The Indian IT Industry exists in a country obsessed with socialism and plagued with policy paralysis. In such a scenario, collectivization of the industry takes into account the present unions, diversity existing across the industry and merits of collectivization itself.
INTRODUCTION
Collectivization as a
concept came into being between 1890-95. Collectivization essentially means the
organization of an economy, industry or enterprise by forming collective
communities where property and resources are owned by the community and not
individuals.[i]
Most famously, collectivization was a policy adopted in erstwhile Soviet Union
under Joseph Stalin between 1928-40 where peasant farms were replaced by
collective ones to increase food supply. This was seen as a solution to the
agricultural distribution crisis faced by them since 1927.[ii]
The Indian IT Industry is highly
decentralized in in terms of geographical distribution as well as the profile
of work. Thus far, the National Association of Software and Services Companies
(NASSCOM) is the largest organization association in the industry.
Industry
overview
The Information Technology Industry
in India primarily consists of two broad horizons – IT Services and Business
Process Outsourcing. Other areas such as Software, ER&D and Hardware also
account for a fraction of the industry. The industry has seen a robust revenue
growth in both domestic and international markets. Between FY 1998-2012, the share
of the IT sector in total Indian exports increased from less than 4% to about
25%.[iii]
The booming industry with its vast export market also contributed strengthening
ties with both the USA and the EU.
The IT-BPO industry
is a net employment generator. In FY2012, the industry added 230k jobs totaling
to a direct employment to about 2.8m while indirectly employing 8.9m people.[iv]
The Indian IT sector currently
specializes in providing low-cost business solutions.
Only a few companies have the competency to take up projects involving high end
SLDC (Software Development Life Cycle) processes such as requirement analysis,
architectural design and product development. However, there has been a slow
upward trend in this direction. A problem which the industry faces is the
lethargic attitude of the government in providing a telecommunication
infrastructure which slows growth.[v]
The landscape of the
Indian IT industry is marked with the coexistence of two diverging yet
prominent features – diversity and concentration of power. NASSCOM figures show
that there are over 1.3k start-up firms in the IT sector, primarily in
e-Commerce, Education and Internet services. The industry itself comprises of
over 16k companies. However, more than 40% of the revenue generated is
attributed to the top 11 players while an odd 15k companies are able to attract
only 9-10% of the revenues. Moreover, the industry draws a major chunk of the
working population equipped with many different skill-sets and educational
qualifications. It is in the background of this concentration and diversity, we
address the issue of collectivization in the sector.
Nasscom
The NASSCOM is a non-profit trade
association of the Indian IT industry and allied sectors registered under the
Indian Societies Act, 1860 with its headquarters at New Delhi. Among its 1,500
members, about 17% are companies from the US, EU, Japan and China. The
companies registered with NASSCOM represent 95% of the industry revenues and
have commanded ingenuities to shape the industry in India as well as globally.[vi]
NASSCOM plays a role in the
enforcement of Intellectual Property Rights in the Indian Software and BPO
industry. The organization also provides a mentorship programme for mid-sized
companies, i.e. a 6-month engagement which helps organizations to develop a
better assessment of their strengths and weaknesses. The members can
participate in opportunities for global networking and build business at
NASSCOM's global events, and through delegations and road shows.
CURRENT
STATUS
The IT Industry has a framework in
place for advisory, technology growth and networking initiatives. However,
there are no frameworks in place to pool resources or revenues for the sector.
Cooperative solutions to address key industrial challenges are encouraged to
drive industry growth. Furthermore, 8 councils consisting of Directors, CEOs
and senior Executives of major IT companies tailor to the requirements of
sundry sections of the industry and aim to create detailed programs which may
assist these sections to realize the opportunities and share the best
practices. These councils act as advisory groups to the industry members for
modelling the programme on a regular basis and take control on particular
ingenuities. They also hold an annual product conclave showcasing innovative
product companies. The advisory groups have been formed for the following
sectors:
In addition to this, 6 Regional
Councils have also been formulated to function across different cities. The aim
of these councils is to construct strategies, address indigenous disputes,
allow intra-industry networks and share best practices. Moreover, these
Regional Councils also contribute towards the development of the industry in
tier-2 cities where the industry has significant presence but has strong growth
potential namely Coimbatore, Indore, Kochi, etc. Another motive of forming
these Regional Councils is to lobby with local governments for policy advocacy.[vii]
10,000
Start-ups Initiative
One of the most interesting and
exciting developments in the IT industry in recent times has been the advent of
a large number of entrepreneurial innovative companies in the space of IT
driven by young entrepreneurs bubbling with new ideas. The 10,000 start-ups
programme is an early stage incubation program NASSCOM has put together to help
faster growth of the entrepreneurial ecosystem in India. Entrepreneurs who have
ideas are often desperate searching for someone who can guide them on issues
like how to run a start-up, how to grow a business, etc. The initiative is
partnered by large enterprises like Google, Microsoft, Kotak, etc. aims to make
the bright young talent of the country look for more than just their next
job. Entrepreneurs
are given an opportunity to meet with mentors, potential investors, and fellow
entrepreneurs.
