categories, Indian centers have achieved higher productivity levels-for example, the number of transactions per hour for back office processing, than their Western counterparts.
  • Also, India is able to offer a 24x7 service and reduction in turnaround times by leveraging time zone differences. India's unique geographic positioning makes this possible.
  • The regulatory environment, specially relating to ITS and ITES is highly progressive and most of the earlier policy recommendations made to the Government have been accepted and acted upon.
  • Incentives such as income tax holiday have been provided for the export of IT enabled services.
  • The Government of India has announced a special policy for call centers
  • Many state governments in India are offering incentives and infrastructure for setting up IT enabled services.

A comparison amongst some countries in Asia Pacific based on these factors highlights the following: (Ratings are on a scale of 1 to 3, with 1 being the lowest and 3 the highest.)

Country Workforce Market Access Local Market Infra-structure Cosmopolitan Cost base
New Zealand 2 2 - 2 3 2
Kuala Lumpur 1 2 - 2 2 2
Japan 1 2 1 3 1 3
Hong Kong 1 2 2 2 2 2
India 3 2 2 2 3 1
1 denotes low; 2 denotes average; 3 denotes high
Source: Mckinsey & Co

Market Segments

Customer contact centers

The hottest growing segment within ITES is the Contact Center Services activity, which accounts for almost over 80 percent of the revenues generated by the sector. In this section we take a detailed look at the Contact Center Services market and the opportunities it offers to existing and potential players.

• Contact centers
• Medical transcription
• Back office operations, GIS, animation, engineering & design, on-line training

Contact centers

Contact centers have become catalysts for business transformation, freeing up businesses to focus on core activities. A contact center can be any of the following:

  • A telemarketing center
  • A tele-servicing center
  • A help desk, both internal and external
  • An outsourced center (also known as a service bureau) that uses its large capacity to serve multiple companies
  • A reservation center for airlines or hotels
  • A catalog retailer
  • An e-tailing center
  • An e-commerce transaction center that handles automated customer interactions
  • A fund raising and collection organization

The contact center is traditionally defined as a physical location where calls are placed or received, in high volume for the purpose of:

  • Sales
  • Marketing
  • Telemarketing
  • Customer service
  • Technical support
  • Specialized business activity

While early descriptions of contact centers called them places of doing business by phone that combined a centralized database with an automatic call distribution (ACD) system, today, these centers have evolved to become sophisticated business enterprises providing integrated services that are essential to the success of corporations they serve.

Staff called "agents" who work in shifts in a typical 24x7 operation mans the centers. The "seats" in a contact center refer to the number of people who can work at a given point of time. Contact centers began as huge establishments managing a large volume of communications, as only large companies had the financial muscle to invest in technologies such as the Automatic Call Distribution system that allowed them to handle huge volumes of calls. Today, however, with the development of LAN based switches, Internet based transaction processing, and open phone systems, any contact center can house advanced call handling and customer management systems, including the smaller facilities. A contact center can now range in size from a micro center with 5-10 seats to a huge set up with thousands of seats.

High on the latent potential scale

According to CM Insight of the UK, on a Latent Potential Scale (Source: Political & Economic Risk Consultants), India ranks the highest with a score of 2.0 in the segment of contact centers. Countries such as Philippines, China, Australia, Japan,

Korea lag behind, proving India's edge. The study states that there a is credible opportunity to place business safely in India. The indications are that India is seen to have amongst the most professional and capable business operations seen anywhere in the world. The environment in the country is estimated to be world class, with India scoring high in the areas of infrastructure, technology & telecom, management leadership, processes & quality systems and agent skills & attitude.

Medical transcription

The medical transcription industry has its roots in the US market where it emerged out of a Tmarket need. Bound by a strict code of ethics and statutes, medical practices in the US require a high level of documentation at every stage of the treatment. Owing to the fact that this is a demanding and time consuming process, many doctors/medical institutions in the US are outsourcing this activity to trained professionals who convert voice files into typed forms. The current practice is for doctors as to simply record their findings through a dictaphone or some such device. These sound tracks are then sent through datacom lines to overseas companies (where costs are much lower) that employ "medical transcriptionists" who hear these recordings, transcribe them into reports and send them back electronically through datacom lines. Initially, it was only being contracted out to companies that were in close proximity to these hospitals. Increasingly, however to take advantage of lower costs, this work is being sent abroad to countries such as India, Ireland, Mexico, West Indies etc. Improving telecom infrastructure including the high speed satellite links, is now making it possible to outsource this work.

