Impact Evaluation Studies on STPI Scheme in Tier II and Tier III Cities Other than Metros

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Impact Evaluation Studies on STPI Scheme in Tier
II and Tier III Cities (Other than Metros)

Developed for Software Technology Parks of India
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Objectives of the study

• Software Technology Parks of India (STPI) a
  Autonomous Society under Dept of IT was set up in
  1991 to implement Software Technology Park (STP)
  Scheme and Electronics Hardware Technology Park
  (EHTP) and also to provide High Speed Data
  Communication to software exports. Apart from
  Statutory and datacom services, STPI has been
  providing incubation facilities for software
  exports, specifically to SMEs and start up units.
• The objectives of the study are
• Assess the impact of STPI scheme on the overall
  development of IT Industry and its impact on
  Indian economy
• Identify Tier II and Tier III cities that can
  be engines of growth for future IT products and
  services in India
• Identify SME IT industrys growth, the
  challenges and constraints
• Suggest appropriate policies to sustain the high
  growth of Indian IT and ITes Industry

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IT Industry
In crores

• India accounts for 65 percent of the global
  market in offshore IT 46 percent of the ITeS
  market
• Total export revenues earned by IT-ITeS sector
  in 2006-07INR 161,925 crores

Source NASSCOM
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Indias GDP and the IT sector
Growth of Indian Software Industry
Indias GDP and IT sector contribution

• IT sector contribution as a of GDP has been
  rising YOY, from 1.2 in 1997-98 to about 5.4 in
  2006-07.

Rs billion
Indias GDP and the IT sector

• Sustained Economic growth, Positioned as the
  fourth largest economy with a PPP of 3,062.
• Developed Banking system moving rapidly towards
  ICT integrated core banking/net banking

Growth of Indias GDP and the IT sector
Growth rate
Source Ministry of Statistics Programme
Implementation, NASSCOM, Central Statistical
Organization and Frost and Sullivan Analysis
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STPI Scheme Some Performance Indicators

• The STPI with its 49 centres, has crossed
  Rs.1,00000-crore IT exports (Rs.1,00,965 crore
  during 2005-06 as compared with 74,019 crore last
  year).
• Has been a major contributor for spreading the
  IT industry development across India.
• A total number of 7688 units were approved and
  5116 units were exporting in FY 2005-06.
• More than 5,00,000 sq.ft of space available with
  STPI across the country for the incubation
  facility

Source STPI
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• Net exports earnings by STPI units in 2005-06
  INR 101,090 crores. Share of STPI units of export
  revenues earned by IT-ITeS sector in 2005-06 -
  96.7 percent
• More than 80 of the STPI members units are
  Small and Medium Enterprises (SME).
• Direct manpower employed by the exports segment
  of the Indian IT-ITeS sector in 2005-06 920,000
• Share of around 4000 emerging players (SMEs) in
  the IT Services domain having revenues less than
  USD 100 million 10 to15 of total IT Services
  export revenues.
• Share of emerging players (SMEs) in BPO having
  revenues less than USD 10 million 5 of total
  ITeS export revenues. Estimated global spending
  in IT-ITeS in 2005 Over US 1 trillion
• Share of Indian IT-ITeS exports of the total
  global spend on IT-ITeS in 2005-06 less than
  2.5 percent

Impact of the STPI scheme
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• Definition of Tier II Tier III cities
• Tier II Tier III cities are non-metro cities
  endowed with sufficient human, natural, and
  infrastructural resources required to grow and
  sustain ICT development in India.
• The difference between the Tier II Tier III
  cities is with respect to the quality of social,
  economic and IT environments.
• The next slides detail the social, economic IT
  environments that are used to identify potential
  Tier II Tier III cities.

Identification of Tier II and Tier III Cities

• Identification of Tier II and III cities
• In this study, we attempted to identify Tier II
  and Tier III cities based on two approaches
• Scoring model where weights are assigned for
  primary data of economic, social IT factors
  related to a city to identify high total score
  and low total score Cities
• Discriminant Analysis Based the social, economic
  and IT factors use a standardized discriminant
  analysis to identify the groups (i.e., Tier II
  and Tier III cities) and also discriminating
  variables (what differentiates between Tier II
  Tier III Cities).