A start-up warehouse programme
identifies some of the best start-ups and provides mentorship, space, customer
connects, etc. Some of the start-ups participating in the programme have been
able to connect with large platform players like Intel, Google, Microsoft; some
of the largest retailers in the world – Walmart, Tesco, Target, etc.
At a very early stage a start-up
requires capital and connections which is exactly what is provided.
Entrepreneurs gain exposure by talking to investors in accelerator programmes. Selection
by such programmes gives a lot of validation to the product-concept. The power
is shifted from the investors and accelerators towards the entrepreneurs.
Initially the focus was only on creating a database of start-ups but has
evolved since. Awareness around the massive set of opportunities that existed
for entrepreneurs in India to build technology start-ups was increased. The
platform primarily provides support for funding, acceleration, mentoring,
enterprise connections, recruitment support and prototype development.
A lot of knowledge and initiatives is
driven in the deep-hearted start-up communities of tier-2 and 3 cities which
are hitherto unknown to the ecosystem outside.
A momentum has already been build
which is continuing. Now the initiative looks to address some constraints which
are emerging. A number of policy inputs based on the funding requirements,
regulatory issues, infrastructural support, etc. which have emerged through
this process allow for policy inputs to the government so that government
policies are also supportive of this ecosystem.
In its first 9 months, the programme
has impacted over 200 start-ups directly and touched over 25k entrepreneurs.[viii]
Policy
advocacy
In 2013, the IT industry as a whole
was able to work with the Government of India to change and release Safe Harbor
Rules which lays out amendments in taxation policies, SEZ rules in tier-2
cities, service tax refunds, etc.
In recent times, the Judiciary and
tax department have been burdened with accumulating litigations and cases. As
per new norms, Government would notify the tax norms relating to the industry
which would help attract new investment from previously concerned MNCs,
expansion of existing centers and offer certainty. The rules are to be
applicable for 5 assessment years beginning from 2013-14.[ix]
In the realm of
Global Trade Development, the US Immigration Bill when came into place was seen
as discriminatory and detrimental to the Indian IT Industry. The bill tabled
immigration reforms addressing America’s problems. This challenged the
influence of the Indian IT industry on the US economy in terms of taxes and
social security, creating employment, and renovating companies by making them
more competitive.
Moreover, the unemployment in the IT
sector in the US was 2.2% in 2013 Q1[x]
while the headline unemployment rate stood at 7.6%.[xi]
Further restricting immigration would only add to the existing problem of
finding talent in the sector making it difficult for all organizations to hire
locally. Another finding by the National Foundation for American Policy states
that the top 25 India-based companies utilized 20% of the H-1B visa approved
for initial employment in FY2012 representing only 0.017% of the US labor
force.[xii]
These issues were raised with the
Indian Government. Subsequently, the Finance Minister, Commerce Minister, and
the Minister of External Affairs raised these concerns with US authorities. In
addition to this, NASSCOM connected with international firms, associations and
others on expressing the influence of these deleterious provisions on the US
industry and the trade relations among the two nations. The Global Trade
initiative also deepened its emphasis on building new market prospects in
emergent markets such as Japan, China and Africa.
Skill
Identification
Regularly, IT-ITeS
Industry Occupational Analysis Reports are released which ascertain unique professional roles in the industry for entry,
middle and leadership levels. Enactment of these standards aid in better
defining of skills and proficiencies for the industry. The reports intend to
normalize and simplify the practice for employing and training talent and will
assist the sector to shape rightly-skilled, high class, job-ready and
employable manpower.
The four sub-sectors included in the
Occupational Analysis are IT Services, Business Process Management, Engineering
and R&D & Software Products and 67 unique entry-level job roles have
been acknowledged in the purview. The reports concerning knowledge, abilities
and conducts, vital for performance in a specific occupation have been
recognized in the analysis.
“India
is at the cusp of a great opportunity and is entering an era of becoming the
workhorse for the world. Reports like these are the first steps towards
creating an understanding for the skills and behaviors required for the IT-BPM
industry. The Government of India has set a target of skilling 500 million
people by 2022; to be able to deliver this target, a structured approach
involving all stakeholders is imperative. This is a starting point in the
direction of imparting skills for the relevant jobs. These reports give us a
clear understanding of the opportunities of the industry.”