Market description

Medical transcription is the process whereby one accurately and swiftly transcribes medical records dictated by doctors and other medical professionals. The material transcribed includes, amongst others, patient history and physical reports, clinic notes, office notes, operative reports, consultation notes, discharge summaries, letters, psychiatric evaluations, laboratory reports, X-ray reports and pathology reports and other similar kinds of medical records. Medical transcription may be carried out for any medical professional operating out of a small clinic or a large hospital. These transcribed records are used for purposes of archives, reference or for serving as a legal proof of medical advice. The typical process of medical transcription begins with receiving dictation by tape, digital system or voice data file. Conventionally, recorded advice was sent through physical means (i.e. a magnetic media). However, there is steady emergence of a new practice. Using a toll free telephone line, doctors can call up a designated number and dictate the message, which is converted and recorded into a dedicated server on a real time basis. This helps to save shipping costs and improves productivity manifold.

The parent US Transcription Company connects to this server through a high speed data link (preferably Internet or ISDN link of 128 kbps or above) and downloads any fresh dictation left by customer organizations/doctors. The digitalized data is then compressed and encrypted, for onward transmission via satellite link to India. The local transcription company can then start to immediately retrieve the sound files, uncompress the data and route them to different workstations for transcription. Using earphones and a foot pedal for start-stop control, transcriptionists are able to hear and control the speed of audio messages.

Back office operations, GIS, animation, engineering & design, on-line training

Back office operations refer to the offsite delivery of a range of non-core service functions, including routine administrative tasks, customer service and technical support. Back office operations manage an activity or function on a turnkey basis for their clients. Any aspect of service operations that involves high volume transactions is an opportunity for back office delivery.

Over the past 25 years, the types of service activities being outsourced have changed considerably. Outsourcing, as we know it today, began in the 1980s, when organizations began contracting out specialized functions that were not part of their core business. The availability of more cost efficient telecommunications supported corporate decisions to scan globally for the technical skills they need and hence optimize their use of talent.

The growth of the Internet and on-line connectivity made possible the provision of technical support and problem resolution for customers from remote locations. Contact center activity began to accelerate.

Finally this was followed by entire support processes getting outsourced (business process outsourcing), as corporations began to focus primarily or exclusively on their core business. Some of the earliest examples were payroll processing and credit card processing.

Business Process Outsourcing

BPO involves turning over an entire function or business process to a back office supplier (for instance the resource management of an organization which may involve payroll and finance; information technology; human resources; inventory management). As corporations merge and consolidate operations, this trend towards outsourcing basic business processes is becoming a new business model for international corporations.

Back office operations evolution

Initially, back office operations were created as captives of parent companies and were treated as cost centers. Over the period, these have evolved from cost centers to profit centers due to:

The emergence of third party back office facilities making it possible for corporations to avail of their services on a flexible or "as required" basis. Corporations are increasingly converting captive back office operations into profit centers by accepting external clients

Types of back office services

Today, back office services cover the following:

  • Administration
    • Tax processing
    • Claims processing
    • Asset management
    • Transcription and translation
    • Document management
    • Other administration
  • Finance
    • Billing services
    • Accounting transactions
    • General accounting
    • Tax consulting and compliance
    • Risk management
    • Financial reporting
    • Financial analysis
    • Financial management
    • Other finance services
  • HR
    • Benefits administration
    • Education and training
    • Recruiting and staffing
    • Payroll services
    • Hiring administration
    • Records management
    • Other HR services
  • Payment services
    • Credit/debit card services
    • Check processing
    • EDI
  • Other transaction processing

Industries such as banks, insurance, airlines, telecom services require large-scale data processing and data-based decision making capabilities. Raw data and/or paper documents are sent to locations where the back office operations (image retrieval, scrutiny of data, data input, customer reports, internal MIS, reconciliation etc) are carried out.

