1.

1 INTRODUCTION

Compensation

Employees need to be compensated for their efforts based on volume of time or volume of
production. Compensation refers to all forms of financial rewards received by employees. It
arises from their employment. It occupies an important place in the life of the employee. It is a
considerable cost to the employer. Compensation dissatisfaction can lead to absenteeism,
turnover, job dissatisfaction, low performance, strikes and grievances. Majority of labour-
management disputes relate to compensation. “Compensation refers to the extrinsic rewards
that employees receive in exchange for their work. It is composed of the base wage or salary
and incentives or bonuses and any benefits.” Compensation is a key factor in attracting and
keeping the best employees and ensuring that the organization has the competitive edge in an
increasingly competitive world. The Compensation Management component enables to
differentiate between the remuneration strategies and those of competitors while still allowing
flexibility, control and cost effectiveness. It provides a toolset for strategic remuneration
planning that reflects the organization culture and pay strategies, and it empowers line
managers within a framework of flexible budget control. Compensation Management allow to
control bottom-line expenditures and offer competitive and motivating remuneration, be it
fixed pay, variable pay, stock options, merit increases, or promotion – in other words, total
compensation.

1.2 The objectives of compensation management:

An ideal compensation system will have positive impact on the efficiency and results produced
by employees. It will encourage the employees to perform better and achieve the standards
fixed. It will raise the morale, efficiency and cooperation among the workers. It, being just and
fair would provide satisfaction to the workers. Sound Compensation/Reward System brings
peace in the relationship of employer and employees, collective bargaining generally focus on
compensation issues. The perfect compensation system provides platform for happy and
satisfied workforce. This minimizes the labor turnover. The organization enjoys the stability.
The business organization can think of expansion and growth if it has the support of skillful,
talented and happy workforce.The sound compensation system is hallmark of organization’s
success and prosperity. The success and stability of organization is measured with pay-package
it provides to its employees.

1.3 Need of Compensation as component of Human Resource Management

Compensation management consists of designing the lowest cost pay structure that will
attract, retain, and motivate the competent employees and which is perceived as fair by the
employees. However, compensation systems should balance organization’s ability to 1.3.1.
Objectives of compensation management.

1.4 scope of the study

Job evaluation is one of essence of compensation administration and the establishment of

paystructure. Job evaluation uses the information collected through job analysis and
systematicallydetermines the value of each job in relation to all jobs within the organization.
Job evaluation seeks to rank all the jobs in the organization and place them in a hierarchy that
will reflect the relative worth of each and determines the organization’s pay structure.

1.5 LIMITATIONS OF THE STUDY

The limitations of the study are the following

 The data was collected through questionnaire. The responds from the respondents may
not be accurate.

 The sample taken for the study was only 50 and the results drawn may not be accurate.

 Since the organization has strict control, it acts as another barrier for getting data.

 Another difficulty was very limited time-span of the project.

 Lack of experience of Researcher.

CHAPTER II

2.1 LITERATURE REVIEW

2.1.1 Kentucky and Charlotte-Mecklenburg Studies of Teacher Attitudes (1998-

2002)

This study found that teachers considered ‘goal attainment rewards’, including payment
bonuses

for attaining rewards and the public recognition from attaining these rewards, as very
important.

‘Learning’ outcomes were also important for the teachers surveyed (Heneman and Milanowski,

1999), including seeing and being responsible for improvements in student performance and

working collaboratively with peers. This may be rhetoric, as the actual evidence supports the

hypothesis that teachers are motivated by financial rewards. While teachers in the Kentucky