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Scoring Model Parameters of assessment

• SOCIAL PARAMETERS
• City Population
• Youth Population
• Number of Literates
• HDI Index
• Law and Order
• IT PARAMETERS
• Broadband penetration
• Tele density
• E Readiness Index

• ECONOMIC PARAMETERS
• Number of Engineering Colleges
• Degree Colleges and Universities
• Number of Schools in the city
• Number of Industries in the City
• Number of IT industries in the city
• Air Connectivity to other cities
• Number of Banks
• Proximity to SEZ

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STPI Cities Tier II III
Srinagar Durgapur Bhilai Imphal Kharagpur Jodhpur
Ranchi
Kanpur Aurangabad Nashik LucknowShimla Trichy Pon
dicherry
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Non-STPI Cities
Ajmer Gulbarga Kota Bhiwandi Aligarh Bareilly Ujja
in Firozabad Bokaro Bikaner Agartala
Amravati Ghaziabad Patna Rajkot Kozhikode Raipur B
havnagar Jamshedpur Sangli Gwalior Cuttack
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Large, Medium, and Small STPI Units

• In India, majority of the exporting units have
  been SMEs, which contribute 73 to the export
  earnings. SMEs constitute 99.48 to the total IT
  exporting units in India. Of these roughly 83.49
  are small enterprises with revenues less than
  INR10 Crores, while the remaining are medium
  sized enterprises with revenues between INR 10
  and 100 crores

Exporting Units
Share of exports by Large units SME

• Small Medium sized units contributed around
  27 of the IT exports, which is about INR 30634
  Crores, in 2005-06.
• Large units, inspite of being less that 1 of
  the total exporting units, contribute to 73 of
  the exports from India.

Source STPI
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Contribution of SMEs to the National IT-ITeS
Exports (2007-08 to 2011-12)
SME Contribution

• Currently SMEs are growing at 17 p.a. At this
  rate the exports are estimated to reach 1,24,039
  crores by 2012 ,creating direct IT employment of
  7558.

INR Crores
IT Employment generated in SME
No of employees
Source Frost Sullivan
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Estimated Share of IT-ITeS SMEs towards the
National Exports
Share of SMEs in National IT ITeS Exports up to
2011 2012

• At the current growth rate of SMEs and Large
  enterprises, the percentage share of Non-SMEs to
  national exports will continue to increase by
  2012. The share of non SMEs is expected to grow
  from 52.1 of the national exports to 67 of the
  national exports and subsequently, the share of
  SMEs will fall, from contributing to 47.9 in
  2005-06 to 33 of national exports in 2011-12.

Percentage Contribution
Source STPI, and the 11th Five Year Plan
(2007-20012) Working Group on Information
Technology
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Competitive analysis External Internal

• The current phase began in 1991 with the launch
  of the IT2000 masterplan. Singapore is to be
  transformed into an intelligent island, where IT
  permeates every aspect of the society - at home,
  work, and play.
• Intelligent Nation 2015 (iN2015) is Singapores
  10-year masterplan to help realize the potential
  of infocomm over the next decade. Led by the
  Infocomm Development Authority of Singapore
  (IDA), iN2015 is a multi-agency effort that is
  the result of private, public and people sector
  co-creation.
• Civil Service Computerization Program (CSCP)
  setting important precedents for SMEs
  encouraging technology adoption, providing SMEs
  with opportunity to study new costly technology
  without having to commit investments of their
  own.
• Small Enterprise Computerization Program (SECP)
  Small Enterprise Computerized Accounting
  Program (SECAP) aimed at attempting to synergize
  SMEs with ICT to upgrade their business
  operations.

Policy Framework for SMEs in Singapore
Source International Development Association
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Competitive analysis External Internal

• Local Enterprise Computerization Program (LECP)
  allowing SMEs to gain access to a registered
  group of ICT consultants vendors, obtain
  assistance grants
• To spearhead the transformation of key economic
  sectors, government and society through more
  sophisticated and innovative use of infocomm
• To develop a globally competitive infocomm
  industry
• To develop an infocomm-savvy workforce and
  globally competitive infocomm manpower

Policy Framework for SMEs in Singapore (contd.)
Source International Development Association
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Competitive analysis External Internal