Significant potential exists for cost savings through outsourcing across industry verticals. Hence, customer interest in outsourcing will not be limited to just a few verticals, but be much more widespread. Insurance and retail banking generate the bulk of savings because of the high proportion of processes that they can offshore. As a result, companies in these two verticals are taking the lead in sourcing ITES from India and rapidly growing in scale.

For instance: GE has the largest ITES operation in India with more than 10,000 employees and is growing at the rate of more than 700 people per month. HSBC, which started offshore operations employs about 1000 people and plans to double that number in less than a year. Conseco acquired a 350 agent company and has grown the facility to more than 1700 people in a year.

Outsourcing opportunities vary from standaridised corporate centre activities such as accounting, payroll, etc. to more niche and vertical specific opportunities such as clinical trials support for pharmaceutical companies, claims processing for the insurance sector, account opening support for the banking sector, etc.

To calibrate the feasibility of outsourcing and the cost saving potential of any process, a rigorous four step procedure needs to be followed:

  • Lay out the entire value chain for the process.
  • Break down each segment of the value chain into its constituent activities.
  • Identify the activities that can be performed remotely.
  • Estimate the cost (labour and associated infrastructure) of activities that can be outsourced to offshore locations.
  • For example, in claims processing, most activities in origination and closing can be offshored, while others require a physical interface with the claimant and therefore cannot be offshored.

The current offshoring activity in insurance also suggests that claims and servicing are the focus processes. Most companies that offshore insurance processes to India started with simple low-complexity claims and policy servicing processes. Now, the set-ups have also started offshoring more complex claims, risk analysis and underwriting processes.

Like insurance, there is tremendous opportunity in retail banking too. For example, in loan processing, there are several activities from origination to servicing which can be offshored. In application entry to closing stages, the entire data entry, underwriting/credit decisioning, communication and upsell to applicant and final document preparation can be offshored.

Similarly, in fund disbursement to coupon delivery stages, the review of closing documentation, booking of document to system and general ledger reconciliation can be performed remotely. Several service activities, e.g., handling internal and customer inquiries, file management can also be outlocated. Several global financial services are already taking advantage of this opportunity. For example, HSBC provides supports for origination process among several others from India. Similarly, Citibank uses its subsidiary eServe to support cheque processing, customer service and trade finance processes.

Setting up a back office business

  • The first step in setting up a back office business is arriving at a mission statement, answering questions such as the strategic objective to be achieved; benefits that will be offered to clients and benefits that will accrue to the company.
  • The competitive niche positioning will need to be identified. This process will consist of analyzing the competition, defining the type of service operations being planned, selecting the type of ownership structure that is desirable and deciding on the type of customer that will be targeted.
  • In analyzing competition, companies will need to look at issues such as prevailing reputation in back office services, prevailing labor costs, prevailing telecom support, size of labor pool, regional coverage, availability of training for labor force, incentives, etc.
  • Companies will have to determine their primary competitive niche by looking at issues such as quality, speed and reliability, value for money or flexible capacity.
  • Players in the market will have to decide on the service offerings they will introduce, based on the kind of telecom and labor infrastructure they have.
  • Companies will have to decide on the type of ownership model they want to go for, like joint venture, network affiliate, local ownership, etc.

Back office service providers will also need to determine the kind of business and customer they will be going after. Readily available market analysis and reports can be used to decide on the industries that offer the most potential.

Internet Services

The Internet has been referred to as a tool as revolutionary as the wheel, the printing press, the telephone and the microchip. It was to enable businesses and customers to conduct commerce virtually without the need for intermediaries or physical assets, and hence to generate significant value for new businesses and incumbents. The hype resulted in astronomical valuations for dot coms that attempted to transfer value from established "old economy" players to themselves. In India too, massive venture capital flows into start-ups fuelled a "land grab" phase. Leading companies bought into the threat that organizations that did not aggressively embrace the Internet would suffer a competitive disadvantage and so they aggressively invested in e-commerce applications.