school-based rewards system rated ‘school improvements’ as more beneficial than extra
salaries in the research conducted, when teachers allocated program rewards, 98% voted to use
some or all of the rewards as a salary bonus (Kelley, 1999). There was some concern in relation
to goal clarity in school-wide program, meaning there would be some concern about the
compensational capacity of schools (Kelley, Heneman and Milanowski, 2002). Despite this
concern, Kelley, Heneman and Milanowski (2002) concluded that teachers knew about school
goals, and were committed to them. Other analysts have taken these results to show that school-
based performance awards also support school improvement efforts (see, for example,
Tomlinson, 2000), as there are compensation impacts from both positive and negative
circumstances. Teachers were concerned that they would not be paid the bonus upon successful
completion of school-wide criteria. “A striking finding in both the qualitative and quantitative
data from both program sites was the low perceived probability that the bonus would actually
be paid when school goals were met.” (Kelley, Heneman and Milanowski, 2002) In conclusion,
Kelley, Heneman and Milanowski (2002) argued, that in all models, the higher the average
teacher expectancy of student results, the greater the school-based evaluation outcomes. These
analyses, it is argued, shows that between-school differences in teacher expectancy are a
predictor of schools’ future outcomes. “Overall, we believe that our results suggest that SBPA
programs have the potential to contribute to motivating teachers to improve student
achievement. However, the potential was not fully realized in these first-generation programs.
The implication is that program designers should set goals that are perceived by teachers as
achievable and should develop coherent systematic approaches to support goal
attainment...These considerations suggest that providing a bonus may be the least problematic
aspect of a SBPA program, whereas setting realistic goals, maximizing perceptions that
achieving the goals will lead to positive outcomes, minimizing stress reactions, and providing
enabling conditions are where effort and attention need to be focused. impact is not guaranteed
simply by promising a bonus.”

2.1.2 Ballou and Podgursky’s Study of Teacher Attitude (1993)

The conclusions of Ballou and Podgursky are somewhat limited in their application to current

Performance-based reward systems. First, their conclusions are based on old data. The extent
to which these attitudes can now be generalized is unknown. More recent research would be

needed, especially given the growth of performance-related pay as an issue since this data was

gathered. Teacher attitudes may have changed significantly since this survey given the recent

level of debate surrounding performance-related pay. Second, these conclusions are limited in
the extent they can be generalized to other performance based pay system because the question
format of the survey does not reflect the reality of contemporary program. The survey asked
teachers about their attitudes to ‘additional pay’ so it is fair to assume surveyed teachers would
have concluded pay would supplement current income.

This would have the effect of over-emphasizing support for merit-pay program for teachers,
since these programs rarely supplement overall teacher income. While Ballou and Podgursky

(1993) argue their findings would remain robust even given a change of wording or context,
this is doubtful given the strong teacher opposition to merit-pay reported elsewhere (see Kelley,

1999). Even though the statistical analysis proved to be appropriate, there is considerable doubt

whether these results on teacher attitudes would be replicated if different worded questions
were used.

2.1.3 The Dallas School Accountability and Incentive Program (Clotfelter And

Ladd, 1996; Ladd, 1999)

For all four years, pass rates increased more in Dallas than they did in any of the control groups.

However, there were gains before the program was fully implemented. This phenomenon could

reflect a movement back to the state mean, or the positive effects of publicity of the program
(Ladd, 1999). One possible positive conclusion is that Dallas schools maintained a consistent

level of advancement even when the novelty of the program diminished, meaning the program

was successful. Further evidence of increased student outcomes was apparent when the other

cities were factored into the analysis. Dallas had increased student outcomes in comparison to
all the control cities, except for one small district in one city that undertook reform comparable
to Dallas. The relative pass rates of students of economic disadvantage, blacks, Hispanics, and

students with limited English proficiency is lower as the percentage of each of these categories

increase as a proportion of the grade (Ladd, 1999). The less transient the school population, the

higher the average increase in passes rates. Results based on race showed that in reading and
math, Hispanic and white students in Dallas

increased significantly more than Hispanic and white students relative to the baseline year and

the control cities. There was no evidence that black students improved (Ladd, 1999).
Differences in the number of teachers with at least five years experience, and the average
number of pupils per teachers produced no significant results, with the exception of Hispanic
students in math, who had increased pass rates the greater the proportion of teachers with over
five years These results were complicated by the introduction by the Texas government of an
aggressive policy aimed at increasing the resources of low-performing schools during the
surveyed period. To overcome this, an analysis was done excluding 25% of schools with the
highest proportion of students of economic disadvantage. The results followed the same pattern
of the previous data, with significant increases in the scores white and Hispanic, but not black
students (Ladd, 1999). The evaluation of the program depends on the interpretation of the first
year results. If all the measured gains were true program impacts, then increases in student
outcomes were in the order of 10 to 20% relative to the state average. If the gain in 1992 were
because of a return to the mean, the program impacts can be viewed less favorably (Ladd,
1999). The dropout rate of high-school student decreased more for Dallas than any other city
in comparison across all years, with two years (out of three surveyed) showing significance.

