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INTERNATIONAL BUSINESS (MGT 520)DUE DATE: 31/10/2016TOTAL MARKS: 100Instructions• A standard format will be used for the assignments.a. Standard font size is 12b. Standard font style is Times New Roman / Ariel• This assignment covers lesson No. 18-29• Last date for submission of assignment is 31/10/2016• Give the answer according to question and in prescribed format, nomark will be given for irrelevant material and for material provided usingformatting other than the prescribed.• Don’t rely only on handouts, use other reference books also.• Mention the source (bibliography) which you are using for preparing yourassignment.• Basic concepts in the language and words which are mentioned or writtenin your source but the application of those concepts must be in your ownwords.• Avoid long paragraph.• Make sure that you upload the solution before due date. No assignmentwill be accepted through e-mail after the due date.• Cheating or copying of assignment is strictly prohibited; No credit will begiven to copied assignment.• Once you upload the assignment on LMS, it will not be replaced underany condition.The Rise of the Indian Software IndustryAs a relatively poor country, India is not normally thought off as a nation capable ofbuilding a major presence in a high-technology industry, such as computer software. Inlittle over a decade, however, the Indian software industry has astounded its skeptics andemerged from obscurity to become an important force in the global software industry.Between 1991-1992 and 1999-2000, sales of Indian software companies grew at acompound rate in excess of 60 percent annually. In 1991-1992, the industry had salestotaling $388 million. By 2000 they were around $6 billion. By the late 1990s, more than900 software companies in India employed 200,000 software engineers, the third largestconcentration of such talent in the world.Much of this growth was powered by exports. In 1985, Indian software exports wereworth less than $10 million. They surged to $1.8 billion in 1997 and hit a record $4billion in 2000. The future looks very bright. Powered by continued export-led growth,India’s National Association of Software and Service Companies projects that totalsoftware revenues generated by Indian companies will hit $28 billion by 2004-2005 andZ$87 billion by 2007-2008. As a testament to this growth, many foreign softwarecompanies are now investing heavily in Indian software development operationsincluding Microsoft, IBM, Oracle, and Computer Associates, the four largest US-basedsoftware houses. Equally significantly, two out of every five global companies nowsource their software services from India.Most of the current growth of the Indian software industry has been based on contract orproject-based work for foreign clients. Many Indian companies, for example, maintainapplications for their clients, convert code, or migrate software from one platform toanother. Increasingly, Indian companies are also involved in important developmentprojects for foreign clients. For example, TCS, India’s largest software company, has analliance with Ernst & Young under which TCS will develop and maintain customizedsoftware for Ernst & Young’s global clients. TCS also has a development alliance withMicrosoft under which the company developed a paperless National Depositary systemfor the Indian stock market based on Microsoft’s Windows NT operating system andSQL Server database technology. Indian companies are also moving aggressively into ecommerceprojects. From almost zero in 1997, e-commerce or e-business projects nowaccount for about 10 percent of all software development and service work in India andare projected to reach 20 percent within two years.The Indian software industry has emerged despite a poor information technologyinfrastructure. The installed base of personal computers in India stood at just 3 million in1999, and this in a nation of nearly 1 billion people. With just 22 telephone lines per1,000 people, India has one of the lowest penetration rates for fixed telephone lines inAsia, if not the world. Internet connections numbered less than 100,000 in 1998,compared to 60 million in the United States. But sales of personal computers are startingto take off, and the rapid growth of mobile telephones in India’s main cities is to someextent compensating for the lack of fixed telephone lines.In explaining the success of their industry, India’s software entrepreneurs point to anumber of factors. Although the general level of education in India is low, India’s mostimportant middle class is highly educated and its top educational institutions are worldclass. Also, India has always emphasized engineering. Another great plus from aninternational perspective is that English is the working language throughout much ofmiddle-class India-a remnant from the days of the British raja. Then there is the wagerate. American software engineers are increasingly scarce, and the basic salary has beendriven up to one of the highest for any occupational group in the country, with entry-levelprogrammers earning $70,000 per year. An entry-level programmer in India, in contrast,starts at around $5,000 per year, which is very low by international standards but high byIndian standards. Salaries for programmers are rising rapidly in India, but so isproductivity. In 1992, productivity was around $21,000 per software engineer. By 1997,the figure had risen to $45,000. As a consequence of these factors, by 2000 work done inIndia for US software companies amounted to $25 to $35 an hour, compared to $75 to$100 per hour for software development done in the United States.Another factor helping India is that satellite communications have removed distance as anobstacle to doing business for foreign clients. Because software is nothing more than astream of zeros and ones, it can be transported at a speed of light and negligible cost toany point in the world. In a world of instant communication, India’s geographicalposition between Europe and the United States has given it a time zone advantage. Indiancompanies have been able to exploit the rapidly expanding international market foroutsourced software services, including the expanding market for remote maintenance.Indian engineers can fix software bugs, upgrade systems, or process data overnight whiletheir users in Western companies are asleep.To maintain their competitive position, Indian software companies are now investingheavily in training and leading-edge programming skills. They have also beenenthusiastic adopters of international quality standards, particularly ISO 9000certification. Indian companies are also starting to make forays into the application andshrink-wrapped software business, primarily with applications aimed at the domesticmarket. It may only be a matter of time, however, before Indian companies start tocompete head to head with companies such as Microsoft, Oracle, PeopleSoft, and SAP inthe applications business.Sources: P. Taylor, “Poised for Global Growth,†Financial Times: India’s Software Industry, December 3, 1997, pp. 1,8; P. Taylor, “An Industry on the Up and Up, “Financial Times: India’s Software Industry, December 3, 1997, p. 3;Krishna Guha, “Strategic Alliances with Global Partners,†Financial Times: India’s Software Industry, December 3,1997, p. 6; “Indian SW Industry to Touch $13 Billion in 2001-02,†Computers Today, December 15, 2000, pp. 14-17;and United Nations, Human Development Report, (New York: Oxford University Press, 2000), and Table 12.Case Discussion Questions (Marks 100)1 To what extent does the theory of comparative advantage explain the rise of theIndian software industry?2 To what extent does the Heckscher-Ohlin theory explain the rise of the Indiansoftware industry?3 Use Michael Porter’s diamond to analyze the rise of the Indian software industry.Does this analysis help explain the rise of this industry?4 Which of the above theories-comparative advantage, Heckscher-Ohlin, or Porter’sgivesthe best explanation of the rise of the Indian software industry? Why?


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