-
Mr Shashi Tharoor, erstwhile MHRD,
GOI[xiii]
The Indian IT-BPM Industry currently
employs about 3M people directly and about 9M indirectly. The Industry holds a
potential to provide 30M employment opportunities by 2020. Training
professionals in the identified courses may lead upto 60% increase in
employability. The Government of India has set a goal of skilling 500M people
by 2022. To be able to achieve this a planned method linking all stakeholders
is vital.
CONCLUSIONS
In an era of policy paralysis and
upcoming start-ups, collectivization of knowledge and networks does produce a
faster growth curve. It speeds up the learning curve of new entrants in the
arena for both individuals and corporations. However, pooling of resources
might do more harm than good. One of the major competencies of the Indian IT
sector is its cost-effectiveness which is guided by the violent competition
within the industry. Other Asian nations having abundant cheap labor do not
enjoy this thrill of in-competition which contributes to the growth of the
industry.
Diversity
As already seen, the Indian IT
industry is vastly diverse in terms of geography, size of operations and
verticals of competency. While they make collectivization difficult, they also
provide specialization in various fields the constantly evolving industry
demands. Collectivization also entails scientific management where one correct
way of doing things is found. However, the industry continues to grow and
evolve in unchartered areas in the beginning of the 21st century
making it very difficult to have a stringent procedure. Collectivization may kill
the creativity which is a prime feature of this industry.
Even the new players
in the field do not define the one growing vertical of the industry. The two
leading areas continue to be education and ecommerce which themselves create
space for further concentrations. Even the largest exporting sector, i.e. IT
services accounts for only 30% of the total exports creating a vast space for
other areas such as BFSI, healthcare, utilities, etc.
Even the revenues of the industry
have shown stark imbalance where 40% of the returns are enjoyed by the big 11
firms while 1.5k firms share 10% of the proceedings. In such a scenario,
collectivization is sure to kill off the small growing players. This has two
adverse consequences. One, it kills the entrepreneurial spirit which has been
industriously nurtured in the country. Two, it would cause people falling out
from one of the biggest employing industries for young educated Indians.
All successful IT companies in India
share a culture of a healthy hierarchy and manageable size. It has been seen
that companies usher their own doom by becoming too big to manage. In the
absence of strong resource databases and knowledge-sharing systems, the
industry might face similar consequences on collectivization. Already, the industry
faces a management to employee ratio of 1:25 while the recommended average of a
large industry is 1:40. The reason why the industry is able to sustain this
number is due to the small size of organizations and high number of start-ups
where management and employee roles are mixed. As of now, the Human Resource
Capital of the industry in India does not allow for efficient collectivization.
Collectivized
Rights
Collectivization poses the problem of
Collectivized Rights. In a collectivized industry the system is ruled by the
requirements of the leader, i.e. the majority gang leaving no space for
minority interests. Just because the collectivized industry chooses to pursue a
certain product or service, does not mean it is the right or required thing to
do. Collectivized rights put too much might with the leader which poses the
risk of destroying the industry at once.
Collectives need to
take into account the needs of all individual participants. The collectivized
rights need to be derived from the rights of its members through voluntary,
individual choice and contractual agreement. Every legitimate group undertaking
should be based on the participants’ right of free association and free trade.
Forcing participation would not count as legitimate collectivization. As we
have seen, the IT industry is extremely concentrated in power making it easy to
forecast the power balance in a state of collectivization.
Currently the IT industry enjoys the
right of engaging or not engaging in businesses which is derived from the right
of the owners to invest their money in a productive venture, the right of a
firm to hire employees, the right of the employees to sell their services, the
rights of producers to produce and sell their products and the right of the
customers to choose and buy those products. Every link of this chain of
contractual relationships rests on individual rights, choices and agreements. The
notion of collectivization in the IT sector would leave these rights to some
firms and take them away from others, which would rest on the power of
lobbying.
Collectivization takes away the
freedom the IT industry currently enjoys. There need to be some norms which
help avoid criminal activities, i.e. violating the rights of others, but
collectivization may lead to an industry where small players become pawns in a
bigger game. The law must not give anyone the right to this. IT would not
matter whether the smaller players are bullied by force or voting, the fact
would remain that they would lose their rights. Again, it is not the duty of
the big companies to nurture the younger players at their expense. This cannot
be done until some vested interests are first taken account of. The big firms
must only help the smaller ones if and when they choose to do so. Even in a
state of collectivization, the leaders must have no right to violate the rights
of the smaller firms.[xiv]
Benefits of Collectivization
It is difficult not to see the
benefits of Collectivization in the Indian IT industry. It is easily seen that
the growth of the IT industry follows the growth of NASSCOM. It also helps in
identifying talent and training them according to broad industry needs while
growing the industry itself in important sectors. Infact, some prefer
collectivized decisions which protect the smaller firms from eradication as
opposed to a capitalist environment which makes it impossible for start-ups to
survive. Collectivization also assures obligatory employment. Most
professionals are unable to find employment in the fiercely competitive market.