Turnover rates for principals jumped dramatically after the first year of the program. It appears

that the school districts were more willing to change principals than in the past. Qualitative
research suggests that these principals were either demoted or fired, so this does not represent
a shuffling of poorly performing principals (Ladd, 1999). Ladd (1999) concludes that the
turnover of principals is desirable as it represents district administration being more proactive
in making principals accountable to student results.

Overall, Ladd (1999) concludes there is reason to be cautiously optimistic about performance

based reward programs. The seventh grade results are positive and large, but only significant
for Hispanic and white students. Other positive results are the reduction in dropout rates and
the high turnover of principals. However, more research needs to be to examine the ranges of
student increases in scores. Further research could be conducted to make a more accurate cost-
benefit

2.2 RESEARCH METHODLOGY

The research problem here in this study is associated with the compensation of employees of
INDIA INFO TECH, chennai. Research is a systematic method of finding solutions to
problems. It is essentially an investigation, a recording and an analysis of evidence for the
purpose of gaining knowledge. According to Clifford woody, “research comprises of defining
and redefining problem, formulating hypothesis or suggested solutions, collecting, organizing
and evaluating data, reaching conclusions, testing conclusions to determine whether they fit
the formulated hypothesis”.

There are a variety of factors that can influence a person’s level of compensation; some of
these factors include

1. The level of pay and benefits,

2. The perceived fairness of promotion system within a company,
3. Quality of the working conditions,
4. Leadership and social relationships,
5. Employee recognition
6. Job security
7. Career development opportunities etc.
Motivated employees are a great asset to any organisation. It is because the compensation and
Job satisfaction is clearly linked. Hence this study is focusing on the employee compensation
in the organisation. The research problem is formulated as follows:

“What are the factors which help to compensate the employees?

2.2.1 Sampling Design.

A sample design is a finite plan for obtaining a sample from a given population. Simple random
sampling is used for this study.

2.2.2 Universe.

The universe chooses for the research study is the employees of INDIA INFO TECH .

2.2.3 Sample Size.

Number of the sampling units selected from the population is called the size of the sample.
Sample of 50 respondents were obtained from the population.

2.2.4 Sampling Procedure.

The procedure adopted in the present study is probability sampling, which is also known as
chance sampling. Under this sampling design, every item of the frame has an equal chance of
inclusion in the sample.

2.2.5 Methods of Data Collection.

The data’s were collected through Primary and secondary sources.

2.2.6 Primary Sources.

Primary data are in the form of “raw material” to which statistical methods are applied for the
purpose of analysis and interpretations.
The primary sources are discussion with employees, data’s collected through questionnaire.

2.2.7 Secondary Sources.

Secondary data’s are in the form of finished products as they have already been treated
statistically in some form or other.

The secondary data mainly consists of data and information collected from records, company
websites and also discussion with the management of the organization. Secondary data was
also collected from journals, magazines and books.

2.2.8 Nature of Research.

Descriptive research, also known as statistical research, describes data and characteristics about
the population or phenomenon being studied. Descriptive research answers the questions who,
what, where, when and how.

Although the data description is factual, accurate and systematic, the research cannot describe
what caused a situation. Thus, descriptive research cannot be used to create a causal
relationship, where one variable affects another. In other words, descriptive research can be
said to have a low requirement for internal validity.

2.2.9 Questionnaire.

A well-defined questionnaire that is used effectively can gather information on both overall
performance of the test system as well as information on specific components of the system. A
defeated questionnaire was carefully prepared and specially numbered. The questions were
arranged in proper order, in accordance with the relevance.

2.2.10 Nature of Questions Asked.

The questionnaire consists of open ended, dichotomous, rating and ranking questions.
2.2.11 Pre-testing

A pre-testing of questionnaire was conducted with 10 questionnaires, which were distributed

and all of them were collected back as completed questionnaire. On the basis of doubts raised
by the respondents the questionnaire was redialed to its present form.

2.2.12 Sample

A finite subset of population, selected from it with the objective of investigating its properties
called a sample. A sample is a representative part of the population. A sample of 50 respondents
in total has been randomly selected. The response to various elements under each questions
were totaled for the purpose of various statistical testing.