Internet Subscribers in India

The Net has virtually become a household name in India. The significant boost to the country's Internet plans can be accounted to the Government, which has announced several landmark decisions that have helped increase Internet penetration in India. The splurge in the Internet front is in a large way also owed to the increasing number of private ISP market mushrooming all over the country and affordable smart phones and mobile data plans, offering the cyber voyage for more and more competitive prices. In a splash of time, Internet in India has come to be viewed as the most vital medium for information, entertainment, communication and the sole means for electronic commerce.

Today, everywhere one looks, the signs of Internet's arrival and adoption loom large. And as the Internet proliferates, so will e-commerce and e-business - this is now a universally recognized fact. Therefore, a boost in the expansion of the Internet in the country will not only help India become a vital part of the emerging global e-conomy, it will also enable its citizens to avail the benefits of the web enabling experience.

India's Internet subscribers increased - from a meagre 0.7 million subscribers in November 1998 to over 1.8 million subscribers by December 2000. In 2001, there were approximately 7 million Internet users in India. This number has grown by 25 times in the last 12 years at a compounded rate of over 30 percent y-o-y. Today, ~40 million Indians are online every day, spending ~40-45 hours over the Internet per month. India is the second largest market for social networking giants such as Facebook and LinkedIn; 58,000 new users get connected on to a social network every day.

The number of Internet users in India is expected to cross the 300 million mark by the end of 2014, overtaking the US as world’s second-largest Internet market. While China leads with more than 600 million Internet users, the US has an estimated 279 million users.

According to a report by the Internet and Mobile Association of India (IAMAI) and IMRB International, the number of Internet users in India is expected to grow 32 per cent to 302 million at the end of December 2014 from 213 million at the end of December 2013. The user base in India is further estimated to grow to 354 million by June 2015.

Though we still lag behind countries like China, Japan and Taiwan in terms of Internet usage, yet the gradual quickening in the pace of India's Internet growth can be judged by the growth in subscribers. “The Internet in India took more than a decade to move from 10 million to 100 million and 3 years from 100 million to 200 million. However, it took only a year to move from 200 to 300 million users. Clearly, Internet is mainstream in India today,” IAMAI-IMRB said in a statement.

The report said of the 278 million users Indian had in October 2014, 177 million are in urban India, higher by 29 per cent from last year. In rural India, the number of Internet users increased by 39 per cent to reach 101 million in October 2014.

About 119 million users access the Internet on mobile devices in urban India, while rural mobile Internet user base stood at 40 million in October 2014. This is further estimated to touch 128 million (urban) and 45 million (rural) by December-end 2014.

Nasscom Internet survey conducted in 68 cities / towns in India in January 2001 (accounting for over 92 percent of the total Internet users in the country) on Internet Usage Trends and came up with some interesting findings:

  • More than 200 cities and towns in India have Internet connectivity.
  • As of December 2000, there was a PC base of 5 million PCs. Out of these, there were more than 3.7 million machines that had Pentium I and above processors (i.e. machines which could be effectively used for Internet).
  • More than 120 private ISPs would be fully operational by June 31, 2001 (out of the projected 500 licenses to be given by that date).
  • At least 12 private international gateways for Internet are expected in the same period. Seven private international gateways are already operational by December 2000.
  • Over 81 percent of PCs sold during financial year 1999-2000, were driven by the need to access the Internet.
  • More than 86 percent of top 100 corporate companies (who responded to the survey) have endorsed the Internet and e-commerce as being an integral part of their corporate strategic framework for next year.
  • 91 percent of India's corporate Web sites are located overseas.
  • The capital cities (New Delhi and other state capitals) today account for 79 percent of Internet connections across the country.

E-commerce in India

India is currently in the midst of an e-commerce revolution. The arrival of the Internet followed by the escalating growth of Web-based businesses is leading to e-commerce both on the B2B and the B2C sides. E-commerce is shifting users from shopping in stores to shopping on the go. The e-commerce trends in India are in perfect accordance with the sweeping changes taking place in the global markets. Even the Government has proved itself to be IT friendly and has taken significant strides to ensure that the economic climate is ripe for e-business.