• The Russian Govt. has approved a USD 2.6 billion
  program called Electronic Russia 2002 2010,
  intended to boost e-commerce internet use in
  the country
• It is projected that by 2010, Electronic Russia
  2002 2010 would enable the IT sector to
  account for 2 of the economy (compared to the
  current figure of 0.61 ).
• Estimated Russian IT spending by 2009 USD 21.8
  billion
• Government-supported venture capital fund to
  focus on SMEs engaged in high-tech research
  development
• Project called E-Skills for Russian SMEs
  initiated to enhance competitiveness of SMEs by
  supporting the upgrade of their computer based
  operations and the enhancing of local consultancy
  capacity in selected regions
• In 2006, Russian Outsourcing and Software Summit
  (ROSS) allotted more importance to SMEs by
  organizing a specialized event called SME
  marketplace for SMEs from capitals and regions
  offering opportunities of smaller outsourcing

Policy Framework for SMEs in Russia
Source International Finance Corporation World
Bank Group
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Competitive analysis External Internal

• Ahmedabad, Gandhinagar, Vadodara, Rajkot and
  Surat to be developed for IT parks
• Government will take initiative to provide
  training in respect of communication and soft
  skills to youth
• Govt to promote and strengthen educational
  infrastructure of the state
• Identify and reserve suitable Government land
  for IT industry
• Assist IT industry units in acquiring land under
  Land Acquisition Act
• Exemption from payment of Electricity duty for a
  period of 5 years
• IT and ITeS units will be considered eligible
  for exemption from power cuts
• Gujarat IT fund under the aegis of Gujarat
  Venture Finance Ltd set up

Gujarat
Source Govt of Gujarat
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Competitive analysis External Internal
IT Infrastructure of the States
Karnataka, Tamil Nadu, Maharashtra, Andhra
Pradesh, Chandigarh
West Bengal, Pondicherry, Madhya Pradesh
Uttar Pradesh, Chattisgarh, Orissa, Sikkim,
Himachal Pradesh, Rajasthan
Mizoram, Jammu Kashmir, Assam, Meghalaya,
Uttaranchal, Jharkhand
Lakshwadeep, Manipur, Tripura, Arunachal Pradesh,
Andaman Nicobar, Dadar Nagar Haveli,
Nagaland, Bihar
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Roadmaps for IT development in selected states-
Gujarat
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Population 50.5 million (5) Area 196,000 sq.
km. (6) GSDP USD 7.1 million Inflation rate
(WPI) 9.3 Per capita power consumption1175
units
Economic snapshot
Source STPI
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Roadmaps for IT development in selected states-
Gujarat
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States expenditure on Education Grants received
In Rs Lakh
In Rs Crore
Indias GDP and the IT sector
Grants from Centre include State Plan Schemes,
Central Plan Schemes, Centrally Sponsored
Schemes, NEC/ Special Plan Scheme, Non Plan Grants
Includes Education, Sports, Art and Culture
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Roadmaps for IT development in selected states-
Gujarat
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• The main focus is on an extensive critical
  infrastructure and a sound e-commerce foundation
  plentiful opportunities in IT enabled services.
• Higher standard of living, complete computer
  literacy and e-education Networked and digitally
  accessed Libraries Tele-medicines enabled
  Multiplied revenue generation and large
  disposable income.
• Some strategies and incentives by the state
  government
• The state government has a LAN policy for
  purchase of hardware/software and has also framed
  a website policy. Up till now all departments
  have developed their websites and more than 215
  websites have been hosted in the server firm.
• The government has also taken initiatives on
  Gujarati language software standardization which
  will help improve interoperability of
  software/database among the government
  departments.
• The state shall provide highest of security for
  the operation of IT/ITES units. For this purpose
  government shall further strengthen the Cyber
  Crime Detection cell.

Areas of Focus in IT
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Roadmaps for IT development in selected states-
Gujarat
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Indias GDP and the IT sector
Projected Software Exports and Employment at
current growth rate
Software Exports (Projected )
In Rs Crores
Indias GDP and the IT sector
IT Manpower (Projected )
In Numbers

• Possible Tier II and Tier II cities- Surat,
  Vadodara, Rajkot, Bhavnagar

Source Frost Sullivan
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Strategic Recommendations
Best Practices

• Andhra Pradesh has a vast potential for growth of
  the IT/ITeS industry due to a large, talented
  human resource pool. As a part of the JKC
  program, the Government has tied up with
  universities, colleges and industry, across the
  state to impart communication skills to the fresh
  graduates to make them employable in the IT
  industry.
• 5000 students are screened out from eligible 6th
  semester students. These students are involved in
  communication and other soft skills development.
• Of the other students left, 3000 students get
  selected for the JKC prepration. Infosys, Wipro
  and Satyam through their campus connect programs
  train these additional resources.
• Cost for each college turns out to be 25 lakhs.
• JKC training involves a short-term training known
  as Campus Placement Mission (CPM). In this
  program the students are made aware of the
  recruitment process of different companies.