2.2.13. Variables of the Study.

The direct variable of the study is the employee motivation

Indirect variables are the incentives, interpersonal relations, career development opportunities
and performance appraisal system.

2.2.14. Presentation of Data.

The data are presented through charts and tables.

2.2.15. Tools and Techniques for Analysis.

Correlation is used to test the hypothesis and draw inferences.

2.3 SIGNIFICANCE OF THE STUDY

The study is intended to evaluate compensation of employees in the organization. A good

program procedure is essential to achieve goal of the organization. If efficient programmes of
employees are made not only in this particular organization but also any other organization;
the organizations can achieve the efficiency also to develop a good organizational culture.

Compensation has variety of effects. These effects may be seen in the context of an individual’s
physical and mental health, productivity, absenteeism and turnover. Employee delight has to
be managed in more than one way. This helps in retaining and nurturing the true believers “who
can deliver value to the organization. Proliferating and nurturing the number of “true
believers” 1is the challenge for future and present HR managers.

This means innovation and creativity. It also means a change in the gear for HR polices and
practices. The faster the organizations nurture their employees, the more successful they will
be. The challenge before HR managers today is to delight their employees and nurture their
creativity to keep them a bloom.

This study helps the researcher to realize the importance of effective employee compensation.
This research study examines types and levels of employee programmes and also discusses
management ideas that can be utilized to innovate employee compensation. It helps to provide
insights to support future research regarding strategic guidance for organizations that are both
providing and using reward/recognition programs.

2.3.1. Establishing Pay Structure

Once the job evaluation is completed, its data become the nucleus for the development of the
organization’s pay structure. This means establishing pay rates or ranges that are compatible
withthe ranks, classifications or points arrived at through job evaluation. The pay structure
can bedetermined through following process.

2.3.2. Wage survey

Wage survey is the systematic gathering of factual information on pay practices from
comparable firms within or outside the industry. The gathered information gives an idea of
the standard market practices which are used to set the actual wage levels. The data can be
generated or the organization can collect the data through secondary sources such as
publications, research firms or organization can generate the data through primary sources
such as conduction their own surveys. Typically the structured question comprises of
questions like wage ranges for jobs, overtime pay, festival allowances, bonuses, length of
normal workday and workweek etc.

2.3.4. Wage Curves

When management arrives at point totals from job evaluation and obtains survey data on
what comparable organizations are paying for similar jobs, then a wage curve can be fitted to
the data.A complete wage curves tells management the average relationship between points
of established pay grades and wage base rates.

3.1 COMPANY PROFILE

The year 1946 saw the birth of India. It was also the year INDIA INFO TECH was founded.
Over the decades, it has blazed a pioneering path in the fibre cement industry and has grown
into a formidable player. The corporate office of HIL is situated at chennai. The HIL R & D
centers situated at chennai support all its manufacturing units to achieve excellency in its
manufacturing activities. The Manufacturing facilities are at Chennai.

The company has one regional offices, all with the purpose of providing convenient services
to customers. INDIA INFO TECH is a flagship Company of the uniq group of Companies,
incorporated on 17th June 1946. HIL has blazed a pioneering path in the building products
industry. HIL has led the cement industry for well over five decades. Today HIL is a multi
product, multi locational organization with a formidable network of branches, depots, stockiest
and personnel spread all over India.

HIL being backed by the organizational and technical expertise of the company, also has a
Board of directors comprising experienced personnel from Business, Finance and Industry. The
Board is chaired by Mr.Hussian. HIL’s product range include Fibre Cement roofing sheets,
Autoclaved Aerated Concrete Blocks and Panels called AEROCON, Calcium Silicate
insulation product called HYSIL, Jointing material for Gaskets and Plant and machinery for
these products.
The INDIA INFO TECH, where the exact place where the company is situated is which is an
industrial area. This company was incorporated in the year 1985 and commenced production
in 1986 in the name as MALABAR BUILDING PRODUCTS, which was a joint venture by
HIL and KSIDC (Kerala State Industries Development Corporation. Later in the year 2005
April the company was merged with the HIL completely from the KSIDC. And in the same
year the company changed its name to HYDRABAD INDUSTRIES LIMITED.

About 200 employees are working in HIL, Thrissur as a whole. In that 110 employees are
working in plant, 72 are office staffs and 18 are bargaining staffs. The plant is working for 24
hours and there are three shifts per day. The whole plant is completely automated. The HIL
Thrissur plant is producing only the AC roofing sheets in the name of CHARMINAR.