As per a Nasscom - McKinsey study, India has the potential to earn revenues worth US$ 10 billion from e-business solutions. (Both the domestic and export markets put together).

And the Indian players can achieve this goal by:

  • Increasing their reach
  • Establishing deep relationships
  • And expanding the scope of businesses covered

As part of its survey on e-commerce, Nasscom also conducted a study on the plans and capabilities of software companies in India. Some of the preliminary findings on e-commerce / e-business software exports potential are as follows:

  • The study revealed that Supply Chain Management optimisation and Customer Relation Management are going to be one of the strongest drivers of the global e-commerce solutions market. And more than 72 percent of Indian software houses were found to possess strong expertise in Supply Chain Management and CRM.
  • Some of the areas of e-commerce services available are:
    1. Legacy application integration
    2. Internet application integration
    3. EDI
    4. Migration to Web-based models
    5. New IT frameworks
    6. Integration with business strategies
    7. E-commerce training services
  • The projections of revenues from Internet and e-commerce related software and services exports were revealed as follows:


United States had provided a three-year moratorium to not levy any tax on e-commerce transactions. While our Finance Minister has also announced that there will be no tax on e-commerce transactions, it is imperative that a clear-cut policy of Government of India is formulated. The India government has formed a high-powered committee on electronic commerce and taxation under the Central Board of Direct Taxes. This committee is reviewing the various aspects of e-commerce transactions and technology transfer and evaluating whether these should be subject to income tax.

Nasscom had recommended a five-year moratorium on e-commerce transactions and also suggested a comprehensive study on the various issues involved, before a decision is taken to tax e-commerce. In fact, due to the global nature of e-commerce, it is suggested that India should support a permanent ban on taxes on Internet access, a permanent ban on custom duties on electronic transmissions, international tax rules that are neutral, simple and certain; and simplification of state and local sales taxes.

E-commerce Survey

The total volume of e-commerce transactions in India was about Rs. 450 crore in 1999-2000. The Nasscom survey revealed that e-business transactions in India are expected to exceed Rs. 2,300 crore in 2000-01 and go up to a whopping Rs. 40,000 crore in 2003-04.

The survey revealed that during the year 2000-01:

  • E-commerce transactions did not grow to the level, as was initially expected.
  • The B2C segment was the biggest hit.
  • E-tail segment is projected to earn only Rs. 50-60 crore.
  • Whereas stock traded online are projected to have transactions worth Rs. 1,200 crore.
  • The total projections of e-commerce transactions during 2000-01 are at Rs. 2,300-2,500 crore.

A firm regulatory framework, improvements in telecom infrastructure and enhanced PC penetrations are expected to spur this trend during coming years.

The user side: E-commerce means business! Some of the highlights of the domestic e-commerce scenario based on the findings of Nasscom's survey include the following:

  • Among user organizations, more than 85 percent expressed keen awareness about the increasing adoption of e-commerce and its potential benefits.
  • More than 43 percent of corporate respondents said that e-commerce transactions were integral to their corporate plans. Of these nearly 85 percent were industries, which did not have direct or frequent contact with end consumption.
  • About 21 percent of companies already have some form of e-commerce infrastructure in place. These have been facilitated through the upgradation of existing IT systems or fresh installations or e-commerce transactions.
  • More than 90 percent of the respondent cited perceived efficiency in Supply Chain Management as a motive for business-to-business e-commerce and enhanced customer service (Customer Relationship Management) for business-to-consumer transactions. The other cited benefits included moving towards Just-in-Time management.
  • About 49 percent of the respondents said that given the right framework and cost effective infrastructure, they would like to move towards adopting e-commerce at the earliest.
  • Some of the key industries that have high potential for early adoption of e-commerce are financial (stock exchanges and banks), automobiles, retail, travel, IT and manufacturing.

Hardware Industry

The IT Industry revolution in India rests on four pillars i.e., hardware, software, service and training. It is imperative that there is uniform growth in all these sectors.

The items of manufacture include personal computers, servers, workstations, super-computers, data processing equipment, and peripherals like monitors, keyboards, disk drives, printers, plotters, digitizers, SMPS, modems, networking products and add-on cards. The bulk production was in PII and PIII based PCs. Amongst the printers, Ink Jet printers have been most popular.

