GD Topic: Why is India one of the most preferred destinations for software development worldwide?
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Software Development commands extreme significance for new IT solutions and IT-enabled services due to the rising global demand. Appropriate software development gives the right amount of thrust to the web sites functionality and service quality. This task requires thousands of skilled professionals who put in hours of research, experimentation, testing and trials. Apart from the rising demand, skilled manpower, technology and infrastructure are essential for Software development and that makes offshore outsourcing an indispensable requirement for the IT Industry.
The developed countries that desire to make rapid strides in the field of IT, finds it difficult to get the right amount of manpower needed. On the other hand, developing countries, especially Asian countries like India and China, have followed an IT policy that resulted in the generation of enormously skilled manpower and a well developed IT infrastructure. This has led to a real boom in outsourcing industry with the destination being India.
India is one of the most preferred destinations for software development worldwide. With its highly skilled and available human resources, use of latest technologies and high–end infrastructure, India is capable of handling any type of software development. The strong point of software development India industry is its capacity to develop more rapidly the required software and provide innovative and customized software development solutions.
Study suggests that 50% - 75% of the Fortune-500 companies have outsourced work to India and the Indian IT outsourcing industry is growing by 25% - 30% on an average annually. Thus, India evidently has a competitive edge and clear-cut advantages over other contending players (destinations) in the Software Development Outsourcing business.
Indian outsourcing destinations like Bangalore, Chennai, Pune, Mumbai, Delhi and Kolkata are developing with lots of investment in the infrastructure in terms of power, road and communications. India also has the expertise of quality certified software firms and outsourcing suppliers that not many countries can boast of. So as of now, India seems to hold its position as the leader in outsourcing service market.
Some of the factors that make India a potential software outsourcing destination are:
Vast Manpower: With a population of 1 billion and ever expanding army of highly skilled science and English graduates, India has unmatched potential in the human resources department even exceeding China in this area.
Cost-effective services: Outsourcing to India helps the companies in saving more than half of their operating costs without compromising on quality as India has a large pool of educated, trained and technically skilled manpower unlike the west, where technical talent is rare.
High-quality services: India uses the latest in software, technology and infrastructure to provide global customers with high-quality outsourcing solutions. India has also proved it’s technical superiority over other countries that provide outsourcing solutions. India has the largest English-speaking audience after the U.S. which is computer literate as well.
State of the Art Communication Infrastructure: Indian companies offer plenty of high-speed bandwidth via satellite connectivity, submarine cables and optical fiber networks. Add to this the fact of countrywide mobile telecom coverage and you have 24/7 flawless connectivity with vendors and clients 365 days of a year.
Time Zone Advantages: The time zone advantages between India and countries in the U.S and U.K has proved to be another important factor why companies outsource to India. Organizations who wish to provide their customer with 24x7x365 days customer support or helpdesk services can outsource to India.
Rapid Economic Growth in India: Indian economy has been witnessing a robust growth rate for many years now and the Indian growth story is largely due to the services sector, which accounts for more than 50% of the GDP. This has catapulted India in the position of world's second largest software exporter, a leading IT superpower indeed.
Stable Polity with Clear IT Policies: India has been witnessing new political maturity with large but stable coalitions that have continued the market-friendly reforms introduced in 1991. The IT and ITeS sectors have been the biggest beneficiary of these policies. The government is also trying to cut down the red tapeism by introducing single window clearances for setting up IT projects and firms. The Indian Parliament has enacted the Information Technology Bill, 2000 recognizing electronic contracts, barring electronic crime, and e-filing of documents. India also has a nodal association of the IT companies called NASSCOM to provide a blue print of the needs and progress path of IT vendors and companies in India.
Attractive Tax and non-tax Incentives for IT Companies:
The Central Government has provided many tax and other incentives to boost investment in the IT outsourcing industry in India. Some of the benefits accruing to IT firms are:
•10 year tax holiday for companies involved in construction and/or maintenance/operation of an infrastructure complex.
•10 year tax holiday to firm that generate and/or distribute power.
•5 year tax holiday to telecom firms providing internet and broadband services.
•10 year tax holiday to IT firms setting up venture in notified IT parks and Special Economic Zones (SEZ).
•5 year tax holiday for IT and other firms setting up a project in backward districts and states.
•IT outsourcing and other firms also get tax incentives on exports as tax is deducted on profit for exporters setting units on SEZ's, Electronic Processing Zones (EPZ), Software Technology Parks (STP).
•Attractive tax incentives are available on expenditure for research and development including deduction of 150% on scientific research and 10-year tax holiday for scientific and industrial research R&D companies.
Today, the MNCs have a greater focus on the Indian IT outsourcing and software development market. While a large number of companies are outsourcing their software development to Indian companies, others are establishing a presence in India and participating actively in the software export arena. Thus, India is an ideal offshore destination for software development, programming and IT outsourcing due to a number of factors some of which are categorized above.
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