Charminar AC Roofing Sheets have been the No.1 roofing sheets of choice for more than 50
years now, providing roofing to millions of low cost houses and to industries, commercial
businesses and for several public utilities. Charminar sheets are widely known for their superior
quality and durability. The raw materials used in the production process are Fibre, fly ash, rag
pulp and cement. Among these raw materials Fibre is importing from Brazil and Canada and
cement is mainly bought from ACC cements. The Company mainly sells their products through
dealers who are selected by the company. The finished products are mainly sold in the south
India, especially in Tamil Nadu.

The company has a visionary management and motivated team of dynamic workers sharing
common vision and working in the union. The company is moving ahead with to innovate and
provide excellent production. HIL is providing to have an operational efficiency compactable
with global standards. As a socially organization, it has contributed significantly towards eco-
friendliness and various social causes.

The company has involved in conducting a lot of community welfare programme. In this year
the company conducted a welfare programme named ‘SOUHRUTHAM 2008’.

3.1.1 Mission and Vision of Industries Limited

To maintain leadership in Fibre cement products industry and develop complementary

products and services to strengthen the core business of building products.
 Fulfilment of market needs with cost effective solutions for enduring and enhanced
customer satisfaction.
 Striving for excellence in all the area of company’s operation.
 Innovative solutions to create world class products and services fostering collective
wisdom and commitment of employees to create corporate and group culture and values
which they are proud to be part of.
 Maintain equitable balance between development and environmental needs of the society.

3.1.2 Quality Policy

Provide products and services that adequately and consistently meet specified and identified
needs of customers by

 Continues upgrade of product value and by

 Building customer responsive environment

In making and deliverance of the products and services

3.1.3 Research & Development.

Research and Development Center of Hyderabad Industries Limited is fully equipped with
latest state-of-art technology, equipment and test facilities including Pilot Plants situated in
ultra modern spacious building covering an area of about 11000 sft of main Building and about
16000 sft area of Pilot Plant. HIL, R & D center is recognized by Department of Science and
Technology Government of India.

HIL have been conferred with the DSIR National Award for R & D efforts in industry
for the year 2000 in the area of new materials for "AEROCON INSTA PANEL"

Dedicated team of scientists and engineers are constantly working for product upgradation,
optimum utilization of raw materials, development of substitute materials, new products and
new product applications, saving substantial amount of foreign exchange for the country.The
R & D Division has contributed in the following specific areas:
  Identification and development of environment friendly building products with
emerging market needs.
 Emphasis on process optimization, cost reduction and development of value added
products.
 Effective utilization of energy, water and waste material.
 Absorption of imported technical know-how.
 Development of new products i.e., Aerocon Insta - Panels, Access Flooring system,
pressed sheets, fire protection boards, Light weight AAC Blocks, non-asbestos
jointing material for automobile industry etc.

Quality Policy

Provide products and services that adequately and consistently meet specified and identified
needs of customers by

 Continues upgrade of product value and by

 Building customer responsive environment
 In making and deliverance of the products and services

Philosophy

INDIA INFO TECH is committed to good Corporate Governance. The Company has been
following good principles of business over the years by following all the laws and regulations
of the land with an emphasis on accountability, trusteeship, and integrity. It is our responsibility
to ensure that the organization is managed in a manner that protects and furthers the interests
of our stakeholders.

3.1.4. DEPARTMENT PROFILE

The organization has mainly 5 departments. They are

1. HUMAN RESOURCE DEPARTMENT

2. FINANCE DEPARTMENT
3. PURCHASE DEPARTMENT
4. MARKETING DEPARTMENT.
5. PRODUCTION DEPARTMENT

3.1.4.1 ORGANIZATION CHART OF HUMAN RESOURCE DEPARTMENT

General Manager (Works)

Manager Industrial Relations

Jr. Manager Establishment

Sr. Officer HR

Security

Time Office Assistants

The managing human resource in the organization is an important task. Human resource
department is doing the management of human resource in the organization. Hyderabad
Industries Limited follows a system in HR department that each authority coming under the
General Manager (works) has to report directly to General Manager (Works) in the hierarchy.
This will helps to speed up the communication flow in the organization.