The Ministry of Information Technology (MIT) estimates PC ownwership at 100 million.The PC penetration levels in terms of the absolute population numbers stands at 4.5 percent, with this figure doubling to almost 9 – 10 percent when it comes to the (individual) households. There has been a freeze in the Indian PC market, having been impacted by the spike in mobile form factors like smartphones, tablets, and phablets.

The figures presented above are based on MIT statistics. It is not known if these figures include Grey market and assembled computers, which is fairly well established in India.

Indian Software Industry 

Indian software industry has done exceedingly well during the last few years, recording an annual average growth rate of above 50%. Domestic software business is also witnessing significant growth. The Indian software industry has worldwide recognition for quality IT solutions. 

IT Applications

Communication & Broadcasting 

The thrust areas covered in this sector non-public network telecom industry, wireless communication, user specific transmission, switching and terminal equipment. The broadcasting sector broadly covers digital broadcasting of audio and video, broadband access, digital compression, digital storage and retrieval, hard disc based and optical technologies. 

With the announcement of New Telecom Policy'99 (NTP), the opportunities in the area of communication and broadcasting had grown rapidly. Internet Service Providers (ISP) licenses were given to private sector, which boosted Internet & IT development in the country. Private investments in telecom sector in value added and basic services were welcomed.

Internet Service Provider (ISP) were permitted to set up international gateways and to hire bandwidth on International Satellites. This enabled the increased availability of Internet bandwidth and facilitated Internet expansion in the country.

IT in Power & Infrastructure 

IT in association with power electronics is poised to play a key role in the infrastructure industry. IT has been an integral part of the power sector. SCADA systems for control rooms and for remote control of the facilities is one of the established IT applications in the power sector.  Some of the other applications include data-logging, automated controls and instrumentation and power plant simulation for training purposes   

IT is used in distribution automotion, metering, billing, analysis and revenue protection in the distribution part of the power sector. With the privatisation and restructuring underway in the power sector, the potential for use of IT solutions has expanded immensely. Distribution Automation projects are being taken up in Andhra Pradesh and WBSEB. Power electronics in association with accompanying software is being used in renewable energy projects for frequency, voltage and load control as well as for the safety of the equipment. High voltage power electronics is being used for electric supply to AC drives and the grid.

One of the examples of IT and power electronics in high voltage is the HVDC link of 200MW/200KV between lower Sileru in Andhra Pradesh. Amongst the major gains in electronics and IT areas are:

• Power Electronics including Power Semi-Conductor Devices.
• State of the Art digital control system.
• System studies using computer and simulators     


In transport, automated vehicle counting and traffic assessment is an activity which will be on demand with privatization progressing in the road sector. This activity will be particularly useful in assessing the viability of any toll based project and also for determining the toll structure. The system can also be used for Urban Traffic Control. Global Positioning Systems and other communication devices that can be placed in vehicles are also areas of IT applications. 

Railways has been extensively using IT solutions. An intranet for northern railways has been established with linkages to all of its divisions. MIS programs using web technology have been implemented for 
a) monitoring rakes & wagon positions
b) movement of essential commodities
c) monitoring passenger complaints 
d) movement of trains

A "Wireless Tag & Base Station" developed by the National Informatics Centre (NIC) has potential applications in vehicles monitoring for traffic control as well as verification in various State Government Check-posts located through out the country. 


There is wide applicability of  IT in manufacturing including process control, machining, assembly and simulation.

Other Utilities

IT obviously has wide applicability in various utility related activities that may include automation and control, analysis, monitoring, billing etc. With several utilities planning modernization and upgradation of their systems or with privatisation, restructuring and reforms, IT is going to play an increasingly important role.

Other areas 

Some of the other areas of IT applications include education, medicine, networking of universities and academic & research facilities, high performance computing, multi-lingual applications, entertainment, media, animation, rural networks, government networks, regional networks, agriculture, trading and e-commerce, engineering & material testing, computerisation of records and their analysis. 

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