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Strategic Recommendations
Best Practices

• Establishment of a IIIT helps the state achieve a
  different level in imparting education to the
  students. The following include the typical
  benefits that can be accrued from such a unit, if
  set up
• Carrying out advanced research and technology
  development in information technologies and their
  societal, scientific, industrial and financial
  applications
• Training and educating, at both undergraduate
  and postgraduate levels, engineers of outstanding
  ability who can become leaders in their
  profession
• Working closely with industry leaders and
  helping them in undertaking programmes needed in
  their sectors
• In short, a IIIT imparts a uniquely broad and
  interdisciplinary IT education of the highest
  academic quality ensuring a great value addition
  for the IT Industry.

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Strategic Recommendations
Best Practices
Government of Maharashtra appointed Training
Providers (TP) in the year 2000 to offer
Maharashtra State Certificate in Information
Technology (MSCIT) course. This certificate was
made compulsory for those wishing to get into
Govt jobs in grades A, B C and for those who
have joined the govt jobs on or after 1st January
2001. On 1st April 2002, Govt of Maharashtra
floated a new company in the name of Maharashtra
Knowledge Corporation Limited (MKCL). MKCL is an
initiative by the Maharashtra Govt to create a
new education paradigm based on e-learning
technologies. It aims to create Network Access
Centers in around 2000 institutions with high-end
computing facilities, broadband connectivity,
rich interactive content and a variety of
e-learning services. Companies such as NIIT,
Aptec are empanelled training providers under
this scheme.
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Strategic Recommendations
Best Practices

• The primary objectives of the BITES are
• Provide access to the highest quality IT
  education and training, tailored to individual
  needs, delivered cost effectively, anywhere and
  anytime.
• In order to foster a better academia-industry
  interaction, establish a network of all the stake
  holders- Colleges, industries, Students and
  faculty .
• Establish a knowledge management portal to share
  and deliver E-learning content online to the
  students and faculty.
• Get government and Industries to provide projects
  to students and help them in technology
  absorption and project management.

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Strategic Recommendations
Roadmap for Gujarat

• Education
• It is believed that in 2006-07, the number of
  professionals that would be demanded in the
  IT/ITeS sector will be 26,904 in the state of
  Gujarat.
• Gujarat currently has about 22,358 professionals
  in the sector due to lack of availability of
  skilled manpower.
• The State produces around 611,909 graduates
  every year, nearly 14.5 of which can be directly
  form the IT workforce base and the rest have the
  eligibility to be employed in the ITeS sector.
• The state has 37 AICTE approved engineering
  colleges which produce nearly 13,000 students
  every year. To make these students employable, a
  program like the Jawahar Knowledge Center
  (successfully adopted in Andhra Pradesh) can be
  introduced in the state.

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Strategic Recommendations
Roadmap for Gujarat

• To the remaining 85.5 of the students
  graduating from the colleges (non-engineering),
  basic soft skills need to be imparted. For this
  purpose, the state Government needs to give
  financial incentives to training institutes like
  NIIT and Karrox to provide soft skill training.
  The subsidy structure follows
• Industry
• Cities like Surat, Vadodara, Bhavnagar, Jamnagar
  Rajkot could be granted Rs. 5 crores from the
  State Government to set up IT parks to encourage
  IT/ITeS participation.

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Strategic Recommendations
Comprehensive analysis
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• A supportive policy regime can boost the IT
  exports from Tier II and Tier III sectors to
  58921 Crores in 2012
• Industry feels STPI ownership of Customs process
  would reduce the transaction costs of running
  their operations, especially in Tier II and Tier
  III cities.
• On infrastructure front, more plug and play
  environment on the lines of Orchid at STPI
  Bangalore, needs to be targeted especially for
  Tier II and Tier III cities.
• SME companies find dislocation cost to SEZs
  severe and prefer to stay with STPI scheme.
• Deduction under 10 a and 10 b should be extended
  for Tier II and Tier III cities till 2011-12 to
  ensure de-congested development of IT industry.
• STPI would move to facilitator role for SME,
  Tier II and Tier III city companies. Its
  incubation, certification, manpower development
  role needs to be accentuated.
• Investments from Central, State and STPI are
  required to ensure IT development is realized in
  different states.

Recommendations
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Thank You