3.1.4.2 ORGANISATION CHART OF FINANCE DEPARTMENT

Deputy Manager Accounts

Assistant manager

Sr. Accounts Officer

Assistants

Sound financial decisions have been one of the critical practices in the success of Hyderabad
Industries Limited, Thrissur proper planning and long vision of the financial managers help the
company to undergo to smooth sail. All monetary transactions of the company are handled and
brought to account by the finance department.

3.1.4.3 ORGANISATION CHART OF PURCAHSE DEPARTMENT

Sr. Purchase Manager

Assistant Manager Purchase

Purchase Officer

Assistants

The purchase manager is the only person who is the having the prime authority to make orders
for the purchase of raw materials. After referring the stock report of raw materials and finished
goods, the purchase manager purchase the raw- materials in order to ensure the continuous
flow of production.

3.1.4.4 ORGANISATION CHART OF PRODUCTION DEPARTMENT

 Production Manager

Deputy Manager Production Deputy Manager Maintenance

Jr. Manager Production Jr. Manager Production

Shift in charge

The production manager and his team are responsible for realizing the visions of the company
within constraints of technical possibility. This involves coordinating the operations of
various production activities and maintains a good flow of work without any blockage.

3.1.4.5 ORGANISATION CHART OF MARKETING DEPARTMEN

Marketing Manager

Sales Manager

Regional Sales Manager

Area Sales Manager

3.2 INDUSTRY PROFILE

Today’s digital age has made it impossible to read a news story or magazine article without
knowing about the impact of information technology (IT) on our society. Information is
traveling faster and being shared by more individuals than ever before. In addition to
becoming faster, IT also has become more convenient and efficient. One can buy just about
anything online, surf the Web on a mobile phone and use a wireless Internet connection at
most establishments. In the business field, an increasing number of companies are realizing
the importance of employing IT in their operations. Companies have linked their many
systems together to help them fill orders on time and serve their customers better. Software
companies are continually developing new products to help streamline work and achieve
better results. Seeking to harness the power of IT, many organizations are tapping IT experts.
IT consulting is a field that focuses on advising businesses on how best to use information
technology to meet their business objectives. IT consultants provide expert advice and
assistance in the fields of writing, modifying, testing and supporting software to meet the
needs of a particular customer. They also plan and design computer systems and integrate
computer hardware, software and communication technologies. In addition to providing
advice, IT consulting firms often estimate, manage, implement, deploy and administer systems
on behalf of companies. This process is known as outsourcing. This industry also includes
healthcare technology, since work in many hospitals has become totally technology driven
with electronic data storage systems taking care of the administrative, financial and clinical
aspects. Information technology allows healthcare providers to collect, store, retrieve, and
transfer information electronically. Management consulting and IT consulting are separated
by a relatively unclear line, and sometimes the two fields overlap. IT consultants, however,
often have degrees in computer science, electronics, technology, and management information
systems, while management consultants often have degrees in accounting, economics,
industrial engineering, finance and a generalized Masters in Business Administration (MBA).
The IT consulting industry can be viewed as a four-tier system: a) Professional services firms
which maintain large professional workforces and command high bill rates; b) Staffing firms
which place technologists with businesses on a temporary basis; c) Independent consultants
who are self-employed; and d) Information security consultants. Latest Activities and Major
Players. In 2010, the global IT Consulting and Services industry recorded a total revenue of
$516 billion, representing a compound annual growth rate (CAGR) of 3.9 percent for the
period spanning 2006 to 2010.

The demands on the IT services industry require firms to constantly offer services on the
leading-edge, and not just for growth, but for survival. In order to improve on the efficiency
of operations and to make IT infrastructure affordable, corporations are focusing on service
oriented architecture, which is the standardization of all applications. IT services around
identifying and marketing this architecture, including consulting services of formulation and
implementation strategies, are growing areas. With the exploding use of data by companies,
and the growing threats to that data and the IT infrastructure in general, services of a Managed
Security Services Provider has become essential for corporations seeking to transfer security
risks to professionally run organizations. Other services around data are growing as well, from
data archives, to disaster recovery, to offsite monitoring. Increasingly, many software
companies are transitioning from an application service provider (ASP), which delivers
software in a downloadable format, to a Software-as-a-Service (SaaS) company, where
software in a centralized datacenter is access via the Internet. This shifts the burden of
operation and maintenance of the software and IT infrastructure from customers to vendors.
Since data centers and hosting facilities are required by these software firms, IT services are
needed from hosting, to storage services, to systems integration, to managed service providers,
to consulting.