Collectivization ensures the industry as a whole taking care of everyone where
the needy would be supported by those with means. In a country like India where
unemployment increases year-on-year, collectivization in one of the fastest
growing industries may help to curb this problem to a large extent. The workers
face constant exploitation and low salaries. In recessive cycles, layoffs are
seen as an easy way of cost-cutting. Such problems would not exist in a
collectivized industry. Some argue that collectivized industries leave little
to wish for the workers and they are able to focus better or the work rather
than other aspects of their lives.
Moreover, larger resources such as
bandwidth and allied infrastructure can be more efficiently provided by the
Government equitably through collectivization. Experts could help the industry
to grow in modern ways resulting in better quality and quantity of products and
services. It would also become much easier to procure resources. There would be
fewer supply points in the industry. Also, collectivization aligns itself with
the goals of the Indian Republic, i.e. to be a socialist state. There cannot be
a socialist state where the majority of firms are private who can sell their
products on the market. Collectivization would socialize the industry raising the
overall standard of living.
Demerits
of Collectivization
It has repeatedly
been argued that collectivization would lead to the death of the Indian IT
industry by convergence of the industry diverging from the present dynamic
model. It can easily be seen that a collectivized industry will fail to cater
to the needs of niche markets which might grow over time. Moreover,
collectivization would lead to lower labor requirements releasing unemployed
populace in an already struggling economy. The bureaucracy in such a condition
would move ferociously fast in a mad competition to see who could get most
firms into collectives. The Government, which lays the laws, would have little
control over the happenings in the districts. Over the course of history, it
has been invariably seen that collectivization leads to a rise in prices, later
liberalization, tax reduction and advance cash payments to incentivize
production for niche markets. However, this charade leaves the industry
crippled and incompetent against international players and with a huge labor
force. Ironically, international competitiveness is what the Indian IT industry
is known for. Small private firms grow in size and provide for much of the
production of the industry. With IT guiding the economy of India to a large
extent in the present day, we would not like to risk the entire economy of
India by collectivizing such a key industry.
Impact
on Entrepreneurs
In a collectivized industry, most
enterprising professionals cannot survive. Most new small firms would be shut
down in such a scenario. Entrepreneurs who wish for their own profits would
resist working for a collective. Also, it is difficult to place trust in to
what extent would their resources be collectivized, refraining small players to
share their knowledge to the market. Once profits have been made, entrepreneurs
would find it difficult to fight the larger collective to preserve their fair
share and have to pay a terrible price for their resistance and lack of
cooperation.
Another problem is lack of incentive.
The entrepreneurs have nothing to work for. The profits generated by
collectives cannot assure anything left for them. In this environment, apathy,
neglect and petty insubordination grows. No manager can perform with such
employees at hand.
FINAL WORDS
The study shows a mixed picture.
While Collectivization looks like a good measure to standardize and grow the
industry in a state of policy paralysis and low domestic revenues, the human
costs may turn out to be horrendous. It comes down to a choice which the
economy has to make whether to be dominated by the private market or be at the
mercy of a few large players.
REFERENCES
[i]
Collectivization. Dictionary.com.
[ii] McCauley,
Martin, Stalin and Stalinism, p.25, Longman Group, England, ISBN 0-582-27658-6.
[iii] Gartner
Says Top Five Indian IT Services Providers Grew 23.8 Percent In 2011. Gartner.
Mumbai, India. 7 May 2012.
[iv] India
IT-BPM Overview. NASSCOM. December 2012.
[v] MohanRaj,
Prasanna; Niranjan and Snighdha. "Indian I.T Industry - A Model based
approach to a shift towards a Prominent Presence in the Global Market".
Research Journal of Economics and Business studies. May 2014.
[vi]
"Vision and Mission". NASSCOM. Retrieved 2012-01-13.
[viii] NASSCOM
10,000 Startups Celebrates One Year. 10,000 Start-ups - a NASSCOM initiative.
[ix] SAFE
HARBOUR RULES FINALIZED AFTER CONSIDERING COMMENTS OF VARIOUS STAKE HOLDERS.
PRESS INFORMATION BUREAU. GOVERNMENT OF INDIA. New Delhi: September 18, 2013.
[x] Tech
Employment Snapshot. Dice.
[xi] Labor
Force Statistics from the Current Population Survey. Bureau of Labor
Statistics. June 28, 2014.
[xii] Indian
techies creating jobs in US: Study. Press Trust of India, 3 May 2013.
[xiii] Aimed at
standardizing the process for hiring and training talent. 11/14/13. RSSING.COM
[xiv]
Collectivized Rights. The Virtue of Selfishness. Ayn Rand. June 1963.