Information technology, and the hardware and software associated with the IT industry,
are an integral part of nearly every major global industry. Information technology, and
the hardware and software associated with the IT industry, are an integral part of nearly every
major global industry. The information technology (IT) industry has become of the most
robust industries in the world. IT, more than any other industry or economic facet, has an
increased productivity, particularly in the developed world, and therefore is a key driver of
global economic growth. Economies of scale and insatiable demand from both consumers and
enterprises characterize this rapidly growing sector.

The Information Technology Association of America (ITAA) explains 'information

technology' as encompassing all possible aspects of information systems based on computers.

Both software development and the hardware involved in the IT industry include everything
from computer systems, to the design, implementation, study and development of IT and
management systems.

Owing to its easy accessibility and the wide range of IT products available, the demand for IT
services has increased substantially over the years. The IT sector has emerged as a major
global source of both growth and employment.

THE ROLE OF THE IT INDUSTRY

The IT industry can serve as a medium of e-governance, as it assures easy accessibility to

information. The use of information technology in the service sector improves operational
efficiency and adds to transparency. It also serves as a medium of skill formation.

MAJOR STEPS TAKEN FOR PROMTION OF IT INDUSTRY

DOMAIN OF THE IT INDUSTRY

A wide variety of services come under the domain of the information technology industry.
Some of these services are as follows:

 Systems architecture
 Database design and development
 Networking
 Application development
 Testing
 Documentation
 Maintenance and hosting
 Operational support
 Security services

The Indian Information Technology industry accounts for a 5.19% of the country's GDP and
export earnings as of 2009, while providing employment to a significant number of its tertiary
sector workforce. More than 2.5 million people are employed in the sector either directly or
indirectly, making it one of the biggest job creators in India and a mainstay of the national
economy. In 2010-11, annual revenues from IT-BPO sector is estimated to have grown over
US$76 billion compared to China with $35.76 billion and Philippines with $8.85 billion.
India's outsourcing industry is expected to increase to US$225 billion by 2020. The most
prominent IT hub is Bangalore. The other emerging destinations are Chennai, Hyderabad,
Coimbatore, Kolkata, Kochi, Pune, Mumbai, Ahmadabad , NCR . Technically proficient
immigrants from India sought jobs in the western world from the 1950s onwards as India's
education system produced more engineers than its industry could absorb. India's growing
stature in the Information Age enabled it to form close ties with both the United States of
America and the European Union. However, the recent global financial crises has deeply
impacted the Indian IT companies as well as global companies. As a result hiring has dropped
sharply and employees are looking at different sectors like the financial service,
telecommunications, and manufacturing industries, which have been growing phenomenally
over the last few years.

The Indian Government acquired the EVS EM computers from the Soviet Union, which were
used in large companies and research laboratories. In 1968 Tata Consultancy Services—
established in SEEPZ, Mumbai[3] by the Tata Group—were the country's largest software
producers during the 1960s. As an outcome of the various policies of Jawaharlal Nehru (office:
15 August 1947 – 27 May 1964) the economically beleaguered country was able to build a
large scientific workforce, third in numbers only to that of the United States of America and
the Soviet Union. On 18 August 1951 the minister of education Maulana Abul Kalam Azad,
inaugurated the Indian Institute of Technology at Kharagpur in West Bengal. Possibly
modeled after the Massachusetts Institute of Technology these institutions were conceived by
a 22 member committee of scholars and entrepreneurs under the chairmanship of N. R. Sarkar.

Relaxed immigration laws in the United States of America (1965) attracted a number of skilled
Indian professionals aiming for research. By 1960 as many as 10,000 Indians were estimated
to have settled in the US. By the 1980s a number of engineers from India were seeking
employment in other countries. In response, the Indian companies realigned wages to retain
their experienced staff. In the Encyclopedia of India, Kamdar (2006) reports on the role of
Indian immigrants (1980 - early 1990s) in promoting technology-driven growth:

The National Informatics Centre was established in March 1975. The inception of The
Computer Maintenance Company (CMC) followed in October 1976. Between 1977-1980 the
country's Information Technology companies Tata InfoTech, Patni Computer Systems and
Wipro had become visible. The 'microchip revolution' of the 1980s had convinced both Indira
Gandhi and her successor Rajiv Gandhi that electronics and telecommunications were vital to
India's growth and development. MTNL underwent technological improvements. Between
1986-1987, the Indian government embarked upon the creation of three wide-area computer
networking schemes: INDONET (intended to serve the IBM mainframes in India), NICNET
(the network for India's National Informatics Centre), and the academic research oriented
Education and Research Network (ERNET).

INDIA IT INDUSTRY

The Indian IT industry is mainly governed by IT software and services such as System
Integration, Software experiments, Custom Application Development and Maintenance
(CADM), network services and IT Solutions. According to the findings of National
Association of Software and Service Companies (Nasscom) the revenues of the Indian IT-
BPO industry will aggregate up to US$ 88.1 billion for the FY2011. The IT software and
services sector alone will account for revenues upto US$ 76.1 billion for the same year.The
export revenues earned by the sector will reach US$ 59 billion in FY2011 making the sector
a holder of 26 per cent of market share of the total Indian export industry. The number of
people employed with the sector will also increase to 2 million employees. Within the realm
of exports the IT Services division grew at a rate 22.7 per cent in FY2010. It was the fastest
growing sector accounting to aggregate export revenues of US$ 33.5 billion.

Top IT Companies

As per the latest reports published by Dataquest, The top 20 IT companies in India which
comprise both hardware and software accounted for accumulated revenues of $2 billion in
2009-10.

Top IT Companies in india

Below is a list of top IT Companies in India in 2010 showing their revenue and growth rate

Company Revenue Growth Rate

Hewlett-Packard India Rs 14,992 crore 16 percent

HCL Info systems Ltd Rs 11,836 crore -4 percent

Ingram Micro India Rs 8,824 crore -6 percent

Redingote Rs 7,024 crore 7 percent

IBM India Rs 5,888 crore 2 percent

Dell India Rs 5,275 crore 24 percent

Wipro Rs 5,268 crore 9 percent

Intel India 4,690 crore Not available

Microsoft India Rs 3,575 crore 14 percent

SAP India: Rs 3,204 crore 46 percent

Acer India Rs 2,749 crore 38 percent

Oracle India Rs 2,700 crore 11 percent

APC-MGE Rs 2,620 crore -1 percent

 Emerson Network Power India Rs 2,500 crore NA

Lenovo India Rs 2,396 crore -3 percent

Cisco Systems India Rs 2,324 crore 0 percent

Tulip Telecom Rs 1,965 crore 22 percent

LG India Rs 1,798 crore 39 percent

Samsung India Rs 1,664 crore 29 percent

IT Outsourcing in India

As per NASSCOM, the IT export in business process outsourcing (BPO) services attained
revenues of $ 17.2 billion for the 2010-11 going up by almost 34.5 as compared to last year.
It accounted for more than 77% of the entire software and services income.

Over the year India has been the most favorable outsourcing hub for firms on lookout to off
shore their IT operations. The factor behind India being a preferred destination are its
reasonably priced labor, favorable business ambiance and availability of expert workforce.

Considering its escalating growth, Patni Computer Systems the (IT) services and solution
giants in India have sealed a five- year contract with UK-based IT solution provider 2 e 2
worth US$ 32.09 million. According to the agreement Patni will offer a host of support
services to 2 e 2’s clients and end users.

A 5 year agreement between HCL Technologies and News Crop for administering its
information centers and IT services in UK. As per the industry analyses, the pact is estimate
to be in the range of US$ 200-US$ 250 million.US$ 50 million agreement between HCL
Technologies and Meggit, US- based security apparatus manufacturer, for offering
engineering facilities.

INDIA'S DOMESTIC IT MARKET

India's domestic IT Market over the years has become one of the major driving forces of the
industry. The domestic IT infrastructure is developing contexts of technology and intensity of
penetration. Despite resistance by Barack Obama against outsourcing the Indian IT/BPO
industry still show an impressive rate of growth. According to a study conducted by Gartner,
the IT/ BPO sector in India will grow at almost 19 percent till the next two years. By the end
of the FY 2012, the domestic sector is estimated to expand to US$ 1.7 billion against the
existing US$ 1 billion.